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Poverty reduction remains one of the biggest challenges to the world. According to the World
Bank, nearly half of the world’s population is poor and over a billion of them are extremely
poor or live on less than $1.25 a day. For years, economists, policymakers and philanthropists
have searched for a sure shot way to fight poverty. It remains an elusive pursuit, but many
different approaches have helped the world inch closer to the Millennium Development Goal
of eradicating extreme poverty. Recent economic research says that financial aid has not been
effective in reducing poverty. So what works?
Land Reforms
Land reform has invariably led to poverty reduction in most countries as land acts as an asset
that can be put to productive use or exchanged for capital that can be gainfully employed.
Vietnam is one of the best examples of land reforms playing a crucial role in rural poverty
reduction. Steffanie Scott of the University of Waterloo, Canada, says in a paper that through
a series of land policy reforms in the 1980s and 1990s, farming households were allocated
long-term land use leases and granted rights to transfer, exchange, rent, mortgage and inherit
agricultural land. Land laws have been central to the overall policy reforms in Vietnam’s doi
moi (renovation) process. As a result, poverty dropped from 58 percent in 1993 to 29 percent
in 2002.
Debt Set Go
Access to credit is often pointed out as one of the most important elements in unleashing the
entrepreneurial energies of the poor who would then help themselves out of poverty.
Bangladesh’s Grameen Bank proved that it is possible to sustainably lend to the poor through
its breakthrough micro-finance model. Studies have shown that of Grameen Bank’s
participating households, about 5 percent climbed out of poverty annually. Also the incidence
of poverty is less in households headed by women and credit given to women seems to be
more effective. However, now concerns are being raised that market-savvy micro-credit
institutions are pushing members into a debt trap.