Operationalising Pro-Poor Growth

Operationalising Pro-Poor GrowthA seminar titled “Operationalizing Pro-poor Growth” was organized by Institute of Microfinance (InM) at the Conference Room of Palli Karma-Sahayak Foundation (PKSF) on 2 April 2009.

Professor Robin Burgess of London School of Economics presented the seminar. The seminar was attended by scholars, academicians, members of civil society, and representatives from development partners and development agencies, including microfinance institutions (MFIs).

In the very onset of his deliberation Mr. Burges gave a brief background of operationalizing pro-poor growth. He said, in the past few decades the thoughts of economists were of two streams: the pro-economic growth based on industrialization, urbanization and trade liberalization. Most of the economists of 1970s and 1980s were of this thought. They believed in top down approach. They thought even if the higher section of the society develops, its effects trickle down to bottom or the poor. However, the top-down approach or economic growth in many countries proved failure as poverty and inequality grew in degrees. Thus the second stream of thought with its focus on agriculture and rural sector with a belief that the economy will develop through operationalizing the pro poor growth stepped into the economic thought process. This came to be known as pro-poor growth approach or bottom up approach.

The economist defined that economic growth is the sum of capital stock, human capital, labor and technology. Economic growth simply means efficiency to grow at a faster rate, by producing goods and services. Increasing economic growth can be the main strategy to reduce poverty and inequality. But as the number of hardcore poor is increasing, an appropriate economic policy to reduce poverty and inequality is the main concern today.

Mr. Burgess stated that technology, capital stock and human resources are three crucial factors for which we see difference in the economies across the world. Accepting $1 a day per capita income poverty line, through different data and table he showed that poverty concentrated mostly in Sub-Saharan Africa and Asia. In Asia, during 1990 to 1998 poverty rate fell from 27.58 percent to 15.32 percent, with a drastic fall in China. The poverty situation remained unchanged in Sub-Sahara. In Southeast Asia although the rate of poor people decreased, the number of poor increased from 495 million to 522 million.

While focusing on operationalizing the pro poor, he stressed rights for the poor to secure agricultural land, asset transfer in their favor and enforcement of their legal rights. Showing a clear relation of quality of education and income, he pleaded quality education for the poor, revealing a datum that each additional year of schooling increases income of a person by 6 to 10 percent. However, he mentioned that in the developing countries quality education is scarce. To overcome this problem, he suggested incorporation of ICT in school curriculum, sensitize the teachers by providing incentives, inspire the nongovernmental organizations to open school in disadvantaged areas, and to motivate students towards education by providing them meals at and transportation for school. As the last point he mentioned his concern about the post-war economic model where the governments impose regulation to control market failure, although excess regulation on entry and exit of products and/ or competitors or on pricing generally turns counterproductive. It leads the market mechanism to be inefficient and instigate price hike, clandestine business and deadweight loss affecting the economy seriously.

The economist also emphasized the quality infrastructure and communication system for pro poor growth. He maintained, infrastructure like roads and highways reduces transport costs and a good communication through mobile or internet network impact on pricing of a product. But for all and with these, access to financial market for the poor is very important. He mentioned that through the provision of microfinance or by changing the existing structure of banking institutions, the poor should be bankable to give them a chance to become entrepreneurs. The ultimate result will be that they will overcome poverty and contribute to the growth of their economies.