Poverty in Sri Lanka has become a multi-dimensional situation where low income groups are faced with a situation where basic consumer needs cannot be satisfied. The poor are faced with gaps in access to education, healthcare, water and sanitation. This tends to stifle an individual which results in the drive for personal development not taking place. This in turn contributes to the vicious cycle of poverty in the country. There are also studies that develop a relationship between poverty and terrorism in the context of the conflicts that take place in situations of inequity.

Three million affected by poverty

The World Bank says in its recent research that the overall poverty head count has dropped to 15.2 percent as against the previous number of 28.8 percent which is encouraging. However, the 15.2 percent means that the number of people affected by poverty is Three million Sri Lankans. In addition the research also revels that the non-poor are closely clustered just above the poverty line, which means that the number of poor is subject to sharp increases when slight changes in economic conditions happen like a natural disaster or price increases. If we examine closely the numbers further it reveals that in the rural and urban sectors the headcount ratios are 25 and 8 percent respectively, which means that poverty is essentially a rural phenomenon. This indicates we have to develop a home grown poverty alleviation model so that we can drive equitable economic growth in the country.
                                                                           
Village as a developmental Unit

A key strategy to follow is to make a village a partner in the developmental process specially in the North and the East and in vulnerable areas such as Badulla and Moneragala. This involves a careful identification of the problems at the ground level and there after with the participation of the villages developing a solution. In this process it is vital that one prepares the internal and external resources which can be mobilized. The private sector has a major role to play given the new policy where two percent of turnover has to be used for CSR ( Corporate Social Responsibility) purposes. The key aspect that the private sector must keep in mind is that CSR in its correct sense should be an activity where the company will not benefit directly or indirectly in the short or the long term. In this perspective if each private sector company can link itself with the forty thousand villages in the country on this model of identifying problems and developing a solution in partnership with the village, within a 3-5 year horizon we can drive economic growth across the country. 

Agriculture contribution

Government Role

From the above it is evident that cash grants will not help a typical villager move out of poverty. A strategic initiative can be to identify opportunities for the poor to participate in economic activity through skill enhancement at the village level. 

• Focus on livelihood opportunities to provide income avenues to the village by way of economic linkages to vegetable produce.
• Provide concessionary funding and technical know how by mobilizing resources from donor agencies.
• Invest on special poverty reduction projects like building irrigation projects, causeways and village level ware houses.
• Provide promotional support for marketing the produce to indirect exporters.
• Assign Pradeshiya Sabha members to support and monitor performance.
• Test the participatory approach of development from a village basis, and thereby share best practice among other villages.
• Mobilize the line ministries to allocate resources to selected villages on priority basis to accelerate the developmental process.

Drive social and ethical standards in a village with psycho social development work with the help of NGO’s and INGO’s.  

Village level Credit

A lesson in time as highlighted above is that merely raising budgetary allocations to the agricultural sector is not going to reduce poverty levels. The village level development must be covered with a Rural Development Act. This can lead to a drive of extending rural credit to rural non agricultural occupations. The Nobel award winning work of Bangladeshi Professor Muhammad Yunus i.e. Grameen Bank (Bank for the Poor), is a model that we need to examine. Maybe the private sector can do the same on a micro basis. A case in point was Unilever in India that developed a programme on these lines called the Sahkthi Amma that helped a rural area become an integral part of the growth model of the company. The recent research done by Singer Sri Lanka has revealed that the commitment to pay loans is a holy grail in rural areas that is not prevalent in the urban areas, a pattern experienced and shared by the Bangladeshi Grameen Bank champion.

Growth Targets

There is many a discussion on the Millennium Developmental Goals (MDGs). But a key area of focus should be that if the Gini coefficient for consumption inequality remains unchanged at the level of 2002 and growth continues at the same rate it did in 2004 and 2005, poverty will fall by more than 50% to 8.2% by 2015. If however, consumption inequality increases – as it did in the last 10 years –poverty will fall only to 14.8% from the 26% in 1990/91.Given this backdrop it may be that the Village as a developmental strategy can be the way forward to influence the Gini coefficient in Sri Lanka specially in the North and the East. The current strategy of Gama Neguma is aligned to making the village the unit of development. However, this strategy can be successful if the private sector and the international donor groups partner the process so that we can drive down poverty to a single digit and increase the domestic savings to 35 percent. This in turn can power a 8% GDP growth in Sri Lanka. If we do not move in this direction Sri Lanka will lose in the race for growth in the South Asian region.

Economic Affairs Unit, SCOPP