Understanding the dynamics of poverty in Rwanda

Overview

While poverty rates in Rwanda have fallen significantly since the 2000s, the latest estimates reveal a slowdown in the poverty reduction rate. This calls for a better understanding of poverty and poverty dynamics in the country. In this paper, we use the latest three waves of Rwandan panel data, collected in 2010/11, 2013/14 and 2016/17, to characterise the dynamics of poverty in Rwanda and explain the slowdown in poverty reduction. Our results show that education, health insurance, diversification of occupations within households and savings all promote escape out of poverty and prevent impoverishment. The Girinka Programme acts as a lift out of poverty, while business creation has protective effect against impoverishment. Observed trends of these variables, especially the increase in households depending on agriculture wages and the reduction of business owners at the household level, appear as important factors in the slowdown in poverty reduction in Rwanda.

Authors: ODI & IPAR

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What to do about the slowdown in poverty reduction?

Key points

• Rwanda had been a stellar performer in poverty reduction until recently. Many of the gains were the result of government policies and programmes, but some of these programmes also have unintended consequences which need to be reviewed.

• The slowdown in poverty reduction during the 2010s has been driven by fewer escapes from poverty, the challenges people face in sustaining escapes, greater impoverishment as well as continued chronic poverty.

• In Rwanda, as elsewhere, escaping poverty and then staying out of it is mainly possible due to ‘growth from below’, and the government has been promoting this, especially in agriculture. Since around 2012, the government’s main growth thrust has been in promoting ‘growth from above’ as well as continued support to smallholder agriculture, and this has achieved significant improvements in infrastructure, the business environment and investment, as well as productivity growth in farming.

• In reviewing the poverty effects of economic transformation, a better balance between support for growth from below and growth from above is needed, especially in the nonfarm rural economy and the urban informal sector. More comprehensive and better enabling conditions for growth from below would allow more poor people to participate in and benefit from growth. • Reviews of the following issues are needed: the reasons why the rural nonfarm economy is relatively underdeveloped; the unintended consequences of a number of regulations affecting small and micro-enterprises as well as smallholder agriculture; and the unintended consequences of a raft of policies which demand cost recovery from poor and vulnerable households, limiting the savings and investments these households can make.

• Current efforts to make cities more inclusive through city Master Plans are excellent and should be pursued with vigour. This could provide a model for the other reviews suggested above.

• Rwanda’s unique health insurance scheme provides exceptional protection against ill-health as a source of impoverishment. The government and development partners could acknowledge the other sources of impoverishment – including loss of livelihood due to environmental hazards as well as the policy emphasis on cost recovery – and address these more resolutely. The loss of male labour in households where there is separation, divorce or widowhood is a further source of impoverishment, and while the government has made strenuous efforts to enhance the rights of married women in such situations, unmarried women in informal or polygamous unions are less protected.

• There has been significant progress in increasing the numbers of children enrolling in school. However, education costs are significant components of household budgets, even for poor people. Reducing or eliminating these costs through significantly increased public expenditure on education and providing children from poor families with the means to continue through secondary education would contribute significantly towards reducing poverty both now and intergenerationally.

• There are two main sources of chronic poverty: gender inequalities resulting in disadvantaged women-headed households, and the growing dependence of the poorest Rwandans on casual agricultural labour. Extending the protections currently available to married women to unmarried cohabiting and polygamously married women, as well as further measures to tighten the labour market to complement refreshed minimum wage legislation, are potential ways forward. Such measures could include implementing and extending the minimum social protection package to promote graduation from protection and social cohesion.

Author: Andrew Shepherd

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Leave No One Behind in progress to the Sustainable Development Goals: Priority actions for governments by 2020

The 2014–15 Chronic Poverty Report: the road to zero extreme poverty argued that three objectives had to be achieved to get to zero poverty: chronic poverty had to be tackled; impoverishment had to be stopped; and escapes from poverty needed to be sustained. The report identified 14 policy areas that could be critical for the eradication of extreme poverty and leaving no one behind in the process. These can also be clustered into four pillars: human development, pro-poorest growth, transformative social change and resilience.

This paper provides a reasonably comprehensive basis for identifying policies that will contribute to leaving no one behind, since the chronically poor are, by definition, those who are getting left behind in the process of development. Of course, among the chronically poor are those who are able to make progress and sustain escapes from poverty; there are also those who are stuck on the consumption floor, which has barely moved in several decades, some of whom may be experiencing ‘intersecting inequalities’ (those pertaining to different attributes like age, religion, gender, embodied in the same person) – or, in simpler terms, those who experience multiple disadvantages.

This paper explores context through a re-categorisation of countries using income levels, institutional fragility and progress on poverty, and an analysis of countries’ policy frameworks in 2015. It then explores the above priorities in context, and in each policy area outlines key measures that will underpin progress and enhance access for the poorest and most marginalised.

The aim of this analysis is to stimulate debate as to what policy mix is appropriate, necessary and desirable in different country circumstances. Once policies have been selected, policy consistency over time, as well as their sequencing; cross-government coordination to ensure delivery of the right combinations; and multi-stakeholder partnerships for implementation are indispensable tools to reach the objective of LNOB and achieve the SDGs for all. Governments vary in the extent to which they have such mechanisms in place and allow them to influence policy and implementation.

Authors: Andrew Shepherd and Kate Bird with Moizza Binat Sarwar

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