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Future Without Poverty
Future Without Poverty
Poverty and Us
Poverty questions and tests our values in difficult times and often it wins. Experiencing poverty can break a person's character. That is why we all care about poverty. We discuss it all the time. We help with fund-raisers, we donate to charities. We pay a dollar or two more for products that share benefits with the poor. We are content to have made a difference in the life of the poor. The charities assure us. But often a question still nags us. Why is poverty still around despite the aid? Well, not all the aid helps. The reason, I believe, is that we still do not understand poverty. We cannot simply donate food to the hungry and clothes to unclad and solve the problem. People like Dambisa Moyo, Jeffery Sachs and Jacqueline Novogratz have initiated some developments in this direction. I intend to push poverty alleviation a bit further by suggesting a framework based on my observations of the poor. I want to share some insights about the life of the poor. I propose a snakes and ladders approach to design a better solution. It is time to help the poor in a structurally stronger way that will make a real lasting difference. It is time to give them a ladder out of poverty.
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Expense
Migrant workers who typically send money back home tend to manage this phase better. The cash-flow cycle also determines if surplus will be wasted or not. In case of daily-wage the surplus is difficult to save. In case of monthly salary financial discipline forces people to manage it better hence leads to savings.
The poor from this segment can move out of poverty mainly on their own. A gentle push towards savings will often do the trick.
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Often it happens when a single worker takes on additional responsibility - gets married or has kids etc. People make consumption asset purchases like a two-wheeler, car, illegal house. A healthy lifestyle is critical to keep such a person employable consistently. Any income disruption pushes the family into the next phase the poverty treadmill.
This phase requires a holistic intervention. Generally, small loans at affordable rates can ease this situation.
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Income
Usually people try to get loans from friends and relatives. Failure to repay alienates the family and removes the safety net. The loss of face in such circumstances is difficult to handle and has psychological implications. People often try asset sales and get caught in legal issues.
This phase requires comprehensive poverty alleviation arsenal including bigger loans for asset financing, priority re-skilling, income augmentation etc. By far this is most complex stage.
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The first step is usually to the path the household or community takes out of poverty. Typically, households that escape poverty trap seem to follow these steps. These are also consistent with first principles. We can identify 4 phases over which the path is usually spread. The first step is increasing income surplus or increasing income and reducing expenses. In the second step, the resultant surplus is accumulated and used to pay off outstanding debts. Further surplus is used to create income-generating assets forming step three. Step four is what sets the household on to a sustainable path out of poverty into expanded consumption. Poor households labour through this path exposed to challenges (snakes) and opportunities (ladders). Identifying the challenges (snakes) Each community and household face unique challenges, or snakes, while on this path. Some communities have idle people indulging in drugs, others gamble on holidays, some others have idlers loitering at corners making the area unsafe. Some households have terminally ill elder whose care requires lot of expense. Challenges or snakes are result of resources that poor lack. Enabling Solutions (ladders) A locally aware facilitator can structure solutions in acceptable forms helping communities convert idle resources into productive assets. These work as ladders customized to local preferences. Solutions or ladders are rooted in resources available to the poor.
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Eliminate Debt
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Increase Income surplus
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Resources of Poor
Poor do not lack all resources. They just lack financial resources. Further the resources they have are not efficiently channelled to succeed financially in this world. We need a new perspective, a new angle on resources available to the poor.
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Ladies from lower-income households cut vegetables, stitch, or do other household work on Mumbai suburban trains thus releasing time for other activities at home.
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Villages in rural Maharashtra use the concept of Shramdaan (donation of labour rather than money). So every villager contributes his labour to development of village, agriculture improving assets and productivity.
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People who come out of poverty often support their community members and help them. Soon a lot of people in that community can move out of poverty.
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The poor, for example, often cannot get loans against vehicles they own, partly because lack of adequate paperwork or lender apathy. Moneylenders step in at these time charging more than 24% interest at exorbitant terms.
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Just penalties refer to a percentage of sale price fee that additionally gets debited from household account when certain banned good is consumed. The penalty should then be transferred to separate account of the same household to work as pension contribution or other rainy-day term deposit.
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The status of teachers will often tell you which communities will move out of poverty. The children from communities that respect teachers are less likely to dropout. They are more likely to study further thereby creating an ideal launch pad out of poverty.
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Banks can give loan for house cleaning equipment that can increase productivity of the house-keeping organisation referred above. The company can now clean more houses and pay the loans back.
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Profits are bad mentality victimised entrepreneurship in lower-income Maharashtra. The struggling entrepreneurs were considered to be of loose morals and could not marry or make friends. This shunning of entrepreneurship kept the most potent poverty alleviation tool from taking effect.
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