By Joseph Brian Madhimba Countries around the globe are grappling with the intractable scourge of poverty.
By its very nature, poverty is dehumanising. It can also seriously impair a person’s physical and mental health.
Poverty reduction is at the centre of the policies of the Bretton Woods institutions, the International Monetary Fund (IMF) and the World Bank.
The IMF plays a role in poverty reduction by giving loans to countries experiencing balance of payment problems and the World Bank (WB) gives technical assistance and loans for capital projects.
It is often the case that in developing countries poverty is more acute in the rural areas where the people do not meet the criteria for borrowing from the traditional mainstream banks which demand collateral on loans.
In Zimbabwe, poverty is more prevalent in rural areas such as Binga, Kanyemba, Chimanimani and Malipati.
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Concept of poverty
Poverty is defined in many ways depending on the worldview of the definer.
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There are those who would like to argue that poverty, like beauty, is in the eyes of the beholder.
Amis and Rakodi (2014) use two main approaches to define poverty: one which emphasises the absolute nature of poverty, and the other focuses on relative deprivation. The absolute approach sets a minimum or basic poverty level. Individuals below this level are classified as being in conditions of poverty.
The relative deprivation approach defines poverty in relation to either average levels or societal norms. In this case, the definition of poverty is related to its potential causes such as economic exploitation and social marginalisation
These two measures use an income or consumption-based approach to poverty.
However, some experts have criticised the income measure of poverty, arguing that it excludes peoples’ access to basic services such as education, healthcare, adequate quality housing with basic services etc.
A different view on poverty is the entitlement approach. According to this view, deprivation is not overall lack of resources, but has to do with a household’s ability to command such resources by means of entitlements or assets.
The WB has extended the concept of poverty beyond the ideas of income to a more comprehensive notion of lack of opportunities, a sense of voicelessness and vulnerability to external shocks.
Thus, WB poverty reduction strategies are designed “not only to create income-earning opportunities but also ensure improved capabilities and empowerment of the poor.”
Whatever view of poverty one takes, micro-finance can be a useful weapon to reduce poverty in Zimbabwe.
For a long time, micro-finance has been eclipsed by lending from traditional banks. Therefore, there is need for setting up more micro-finance institutions (MFIs) in Zimbabwe.
Definitions of MFIs
Patrick Meagher (2002) defines micro-finance as lending small amounts of money for short periods with frequent repayments. For purposes of using micro-finance as an instrument for reducing poverty, this definition is too narrow.
The definition by Van Maanen (2014) is more useful: It says “micro-finance is banking the unbankables, bringing credit, savings and other essential financial services within the reach of millions of people who are too poor to be served by regular banks, in most cases because they are unable to offer sufficient collateral.”
This broader definition makes sense because some MFIs also provide savings facilities, credit cards, payment services, money transfers and insurance services.
In Bangladesh, India and Pakistan, the concept of micro-finance has been broadened even further by having MFIs provide social intermediation services. These include encouraging people to borrow in groups and training them in financial literacy and small business management.
Impact of micro-finance
Studies carried out by the WB in Bangladesh, India , Argentina and Brazil show that micro-finance has contributed to poverty reduction. It was found that micro-finance empowered the poor by giving them the confidence to tackle their deprivations head-on.
In those countries, low-interest micro-finance loans have resulted in the establishment and expansion of micro businesses such as gardening, farming, and bee-keeping to mention just a few. These small businesses have enabled poor people in rural areas to build assets and improve their living standards
The poor have also benefitted by way of improved nutrition, education for their children, better housing and the adoption of a saving culture.
If these benefits can be replicated in Zimbabwe, then definitely there will be a reduction in poverty levels.
Thus, micro-finance can positively impact the standard of living of poor people in Zimbabwe, giving them self-confidence and enabling them to live their lives with dignity and hope.
However, it should be noted that micro-finance isn’t a cure for all poverty-related problems. It is not the only way to get out of poverty but, used together with other social initiatives, it can improve the lives of poor families.
Lastly, the battle against severe poverty in Zimbabwe can be waged and won by taking a holistic approach to poverty reduction and recognising the value of the poor as change agents and useful members of the human race.
- Joseph Brian Madhimba (PhD) is a business and financial markets expert. He owns a university offering development-oriented degrees in business, economics, entrepreneurship, marketing and logistics and supply chain management.
