Rural Poverty

• Rural poverty issues need to be integrated into all four parts of the PRSP process. Most poverty reduction strategies identify rural development as a priority sector and identify many interventions for rural development. However, the impact of poverty reduction strategies can be improved through the inclusion of: (1) a rural participation strategy to ensure that rural stakeholders are involved fully in the design, implementation and monitoring of the strategy; (2) a diagnosis that not only assesses the rural poverty profile, correlates of poverty (including income sources and access to assets and markets) and key determinants of rural poverty, but also evaluates the overall performance and incentive framework of the rural sector and its impact on the poor; and (3) spatially differentiated poverty impact and intermediate monitoring indicators that help focus policy makers and national actors on rural poverty reduction.

• Incidence of benefits and the importance of sequencing. Investments in natural (land tenure and water), financial (credit and livestock) and knowledge assets (research and extension) have direct and indirect benefits, which are not evenly distributed. The most important direct benefits of public investment tend to be in increased land and livestock productivity, while the indirect benefits are transmitted mainly through labor and food markets. The extent to which the poor receive the direct and indirect benefits depends upon their participation in rural markets, the level of physical and human assets, and access to complementary assets (for example, research and extension with credit). A key priority is to ensure a minimum level of human and physical assets for the rural poor, which is necessary to access the economic information, markets and services to allow producers to fully benefit from public investments.

• Packaging. Not only is a minimal level of social and physical infrastructure required to enable people to benefit from investments, but the packaging of such investments is also important. For example, improved access to land or irrigation needs to be combined with improved access to knowledge (research and extension, market information) and financial services. However, given the diversity of service providers and financing sources for productivity enhancing investments, it often is difficult to ensure the delivery of a comprehensive package to smallholders.

• Interventions in the rural sector need to recognize and capitalize upon women as key economic actors, and not only as a "vulnerable and excluded group." Interventions need to take into account the economic role played by rural women and focus not only on improving social well-being and reducing risk, but also on fostering broad-based rural growth and enhancing the access to and management of natural, financial and knowledge assets by women.

• Participation. A participatory approach can be pursued through various means, such as conflict resolution mechanisms for common land management, water users associations, parent-teacher organizations, beneficiary surveys for health, community involvement in infrastructure development, and participatory development of research and extension services.

• Growing demands on a fragile private sector. Following the structural reforms enacted during the past two decades, the private sector’s role has grown. The private sector is expected not only to provide farm and non-farm income generating activities, but also to play a direct role in the financing and delivery of some public goods and services in rural areas. At the same time, in poor regions, the incentives and capacity for private sector involvement are most limited. Options such as market-based business development services and regulatory frameworks that promote private sector involvement (for example, intellectual property rights for seed development, warehousing receipts and their use as collateral, and prudent supervision standards adjusted for microfinance institutions) could need further exploration.

• Institutions for broad-based rural development. The success of development initiatives, particularly those targeted in support of the rural poor, depends upon the existence of well-functioning institutions, able to collaborate across regional and functional boundaries and responsive to the people they are meant to serve. Yet poverty reduction strategies rarely analyze institutional capacity or discuss the institutional framework for priority public actions. The priority areas for action discussed below consistently highlight the importance of strengthening institutional capacity, whether it be public (land registries, extension providers), private (microfinance institutions, extension providers), or civil society based (water users, producer associations).

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