Getting to Zero: A sustainable approach to poverty reduction

Since the Millennium Development Goals (MDGs) were established by the United Nations in 2000, lives have improved around the world at a rate never equalled in human history.

The World Bank estimates that the first MDG goal of halving extreme poverty was reached globally by 2010. The percentage of people in the developing world living in extreme poverty has fallen from 43% to 21% since 1990. We want to see this percentage reduced to zero by 2030.

Yet more than one billion people still live on less than US$ 1.25 a day. The problem is particularly acute in South Asia, where more than one person in three still lives in extreme poverty, and in sub-Saharan Africa, where the ratio is nearly one in two.

Today, roughly 43% of the developing world lives under the poverty line of US$ 2 a day. So not only do we need to eliminate extreme poverty, we also need to cut US$ 2 a day poverty by at least half by 2030.

Since the MDGs, we think that a new generation of development goals will soon be needed to focus on more than just raising incomes, such as ending chronic hunger; ensuring universal access to secondary education; ensuring universal access to safe drinking water and sanitation; reducing child and maternal mortality; and tackling key environmental challenges.

There are plenty of practical initiatives that can bring together government, business leaders, civil society and local communities. Here are two:

First, much of sub-Saharan Africa’s poverty is ingrained because of low productivity subsistence agriculture, the lack of an African Green Revolution and inadequate market-based credit. So we think many farmers will need to band together to form private co-operatives or farmers’ associations.

A financial vehicle will have to be established that can provide long-term loans of between US$ 25,000-US$ 100,000 to these associations. And they will need a business support network to help them identify market opportunities, develop business plans and introduce new farming techniques. To reach 25 million smallholders over five years (roughly a quarter of the total), we’ll need annual public financing of about US$ 5 billion to shore up the US$ 25 billion of annual private lending.

Second, access to basic financial services is crucial for poverty reduction, yet about two-thirds of adults in the developing world do not have a bank account. The very poor often have no access to public services either. But with the roll-out of cheap broadband mobile telephony around the world, access to mobile banking services using smartphones or “smart cards” linked to phones is becoming a real possibility.

Such smart cards could also be used to access government services. We think one billion savings accounts and smart cards could be issued by 2020.

But to achieve such a sustainable approach to poverty reduction it is clear that governments will need input from non-governmental stakeholders too, including civil society, the private sector and academia.

Authors: Dr John McArthur, Senior Fellow, United Nations Foundation and Nonresident Senior Fellow, Brookings Institution, with support from Mark Malloch-Brown, Chairman, FTI Consulting; Members of the World Economic Forum Global Agenda Council on Benchmarking Progress and Institutional Governance Systems, respectively

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