Role of Cooperatives in Poverty Reduction Shankar Sharma National Cooperatives Workshop January 5, 2017
Definition Nepal uses an absolute poverty line, based on the food expenditure needed to fulfil a per capita 2,124 Kcal per day plus a non-food allowances There are other measures used internationally, <$1 a day, <$1.25/day <$1.5/day or <$1.9 a day Poverty incidence will be different with different definition
Food and Non-Food consumption line for poverty incidence Survey Total Income in NRs (%) Food (%) Non-food (%) NLSS I (2003/04) 7,696 (100) 4,966 (65) 2,729 (35) NLSS II (2010/11) 19,261 (100) 11,929 (62) 7,332 (38)
MDG and SDG MDG declaration: spare no effort to free our fellow men, women and children from the abject and dehumanizing conditions of extreme poverty. SDG Agenda: to build upon the achievements of the Millennium Development Goals and seek to address their unfinished business. Focus is on Multidimensional aspects of poverty
Priority actions on poverty eradication include improving access to sustainable livelihoods, entrepreneurial opportunities and productive resources; providing universal access to basic social services; progressively developing social protection systems to support those who cannot support themselves; empowering people living in poverty and their organizations; addressing the disproportionate impact of poverty on women; working with interested donors and recipients to allocate increased shares of ODA to poverty eradication; and intensifying international cooperation for poverty eradication.
SDGs SDGs are a new, universal set of goals, targets and indicators adopted by all countries MDGs, which were agreed in 2001, have expired in 2015. MDGs, in reality were considered targets mainly for poor countries to achieve, with finance from wealthy states, but SDGs are designed to work for every country.
Why SDGs (1) Even today, about 1 billion people live on < $1.25 a day, 800 million do not have enough food to eat. Women are still fighting hard for their rights, and millions of women still die in childbirth. SDGs countdown starts from January 2016
Poverty in Declining Trend Region 1996/97 2010/11 2015/16 Nepal 42 25 21.6 Urban 21.6 15.5 NA Rural 43.3 24.5 NA
But the Variation on Poverty Incidence is High (NLSS III-2010) Poverty By Region Poverty Incidence Poverty by Ethnic groups Poverty Incidence Poverty By Ecological Region Eastern 21.4 Hill Brahmin 10 Mountain 42.3 Poverty Incidence Central 21.7 Terai Middle class Western 22.3 Dalits (Hills- Terai) 28.7 Hills 24.3 44-38 Terai 23.4 Mid- Western 31.7 Janajatis (Hills-Terai) 28-26 - - Far-Western 45.6 Muslim 20 - -
Nepal s Progress in MDGs 1990 2013 2015 (target) Poverty Incidence USD 1 per day Poverty Incidence (National Poverty Line) Net enrolment rate in primary education Ratio of girls to boys in primary education Infant mortality rate (per 1,000 live births) 33.5 16.4 17 (already achieved target) 42 23.8 21 64 96.2 100 0.56 1.02 1.0 108 46 (2011) 36
Progress in MDG (1) 1990 2013 2015 (target) Under-five mortality rate (per 1,000 live births) 1 Maternal mortality ratio (per 100,000 live births) HIV prevalence among men and women aged 15 24 years (%) Proportion of population using an improved drinkingwater source 162 54 (2011) 54 850 258 213 0.15 (2005) 0.03 Halt and reverse the trend 46 85 73
Reasons for decline in Poverty (1) Growth of Remittances Rise in farm income Occupational shift- Increase in non-farm income Urbanization Increasing working age population and household size Government programs micro-credit/access to finance/ education
Reasons for decline in poverty (2) 2007/08 2015/16 Remittances % of GDP 17.5% 30% Total Remittances (Rs. Billion) 142 666 Agri. Growth rate (%) 5.8-0.01 (Average for last 9 yrs. 3%) Agriculture wage rate (2004/05= 100) Index 156 458 Contribution of Non-ag. In GDP (%) Percentage of population bet. 15-59 64 67 50.8 54.2 HH. Size 5.7 4.9
Primary Reasons for Poverty Reduction Remittances* (Household receiving remittances) Improvement in farming income Occupational Shift (Share of population dependent on self employed and wage agriculture )* Urbanization (old definition) 2003/04 2010/11 Contribution to poverty reduction 32% 56% 33% (Real wage in ag. rose by 22%) (Hhl. size fell by 8%) 18% 69% 53% 18% 15% 19% 8% Others 23% * Remittances income was about 30% of GDP in 2015
Other Main Reasons for Improvements in MDGs Decline in Poverty Increase in Facilities (Health & Education) Increased Accessibility Enhanced social security program Increased Awareness Increased level of Women Education Greater Involvement of Private Sector 47
SDG Goal 1: End Poverty in all its form by 2030 By 2030, eradicate extreme poverty for all people everywhere, currently measured as people living on less than $1.25 a day 2014 2022 2030 Pop below US$ 1.25 a day 24.8 12.9 1.0 GNI US$ 772 1647 2500 (>13% growth rate per annum in simple average)
SDG Issues and Challenges (1) There are too many indicators (17 goals and 100s of targets) Effective Monitoring system has yet to be established. It is still uncertain what the global community would do if the countries miss or lag behind in the track
Issues and Challenges (2) Detail work has yet to be carried out for financing SDGs (According to UN estimates, for the new goals to be met will require as much as US$11.5 trillion a year or $172 trillion over the next 15-year) SDGs have to be communicated with appropriate wording and engagement with a multitude of partners beyond national governments should be developed.
Challenges for Nepal (3) Preliminary guestimate reveals that, the cost of achieving SDGs is astronomically high. Successful interventions (education, health related policies etc) have to be up-scaled, but there are financial as well as institutional constraints Domestic resource is limited to achieve SDGs within the time frame
Challenges (4) Role of private sectors (including FDI) should be made much clearer and government should invite private sector in areas where it is more efficient and their role should be enhanced There are challenges in getting more foreign assistance, focusing them in line with the SDGs, and channeling them in the priority areas of the country.
Issue and Challenges (others) There are too many priorities which are also broad. Priorities are in all sectors (growth, inequality, per-capita income etc., health, education, agriculture, forestry, roads, energy and so on) By historical standard the progress rate has to be much higher than in the past (MDGs)
Social Protection Program (MoF) Social Insurance 5 Social support 35 Cash transfer 17 Commodity transfer 9 Community infrastructure 6 Care Service 1 Housing 2 Labor welfare related 5 Others 5
Impact of Social Program Expenditure in those 50 programs more than 13% of budget in 2073/74 Beneficiaries number small Because of too many programs impact negligible
Nepal: Future Course of Actions Reinvigorate growth Developing and effectively implementing strategy for achieving SDGsespecially targeted programs related to poverty alleviations and public services Enhance Government s capacity to spend and for implementation
Strategies for Pro-poor Growth Strategy Agriculture commercialization and productivity (irrigation), High value crops (only 20% agricultural land used for HVCs), and agro and food processing industries Skill Development (only 1% going to overseas employment are skilled and 25% semiskilled) Education (Secondary school completed labor earns about 5 times that of labor with no education) Cooperative, which is one of the pillars of development, should be principle based and focus on multi-dimensional aspects of poverty. They should be promoted.
Strategies for Pro-poor Growth Strategy There are too many programs related to poverty alleviation should be streamlined Access to finance should be enhanced Special productivity enhancing program for informal sector should be given priority Special package program in the poverty pockets should be enhanced Modalities for implementation must be refined and made effective
Achieving SDGs SDGs have to be mainstreamed in national plans, annual budgets, and local plans (local as well as provincial) Local targets should be estimated and should be owned by subnational governments SDGs should get priority in budget preparations
Achieving SDGs (1) Government programs for poverty alleviation should be consolidated Targeting of the programs for needy and exclusive groups should be further refined and strengthened Financing plan has to be developed with much greater emphasis to the private sector
Enhancing opportunities available from Cooperatives Cooperative is an association of people, majority of which are poor, having a common bond of interest, voluntarily join together to achieve a lawful common social and economic end members equitably contribute the required share capital and accept a fair share of the risks and benefits of their undertaking in accordance with the universally accepted corporate principles and practices;
Cooperatives Cooperatives are major providers of employment in rural areas where private investors little interest Agricultural cooperatives have played a central role in job creation in agricultural production, processing, marketing, purchasing and sales Rural cooperatives have also boosted employment in other sectors like financial services, energy, housing, tourism and handicrafts As for example, over 257,000 jobs have been created by agricultural cooperatives in Japan s rural areas, and 65,215 jobs in the Philippines.
Strength Cooperative is a nearest support institution for financial support accessible to household. Access to service, empowerment and bargaining capacity of community member increased. Cooperative has now been identified as an important aspect of poverty reduction and socio-economic progress by the government.
Weakness The awareness and knowledge about the principle and values of cooperatives among the members are very weak. The increasing unethical financial transactions under cooperatives are grooming. Beside, the institutional capacity of department of cooperatives and its offices, increasing number of cooperatives are some of the problem. Cooperative seeks for ethical participation, and this has been challenge to maintain within and in interaction with environment.
Opportunity Cooperatives can potentially empower, support poor in getting out from poverty. The socio-economic progress with distributive justice is the greatest opportunity that cooperative can generate. Beside, it binds rural and marginalized poor and provide institutional forum to bargain, receive benefits and fulfill their socio-economic needs. The urban middle class can have access to services and capital and fulfill their enterprising needs. Rural people can better benefit from access to service and as well from access to capital for enterprise development. Cooperative is working as a nearest and easiest financial transactions/service provider in rural areas and for rural people.
Threat Cooperatives are being private business these days. Though it cannot be generalized, but rate of increase is increasing As cooperative has not yet been clearly identified for financial mobilization, the transaction and economic value are yet not well accounted.
Approaches Recognize Community as a unit of development and provide support to them Help, promote and induce cooperative as a member centered community based enterprise. Make sure that the institutional arrangement promotes equal representative right The community development can be induced through two aspects. First, it generates localization, imports opportunities and incomes in the community. Second, it helps in equitable distribution and helps uplifting consumption and investment potentiality
Approaches (2) Develop cooperative as a good governing institution based on community business. It will potentially contribute community to aggregate the local strength for fighting poverty and defending the threats. Make sure that benefits are shared equitably based on both on ownership and transaction. It is also a unified mechanism of generating self reliant economy. Poor participation due to lack of Improve capacity of members and institutions to make sure that participation is enhanced and cooperatives become functional for poverty reduction
Approaches (3) Policy infrastructure should be strengthened. Acts and regulations should encompass all kinds of cooperatives. It is often felt that it is not enough to manage the large variety of cooperatives with number of challenges in ethical manner. Controlling illegal activities means providing ground for fair play. If we cannot punish the bad ones, it will discourage effective functioning of cooperatives and encourage
Approaches (4) The long term solution for enhancing and expanding cooperatives is to bring confidence among the cooperative to accept value and principle of cooperatives and internalize the norms with due respect Should be empowered and strengthened with required support.
In case of Nepal Evidence from different regions around the world shows that cooperatives have an important role to play in reducing poverty in local communities where they are embedded Poverty aspects and cooperative aspects are closely related. Rank of investments from cooperative and rank of HDI are significantly coorelated Cooperative investment and per-capita income are highly correlated.
In case of Nepal (2) Participation of women and youth is high in Nepal Cooperatives have created new jobs and opportunities Cooperatives have become the main channel for rural people to access financial services, get lower cost inputs, storage, transport and get their products to market Serve to secure livelihoods and reduce poverty.
Improving Implementation Capacity Spending capacity of the government is extremely weak and needs to be improved Institutional capacity for the implementation of national priorities and plan should be enhanced (project preparation, feasibility study, adequate financing, monitoring)
Improving Implementation Capacity (1) Local elections should help in improving local conditions Acts/ capacity related to service providers and contractors should be improved/ enhanced Government, NGOs, Private sector should all be geared towards achieving SDGs
Thank you for your attention