CIDA's Policy on Poverty Reduction

<strong>CIDA's</strong><strong>Policy</strong> onPovertyReductionCanadian InternationalDevelopment AgencyAgence canadienne dedéveloppement international

<strong>CIDA's</strong> <strong>Policy</strong> onPoverty Reduction

A. INTRODUCTIONThe Government's foreign policy statement,Canada in the World, released on February 7,1995, provides a clear mandate for CanadianOfficial Development Assistance (ODA):"The purpose of Canada's ODA is to supportsustainable development in developingcountries, in order to reduce poverty and tocontribute to a more secure, equitable andprosperous world."Canada's development assistance program recognizesthe vital link between poverty reduction andsustainable development, and is built on a broadarray of programs and policies working togetherin an integrated way.Poverty results from the lack of human, physicaland financial capital needed to sustain livelihoods,and from inequities in access to, controlof, and benefits from political, social or economicresources. In an interdependent world, povertyin developing countries increasingly affects theeconomic, social and political welfare of developedcountries. Poverty can lead to serious globalproblems, such as environmental degradation,political and economic instability, and large-scalemigration of people in search of a better life.In this context, the policy will provide a frameworkfor poverty reduction and will guide programmingin each of the six programming prioritiesfor ODA: basic human needs; women indevelopment; infrastructure services; humanrights, democracy and good governance; privatesector development; and the environment.In addressing the challenges posed by poverty,important distinctions must be made between"relief" and "reduction". Poverty relief addressesthe poor's survival needs, their immediate problems,and the effects of inequities. It does notenable the poor to secure or sustain their livelihoods,or to end the ongoing cycle of poverty.Poverty reduction is a process by which the causesof deprivation and inequity are addressed.Clearly, "relief" activities can be critical in dealingwith famines and other disasters-- indeed, shorttermsurvival strategies are crucial for theextremely poor. However, the challenge lies inmaking the transition from the short-termresponse of relief activities to interventions whichwork to reduce poverty in the long run.Poverty reduction is complex and difficult, anddespite considerable programming experience inCIDA, it remains a challenge. <strong>CIDA's</strong> approachto poverty reduction will require:◆◆◆a better understanding of the country-specificand local characteristics of poverty;a coordinated use of project, program, institutionalsupport and policy interventions toachieve maximum impact; anda clear view of <strong>CIDA's</strong> role and capabilities.2

B. POLICYPoverty reduction will be a central focus ofCanada's development cooperation program.CIDA will make concerted efforts through itsprograms to contribute to a sustained reductionboth in the number of people living in poverty indeveloping countries, and in the extent of theirdeprivation.(1) An Agency-wide definition of povertyreduction will be adopted.Poverty reduction means a sustained decreasein the number of poor and the extent of theirdeprivation. This requires that the root causesand structural factors of poverty be addressed.Reducing poverty places a focus on people's capabilitiesto avoid,or limit, their deprivation. Keyaspects of this are: recognizing and developing thepotential of the poor; increasing their productivecapacity; and reducing barriers limiting theirparticipation in society. Poverty reduction mustfocus on improving the social, economic andenvironmental conditions of the poor and theiraccess to decision making.Poverty-reduction activities should be carried outin a manner which promotes sustainability, buildsself-reliance, and avoids dependency relationshipsamong donors, partners, and beneficiaries.(2) Poverty profiles and reduction strategieswill be integrated into country or regionalpolicy frameworks. Efforts will be made toensure that the strategies are complementaryto those of recipient countries.A poverty profile analyzes the root causes andcontributing factors of poverty, and places povertywithin a country's economic, institutional andsocial context. It summarizes information on thesources of income, consumption patterns, economicactivities, access to services and living conditionsof the poor, and examines how poverty iscorrelated with gender, ethnic and othercharacteristics.A poverty reduction strategy requires an understandingof the specific characteristics of povertyin a country or locality, the requirements forpoverty reduction, and assessments of whereCIDA, given its resources, can have the greatestimpact. CIDA will select activities which workto diminish constraints or improve opportunitiesfor the largest possible number of people. Theidentification of constraints and opportunitiescommon to a large number of the poor in agroup or country, as well as the selection of activitiesto reduce poverty, must be done with the fullparticipation of people, their organizations andtheir governments.It must be clearly recognized that the scope ofpoverty-reduction activities can occur at the community,local, regional, national and internationallevels because the constraints and opportunitiesfacing different groups of the poor can occur at allthese levels. A clear distinction must be madebetween these levels to address the systemic causesof poverty and to promote effective programming.3

(3) Programming at CIDA will be consistentwith the goal of poverty reduction.CIDA programming will be assessed with respectto its impact on the poor. To be consistent withthe goal of poverty reduction, programs or projects--evenif they do not directly target the poor--should minimize the negative impacts on thepoor, where possible, and exploit complementaritieswhich can also have a positive impact on thepoor. (For example, in situations where privatesector development can help reduce poverty bygenerating income and employment growth,CIDA will assist programs that support localenterprises, particularly microenterprises, cooperatives,and small businesses.)(4) CIDA will concentrate on areas where it hasa comparative advantage: this includes bothpoverty-focussed and policy-level interventions.Although poverty reduction is multifaceted innature, CIDA cannot be "all things to all people".CIDA needs to focus its efforts to find areas ofcomparative advantage where, given its resources,it can make significant interventions. Strategicinterventions require an analysis of what <strong>CIDA's</strong>capabilities are and on what areas it should concentrate.There must be a constant search forcomplementarities among project, program, institutionalsupport and policy interventions.This means that the target beneficiaries of all programmingwill need to be identified, as well asthose who might face indirect negative repercussions;that poverty profiles will be used for nonpovertyinterventions; and that indicators will bedeveloped to measure the impact of projects.4CIDA Photo: David Barbour

C. PROGRAMMING STRATEGIESIn light of emerging development challenges andlessons learned, and to provide a central focus andcoherence across the Agency in its poverty-reductioneffort, CIDA will:(1) Address the root causes and structural factorsof poverty:For sustained poverty reduction, the root causesand structural factors of poverty must beaddressed. This places an emphasis on improvingthe poor's human and productive capacities, andon removing barriers to their participation in society.Thus, a key element to sustained povertyreduction is enabling the poor to secure sustainablelivelihoods.(2) Adopt a multi-level strategy:Approaches to poverty reduction can occur atboth the individual or community level, and atthe systemic level. The first approach worksdirectly with those living in or vulnerable topoverty, and addresses the constraints facing themat an individual or community level (e.g., provisionof assets, training). The latter approachworks at the policy or institutional level, and seeksto address the broader systemic causes and factorscontributing to poverty.(3) Use a threefold classification in addressingpoverty: targeted poverty programs,focussed poverty programs, and policy interventions.a. Targeted poverty programsTargeted poverty-reduction activities work directlywith the poor to improve their welfare. For aproject to be classified under this category, twocriteria must be satisfied:◆key interventions must be designed to lead topoverty reduction through the promotion ofsustainable livelihoods and the broader participationof the poor in society.Since 1982, CARE Canada's RuralMaintenance Program in Bangladesh has providedover 60,000 rural women with full-timejobs on road crews maintaining a network ofroads across the country--and is now helpingthem start their own businesses.Even though they earn only a few dollars a week,the jobs provide steady, reliable income for someof the poorest people in one of the poorest countriesin the world.The project has resulted in significant improvementsto the lives of the workers and their families.The women have have been able to improvetheir children's diets and send them off to school--and, on the whole, they themselves are healthierand more active in family and community life.A new phase of the project is encouraging womento strike out on their own and set up small businesses.They are hired for a four-year period andduring the third year of the program they areenrolled in a compulsory savings program andare given training in basic marketing skills andbusiness management.So far, about 24,000 women have "graduated"from the program and gone into business forthemselves. They have confidence in themselvesand are respected in their communities.◆the poor must be the specified target group(e.g., destitute women, rural landless); and5

. Poverty-focussed programsPoverty-focussed activities refer to programs andactivities which benefit the poor, but do notinvolve working directly with them. Examplesinclude:◆ capacity building of organizations which workwith the poor;◆ institutional changes to address the needs ofthe poor; and◆ interventions, such as research into small-scaleagricultural techniques, whichcould be employed by poor farmers.The criteria for programs to be povertyfocussedis that they will disproportionatelybenefit a larger number of poor than nonpoor.CIDA Photo: David BarbourSince 1988, the Peru-Canada Fund has improvedthe lives of more than a million poor people in Peruand stimulated the economies of hundreds of smalltowns and villages in the most isolated and impoverishedareas of the country.The Peru-Canada Fund is a private, non-profitPeruvian foundation providing support to a widevariety of community self-help projects in Peru'spoorest rural areas and barrios. Using a network ofcommunity and non-governmental organizations as"catalysts" and project managers, the project hasgenerated jobs, increased agricultural production,created small businesses and supported themarketing of products.Funding for the community projects is generatedthrough an innovative and highly effective "linesof-credit"program administered by CIDA.Peruvian companies buying Canadian-made equipmentmake their payments directly into the developmentfund. (CIDA pays the Canadian supplier.)Thus, the Peruvian buyers import much-neededCanadian-made equipment--which improves theeconomic infrastructure--and provides local currencyfunding for the Peru-Canada Fund.Since its creation, the Fund has financed over 170projects which have directly benefited 1.3 millionpoor people. The value of their contribution--whichis estimated at double the amount of the financingprovided by the Fund--is their ideas and theirlabor.The Peru-Canada Fund has become a model forcooperation programs by other donor countries inthe region.6

c. <strong>Policy</strong> interventionsActivities which affect the policy environment arealso crucial to poverty reduction. Removing systemicconstraints at both the national and internationallevels can work to address the root causes ofpoverty for both peoples and nations. Examplesinclude:◆◆◆◆◆the promotion of equitable growth-orientedpolicies;working to reorient public expenditurestowards social priorities;promoting and enshrining property rightswhich are equitable to women;stimulating a national dialogue on povertyissues; andworking in the international policy area toreduce global poverty.As a result of Canada's initiative, a set of recommendationsfor the explicit and systematic consideration ofgender issues in economic reform programs wasendorsed by the most recent SPA plenary meeting inParis in November 1995. Highlights include:• upfront gender analysis in designing adjustmentoperations;• protecting and enhancing public expenditures thatfoster gender equity, such as primary education,basic health services; and• finding ways to increase African women's participationin economic decision making.There is now broad acceptance that effective integrationof gender concerns into the design and implementationof measures to support economic reforms inAfrica can lead to improved results.Canada, through CIDA, is an active participant inthe Special Program of Assistance to the low-incomecountries of sub-Saharan Africa (SPA). This internationalforum of donors, chaired by the World Bank,coordinates support for economic reforms in most ofsub-Saharan Africa.Since it was launched in 1987, the SPA has sent aclear message to Africa and the rest of the world: thereis a vital link between good economic policy andpoverty reduction.Significant progress has been made in highlighting theimportance of "gender equity"--recognition that menand women are affected differently by economicreforms. African women, for example, do the bulk offarming and trading, but are constrained in theirability to respond to new economic incentives, due tofactors such as limited access to credit and appropriateagricultural extension services, an already heavy workload,etc. With the acceptance by the SPA that gendershould be recognized as an important part of theadjustment agenda, Canada established the StructuralAdjustment and Gender in Africa initiative--or"SAGA"-- a collaborative framework for SPA donorsand working groups.7

(4) Combine economic growth and socialinvestments:There is no automatic link between economicgrowth and poverty reduction. Economic growthreduces poverty when the productive capacity ofthe poor is matched with the physical locationand the labour needs of the growth sectors.Sound economic management, openness todomestic and international trade and investments,private sector development, investment in infrastructureservices and in social sectors to meetbasic needs, have been key elements of nationalpolicies which have strengthened the positivelinks between economic growth and povertyreduction.National governments and political leadershipcommitted to poverty reduction play a criticalrole. The conditions established by governments'economic and social policies are crucial to thelong-term sustainability of poverty-reductionmeasures. Governments determine the economicpolicy framework, redistribute resources, providecritical social investments for the poor, and framethe legislation that establishes property rights andthe legal basis for removing gender inequities.(5) Address basic human needs:Addressing priorities such as basic education, primaryhealth care, nutrition and family planning,water and sanitation, and shelter, play a key role inpoverty reduction. Education, particularly basiceducation, has significant benefits for the poor byincreasing incomes; it also promotes participationby educating people on social issues. Educatinggirls is, in particular, the single most effectivedevelopment investment.(6) Achieve food security:Food security allows people to protect and sustaintheir broader livelihoods--while food insecuritycan lead to powerlessness, dependency, pain, andreduced physical and intellectual growth. Foodinsecurity reinforces the cycle of poverty.CIDA will take steps to ensure that food aid isconsistent with, and better integrated into, overallpoverty-reduction and food-security programmingstrategies.Project and program food aid, which is used as adelivery channel for bilateral programming, mustbe explicitly integrated into overall programmingstrategies to increase effectiveness. Food aid mustbe recognized as only one aspect of food securityand poverty reduction, and must be closely integratedwith other development inputs and programs.However, given the nature of relief activities andthe countries in which they take place, there maynot be country development policy frameworkstrategies available for emergency food aid programs.This is because strategies are only done forcountries which are core-funded. In such cases,the development of food-security strategies andthe choice of partners will be crucial. It is criticalthat Canada work with partners who will be presentto work on the transitional and rehabilitativeneeds, beyond the immediate relief requirements.(7) Promote participatory approaches: buildnetworks and involve governments:Supporting the work of local non-governmentalorganizations (NGOs) and the internationalfinancial institutions (IFIs) is an area in whichCIDA will continue to make a contribution.8

CIDA can operate at a much smaller scale thanthe IFIs, more consistent with smaller absorptivecapacities in many countries and areas.Working with recipient governments in buildingnational approaches to poverty reduction is vital.For example, CIDA can assist countries in developinganti-poverty action plans by building onexisting strategies for the provision of basic education,primary health care, and improving the welfareof children. This can also facilitate donorcoordination if donors are placing their activitiesin overall country frameworks for addressingpoverty.To further promote participatory development,CIDA will:a. Enable people to realize their own capacitiesand goals through participatory processes:Growth, through industrialization and modernizationcan marginalize the poor if they are notable to participate in, or be integrated into, technologicalproduction processes. Political and economicparticipation in society is essential for theempowerment of the poor and sustained povertyreduction, and enabling the poor to participate inemerging opportunities is crucial.c. Contribute to donor coordination mechanisms.With increasing donor interest in poverty reductionactivities, the need for consultation and coordinationbecomes paramount. CIDA, in conjunctionwith like-minded donors, will take a leadin harmonizing projects and interventions withconflicting goals. This is particularly important inintegrating short- and long-term objectives and inpromoting relief-reduction transitions.d. Support capacity building and institutionalstrengthening of various groups andorganizations.Developing the capacity of peoples and countriesto reduce poverty themselves is central to sustainedpoverty reduction. To achieve this, CIDAwill work actively in assisting the capacity andinstitution building of NGOs, governmentdepartments, administration and research bodies.Whether at the community or national level, sustainableinterventions will require both the commitmentand the capacity of the developing country.b. Implement policies and programming toaddress the gender-poverty nexus.CIDA is recognized as an international leader inpromoting and addressing women in development(WID) and gender equity issues. However,although the Agency has traditionally worked atthe targeted level, experience indicates that to besuccessful, programming must also address theroot causes of gender inequities. CIDA will contributeto both the policy and programmingstrategies of addressing the gender-poverty nexus.CIDA Photo: Patricia Baeza8

D. MONITORINGCIDA will prepare periodic progress reports outlining achievements, progress in implementation, and priorityactions for the following period. A formal evaluation of the policy will be conducted within five years.CIDA Photo: Roger LeMoyne10