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How successful World Bank is, in reducing poverty?

31 Oct 2017, 12:29

Abu Saieed

The World Bank has been working as an international organization to fight against poverty and has set its motto as “Working for a World Free of Poverty”. The World Bank and International Monetary Fund (IMF) were established in July 1944 at the Bretton woods conference in USA. At the beginning of the journey, World Bank was focusing to provide loan to the war-torn west Europe, soon after it turned focus to assist world’s poorer countries. At first in 1970, Bank adopted poverty reduction as its priority strategic objectives and for the first time in 2013, Bank explicitly set numerical target to reduce poverty to 3 per cent by 2030 where poverty is lined as people living less than $1.25 per a day.

The progress world development partners have been able to make in terms of poverty eradication is quite praise worthy. There has been significant progress in creating a world free from poverty and hunger especially after the joint effort of achieving Millennium development goals (MDGs) since 2001. In 1990, 43 per cent of global population was in extreme poverty which reduces to 17 percent in 2011. The progress belongs to the coordinated effort of development partners rather giving full credit to any particular institutions. Despite considerable progress, according to World Bank report published in 2015, there is about one billion world population still live in extreme poverty. Moreover, there is degree of criticism that the term poverty has been defined and calculated in a way that shows much progress in poverty reduction but real scenario differ from the claim of development partners. However, some of the World Bank programs are directly playing a significant role in reducing poverty and some of them have indirect and long-term impact on poverty reduction.

World Bank and IMF started Structural Adjustment Programs (SAP) in during 1980s to support developing and the economies are in crisis. SAP requires recipient countries to take policy reform measures as a condition of getting a loan from the Bank. The fundamental reform measures includes, opening domestic market for international investors through liberalization, privatizing public services, cutting expenditure on social safety nets including reducing expenditure on health, and educations. Some of the policies have been highly criticised due to the unpleasant consequences of the conditions. Reducing or stopping finance in education and health sector has severe repercussion especially in developing or poor countries.  Where people fights every single day to manage their foods and basic livelihoods, how can they afford the expenses of their education and health. It is also argued that SAP policy enhanced the number of illiterate people which indeed increased poverty in the long run. Moreover, poor countries had to return much higher to the World Bank due to the high interest of conditional loan; consequently, poor countries became poorer.

Nevertheless, from the economic point of view, World Bank prescription on reducing budget deficit, devaluation of currency, and enhancing economic growth play important role in reducing poverty in the incumbent countries. It is well agreed that Bank’s policy on domestic credit access, inflation reduction had a positive impact to poverty reduction.  

Yet, as a better replacement of SAP, Poverty Reduction Strategy Papers (PRSP) was introduced in 1999 with a view to achieving sustainable poverty reduction goal. World Bank and IMF assist least developing countries to craft strategies to fight against poverty under the PRSP initiatives. In a national stakeholder survey, World Bank found that 60 % of stakeholders completely agree or agree that the approach of PRSP proved good in alleviating poverty. 

World Bank has a long track of success in promoting education, especially in developing countries through enhancing primary school attendance and girl’s education. The support for education has significant positive impact on poverty reductin in the long run. Poor people are normally deprived from the access to credit or financial services, for instance, loan for establishing a small business. In this respect, World Bank group introduced microfinance programs targeting poor people which help to lift significant number of population out of poverty. In addition, World Bank has been implementing social safety nets program in low-income countries. Under the program, the World Bank provides income support e.g. conditional and unconditional cash transfer to the poor, disadvantage, disable and vulnerable people.

Natural disaster is one of the factors pushing people into poverty. Poor people cannot protect themselves from disaster or catastrophe thereby falling in trap of poverty for example. Asian tsunami in 2004 put half of the population of affected area into poverty in Indonesia though one-third of them were in poverty before. Bank works in five key areas to create a disaster resilient environment. The key policies are identification of risk, risk reduction, preparedness, financial protection and resilient construction which are designed to defend from catastrophe.

 Poverty is a complex and multifaceted challenge to the world; therefore, it is necessary to address poverty from every aspect. The progress of poverty reduction is not same across countries or regions. This implies that poverty reduction strategies need to adopt with the specific characteristic of the country in particular. Along with international actors, incumbent countries need to be committed and cordial enough to reduce poverty. A coordinated effort can reduce poverty in all its form from the world and achieve the sustainable development goal of Zero poverty by 2030. 

The writer is a researcher, and development professional, Vienna, Austria. He can be reached at abusaieedbd@gmail.com.

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