''What we need now is to move from a system in which the poor participate in officially-led development programmes towards one in which governments and external donors support people-initiated development. That must be the true objective of all of us: the empowerment of the poor, allowing them to gain greater control over their lives and futures.''

Fawzi H. Al-Sultan, President of IFAD
Conference on Hunger and Poverty, 1995

How can the poor benefit from institutions that were initially controlled by the rich and powerful and run mainly in their interests?

Decentralization

Decentralization is often recommended as a way of redefining the boundary between state and market. It is an umbrella term for a number of related policy reforms under which central government agencies transfer rights and responsibilities to local institutions. Decentralization’s merits include easier access to local information, greater sensitivity to local needs, and accountability to the local community.

Devolution of natural resources management has two sets of advantages. For the users, devolution leads to increased accountability of those responsible for its management. For the government, devolution helps to reduce the cost of delivering these interventions.

Delivery of Financial Services for Rural Poverty Reduction

Credit helps the poor to smooth consumption levels, and later to acquire assets greater than the value of the liability. Consumption-level smoothing is especially important for the rural poor; agricultural incomes and rural health fluctuate widely and will destabilize consumption if households cannot fall back on savings or access to credit. Once poor households feel that consumption is safe, they are more ready to risk borrowing for investment in physical, natural or human capital assets.

• In the second phase of the development of the microfinance sector, the need to create sustainable financial markets became evident and the legal and financial sustainability of microfinance systems became a priority. Microfinance systems were set the goal of breaking even, and thereby being able to liberate themselves from grant-funding within a reasonable period of time, and this very rapidly became the fundamental orientation of microfinance ‘best practice’.

Partnerships for Ending Poverty

Poverty reduction is a complex task requiring sustained commitment to consistent, yet flexible, joint action. There are no quick fixes and no easy solutions. No single institution (national or multilateral, public or private) and no unique strategy can hope to deal effectively with the different contexts and causes that underlie poverty. So coherent anti-poverty strategy calls for stable partnerships, based on trust as well as self-interest.

• The most fundamental partnership is with the poor. Poverty reduction is not something that governments, development institutions or NGOs can do for the poor. They can help create the conditions in which the poor can use their own skills and talents to work their way out of poverty.

• Currently, NGOs in developing countries directly reach an estimated 250 million people. These organizations now supplement, and in some cases have replaced, state agencies in the provision of relief and welfare, social services and development projects. In an international finance institution like IFAD, for example, virtually every project approved in recent years involves civil-society institutions and NGOs.

• Partnerships between governments, development agencies and civil-society institutions are of long standing. More recently, it has been recognized that, in a world of liberalization and globalization, with development processes increasingly market-driven, partnerships need to be built with the private-sector. Governments and donors have always dealt with the private sector for the supply of goods and services. Private-sector entities are now showing an interest in private/public partnerships that seek to reduce rural poverty.

Capture or Coalitions?

In many regions, development programmes have in effect been captured by vested interests, with either the active collusion or the passive acquiescence of state elites. Lack of people’s organizations that actively promote coalitions of the poor is usually a major contributory factor in capture by powerful interests.

Participation by the poor in local self-governing institutions helps in evolving a sense of collective identity and building social capital, which over time can lead to empowerment.

Conclusion

One of the most important conclusions of this report is that decentralized institutions are created and run in the interests of those with power. These institutions may come under political, economic or ethical pressure, from the poor themselves or otherwise, to benefit the poor. But on the whole the powerful will run – or allow the poor to help run – pro-poor institutions only if the powerful expect to gain (or to avoid loss) by so doing.

Resources are critical, and without access to adequate resources there can be no elimination or reduction of poverty. But they are not the entire story. The ability to transform resources into production involves the agency of the producers, and the development of this capability is central to the process of poverty elimination. The transformation of social (including gender) relations is part of the poverty-alleviation process.

As our understanding of the dynamics of poverty has increased over the last 30 years, it has been widely recognized that ending poverty is not a matter of simple-minded economic approaches, whether based on central planning or on ‘getting the prices right’. It is now widely recognized that there are many pathways for ending poverty. Building partnerships at various levels that enable the poor to build up their assets, develop labour-intensive management techniques and improve access to assets and techniques, largely by making markets work for the poor, provide the best prospects for poverty reduction.

For further information contact:

At.Rahman@ifad.org or G. Geissler@ifad.org
Corporate Strategy Unit

Prepared by the Communications and Public Affairs Unit
IFAD, Via del Serafico 107, 00142, Rome, Italy
Tel: (00) 3906 5459 2485, Fax (00) 3906 5459 2143
E-mail: communications@ifad.org