Relative poverty is the condition in which people lack the minimum amount of income needed in order to maintain the average standard of living in society in which they live (1). Absolute poverty is when you have insufficient income to have the basic necessities such as: food, clothing and shelter. It can also be defined as living on $1.25 a day or 60% of median income. Strategies to alleviate poverty which will be assessed are: Microfinance and Aid.
This question will be answered by firstly saying how the effectiveness of the various strategies will be measured, I will assess the effectiveness of each one against a certain set of criteria which will be whether that strategy lifts people’s income above a $1.25 a day. I will then compare the differing strategies against one another, then using recent case studies I can assess whether that poverty reduction strategy was effective. Finally I will weigh up the effectiveness of the specific strategies as a way of reducing poverty and explain what makes an effective strategy or what helps to make a strategy effective.
Microfinance is a type of banking service that is provided to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services. (2) . The idea behind microfinance is that the people who receive the money manage their money differently, increase their work skills and open a new business. However, it has been argued that Microfinance has done little work to alleviate poverty in developing countries. An example where Microfinance has been used is Sub-Saharan Africa where only a quarter of the adults living there have access to a bank account with a formal financial institution so they rely on microfinance. A study in Nigeria has taken place to show the relationship between Microfinance and poverty reduction. The conclusion drawn from this study therefore was that microfinance alone cannot reduce poverty in any society where basic infrastructures like good roads, steady power supply, good transportation system etc are nearly not available for the women to benefit from the introduction of microfinance in Nigeria. (3). To conclude microfinance’s effectiveness is circumstantial and although there are signs that it has helped reduce poverty in Sub Saharan Africa by allowing a number of people to come out of poverty it cannot potentially help everyone because of the high interest rates that Microfinance charges.
Aid can be defined as the voluntary transfer of resources from one country to another or loans on concessionary terms. After the millenium development goals were set out one of the main aims was to eradicate extreme poverty and developed countries have decided that aid is a suitable way to target poverty. Aid is given to countries for a variety of resons: to help fill the savings gap, moral reasons and to help reduce poverty by increasing people’s standard of living. However there are critiscisms to aid such as it can be swallowed up in corruption and the recipient’s can develop a dependency culture on it. Recently the amount of Aid has been reduced at an average of about 3.5 percent to 8 percent per year and the population of Sub-Saharan Africa has been increasing around 40 million per year (4). However this has been mainly due to the worldwide recession in 2008 which meant that typical donor countires had to cut the amount they gave through aid. Aid can been passed on in the form of infrastructure this can help build schools, hospitals and water services. Education is important enables people to help their families and improve their communities so that when they grow up their communities and families become less supceptible to poverty, in addition the development of hospitals means that Women can have access to contraception and people have medicine which has means they can increase their standards of living. Also another form of aid known as…