Poverty and Social Exclusion: What do we know, and what do we need to know? Luca Barbone Director, Poverty Reduction and Development Effectiveness Department World Bank The EU definition of social exclusion (European Commission 2004). a process whereby certain individuals are pushed to the edge of society; prevented from participating due to poverty, discrimination, lack of basic competencies and learning opportunities This distances them from job, income, education and training opportunities, and social and community networks and activities. Lacking access to power and decision making bodies, they feel unable to control decisions that affect their daily lives

Outline Why measure poverty and social exclusion Developments ın poverty measurement and methodologıcal challenges Problems in collecting data with regularity Practical aspects of organizing monitoring at the national and local levels Practical aspects of organizing monitoring at the local level

1. Why measure poverty and social exclusion? The new aid architecture and country-based development model: goes beyond the purely economic model of poverty addresses the relationship between structural, institutional, human, & macroeconomic aspects of development emphasizes the links between objectives and the actions needed to reach them – and the importance of clear, monitorable indicators of progress

The country-based development model Poverty Reduction Strategy process Understanding the nature of poverty Monitoring outcomes and evaluating impact Choosing poverty reduction objectives Defining strategy for poverty reduction and growth including: - Macro and structural policies - Governance - Sectoral policies and programs - Realistic costing and funding Implementation of programs and policies Actors and participatory processes including: - Central government agencies and inter- ministerial groups - Parliaments and other representative structures - The public, including the poor - Civil society - External partners BACKGROUND: The process of developing a PRS varies greatly because it takes place in different countries, under different kinds of governments and circumstances. In general, though, the process can be thought of in terms of several phases, although certain elements, particularly participatory processes, may run throughout. It is important that the PRSP build on and provide consistency with other current government processes and resulting documents that set forth national or sectoral development plans and budgets. It is, therefore, also important to build on existing strategies and plans, as far as possible, at the sectoral and national level. Existing national strategies, or national development plans that would have been prepared in any case, provided that these are consistent with the guiding principles of the PSRP approach, may be considered to be the PRSP, as is the case in Uganda with the Poverty Reduction Eradication Plan and Mozambique’s Plano de Acção para a Redução da Pobreza Absoluta (PARPA) [English translation: Action Plan for the Reduction of Absolute Poverty], which also predated the PRSP initiative. It is important that PRSPs reinforce, rather than compete with and undermine, existing democratic institutions and processes. Therefore, PRSPs are expected to be fully based on the formally approved policies and budgets of governments, and their preparation should follow appropriate domestic channels, complemented as appropriate with a greater degree of openness and transparency than may have otherwise been the case. There are important linkages between implementation of the strategy and the annual budget cycle, Medium-Term Expenditure Frameworks where they exist, and the iterative process by which results from the preceding year and ongoing dialogue are fed into policy and program redesign and annual progress reports. It is important that the PRSP become institutionalized in domestic budget preparation and policy and program formulation practices. The PRSP will be the primary instrument by which a country articulates a strategy around which external development partners could align their own programs of support. Development partners should also be involved to ensure that the poverty strategy has a realistic chance of being funded.

Architecture to improve aid effectiveness     C O U N T R Y Consultations Link to the budget Poverty Analysis PRSP Monitoring Policies and programs Sector Diagnostics D O N O R S Assistance Strategies Donor programs: Projects, including budget support Advisory and Analytical Work Support for analysis and consultations Feedback mechanisms

So what should be monitored? Shared growth and equality of opportunity require a broader concept of poverty that encompasses non-economic dimensions such as: access to opportunities empowerment subjective well-being health, education, shelter gender equality participation and “voice” Recent experience amply demonstrates that rapid growth reduces poverty, but the benefits are not always shared equally. So - the key to sustainable growth and poverty reduction is to enhance the capacity of poor men and women to participate in growth (economic inclusion), through investments in better access to education and training, health services, infrastructure, and productive assets. This positions them better to take advantage of the opportunities for productive, income-generating employment, by increasing their productivity or facilitating their mobility. It should be noted that equality of opportunity does not necessarily lead to equality of outcomes, which are mediated by individual effort and intrinsic abilities.

2. Developments in poverty measurement Despite consensus that poverty is multi-dimensional, the expanded definition is still moving “from the periphery to the core”: 1980s – inclusion of nutrition, education and health 1990s – Human Development Indicators Since 2000 – centrality of “well-being” and empowerment CWIQ – annual measure of access, usage, & satisfaction with services to give advance warning of future impact Poverty maps – address spatial correlates of poverty (isolation/accessibility, market access) Evolution of poverty meaning and measurement: 1960s – GDP per capita growth 1970s – GDP + basic goods 1980s – GDP per capita 1990s -- UNDP HDI 2000s -- MDGs Multidimensionality of poverty is accepted but income poverty measures are still “first among equals” in: MDGs (main drivers of contemporary development policy) Human Development and Gender Development Indices (widely used and debated) PRSPs Core Welfare Indicators questionnaire Designed for Africa to monitor change in key social areas Large samples, short questionnaire and quick data entry 1997 Ghana CWIQ of primary school services found adequate access & usage, but found that poor were poorly served and everyone lack books

But -- measuring non-economic dimensions involves methodological challenges Indicators should be: relevant to policy makers and decision makers cheap and easy to collect relevant to interventions unambiguous measures of progress Finding non-economic indicators is more complicated because they: may change more slowly than economic indicators can be more difficult to collect may require special surveys Are more context-specific and less “universal” may be less tangible and quantifiable …hence perceived as less objective and rigorous

Examples of new approaches: poverty maps and policies Overlays used to identify correlates of poverty Sri Lanka: Poverty and isolation/accessibility South Africa: Containing a cholera epidemic Tanzania: Changes in poverty and market access Ecuador: Compare poverty maps at two points in time. … coordinate programs, and improve targeting Cambodia: WFP combined with maps of nutrition, infrastructure, and vulnerability to flooding & drought to identify potential areas for WFP programs. Morocco: Maps suggested different mechanism for urban vs. rural areas. Vietnam: Validated targeting approach of Program 135. Mexico: PROGRESA & Oportunidades South Africa: Municipal grant amounts based on estimated no. of poor Poverty maps: facilitate comparison of income with non-income measures of poverty (access to infrastructure or services, availability and condition of natural resources, distribution of transport and communications GIS based poverty analysis makes it easier to integrate poverty data from various sources Geo-referenced information allows data to be converted from administrative to ecological or other boundaries Visual representation makes the results of analysis more understandable to non-specialists. Examples of application: Tanzania: poverty map challenged conventional wisdom that market reforms in agriculture had left poorer areas behind Morocco: poverty maps demonstrated that urban neighborhoods showed much more economic heterogeneity than did rural, suggesting geographical targeting for rural areas only Mexico: maps led to explicit targeting of the 50 municipalities that combined the highest poverty rates with the lowest Human Development Indicators

Tracking the impact of education of poverty and mobility Poverty and access to education: Importance of secondary education for poverty reduction grew in 1990s Access for poorer households remains low But education has potential to enlarge opportunities for mobility out of low paying agriculture sector.

Tracking impact of secondary education on productivity and mobility Importance of secondary education for poverty reduction grew in 1990s, with rapid non-agricultural growth. Yet, access for poorer households remains low. Uganda: The change in benefit incidence from secondary education for the poorest quintile decreased during the 1990s …while it rose for the top quintile. Education can help create greater opportunities for mobility out of low paying (traditional) agriculture sector

Tracking inclusion in financial markets Systematic information on household financial assets in developing countries remains sparse To date, tracking access relies on combining data from HHS and data on penetration of financial institutions Findings: financial inclusion of the poor still a challenge

Financial inclusion of the poor…still a challenge Shallow financial markets are excluding the poor and limiting their opportunities for investment. This map shows estimates of the share of households with access to financial services for over 150 countries. In most African countries, less than 40% of households are estimated to have access to financial services In China and India, the estimate is only ~40-60% of households. ------------------------------- SOURCE: Note that systematic information on household financial asset holdings in developing countries is very sparse. Honohan (2006) combines data on the penetration of banks, savings banks, and “alternative financial institutions” (such as microfinance institutions, with existing household surveys to estimate these shares. The 3 data sources are: Beck, Demirguc-Kunt and Martinez Peria (2007) use aggregate indicators on bank penetration to predict the proportion of households that uses financial services. Peachey and Roe (2005): data on penetration of savings banks across countries. CGAP (2005): data on penetration of “alternative financial institutions”, such as MFIs.

Selecting indicators to monitor empowerment Definitions focus on choice, participation, control and influence, ownership, voice and means of overcoming oppression Challenging to measure because: Not a unitary concept: intrinsic/ instrumental, universal/ context specific, individual/ collective, subjective/objective? multiple levels and dimensions not directly observable, but must be measured through proxies

Monitoring the impact of reforms on empowerment and social inclusion Measuring Empowerment and Social Inclusion in Nepal tracked effects of decentralization policy and rural water supply and sanitation project on gender, caste and ethnic relations found that greater focus on livelihood interventions was called for to reduce influence of caste and ethnicity Impact Evaluation of Honduras Community-Based Education monitored impact of reforms on community empowerment with respect to influencing school management identified necessity of long-term government commitment to reducing power imbalances between elites and indigenous population within communities

3. Problems in collecting data with regularity Incomplete administrative data (electoral registers, identity cards) Selecting indicators reflects a long social process Under-representation of “invisible” populations Difficulties in coordination, duplication, redundancies Few incentives to participate or relinquish space Weak demand (interest?) from decision-makers Without common purpose, formal obligations don’t work In addition to organizing data collection, national monitoring systems must build demand and establish links to entry points in decision-making processes: Budget MTEF Planning Review/update PRS Parliamentary sessions Public dialogue

4. Practical aspects of organizing monitoring at the national level Choice of institutional lead critical - more effective if a single agency close to center of government Champion important – but dangerous to tie system to a personality Coordination is the greatest challenge: process, advocacy, political leadership critical Promote monitoring within line ministries; change incentives and capacity National statistical agencies: ensure complementarity with existing systems and plans Increase dissemination, training/statistical literacy Institutional lead - range of locations: Ministry of Finance (Mali, Niger, Uganda)  close to budget Ministry of Planning (Malawi, Mauritania)  better analysis Office of the (vice-)President (Tanzania)  greater authority

Practical aspects of monitoring at the local level Involve local governments: limit indicators to reduce burden and increase compliance Central quality control mechanism Support and capacity-building, provide feedback Important that those responsible for collecting data understand how they will be used Build on local civil society, encourage local accountability and dissemination

Thank you! www.worldbank.org/poverty