Evaluation Presentation: Evaluation on Pathways Out of Rural Poverty and the Effectiveness of Poverty Targeting

Evaluation on Pathways Out of Rural Poverty and the Effectiveness of Poverty Targeting

Evaluation Presentations

This evaluation establishes that poverty targeting has been based on easy assumptions: that poor people live in poor regions, public investment in poor regions leads to poverty reduction, and the solution to poverty reduction in a poor region lies within that region.

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Poverty targeting has been used widely in development projects to channel funds to poor regions or deliver benefits to poor households.	Most studies on targeting measure its effectiveness in terms of distributing inputs such as budgets, funds, or projects, or in terms of short-term benefits such as subsidized farm inputs, training courses, or entitlement to construction work during project implementation.	What has been lacking is results-based evaluation that measures the effectiveness of targeting in terms of the number of households that rise out of poverty.
In ADB, wide use of geographic and household targeting to channel funds to poor regions or deliver benefits to poor households fueled the need to evaluate the effectiveness of poverty reduction interventions to understand what works, what does not, and why.	In 2006, the Operations Evaluation Department in ADB provided insights into factors determining the effectiveness of poverty reduction interventions.	Using a poverty exit framework, the study examined how the rural poor selected strategies to rise out of poverty, how various factors— such as household resources and the contextual conditions households faced—influenced their selection of the strategies, how sustainable the poverty exit was, and how effective poverty reduction interventions had been.
The study observed that while poverty had been reduced in all the areas visited, the sustainability of the poverty exit varied significantly.	The study established that the targeting approach is based on easy assumptions, viz.: (i) poor people live in poor regions, (ii) public investment in poor regions leads to poverty reduction, and (iii) the solution to poverty reduction in a poor region lies within that region.	Rather, the study noted that: (i) the bulk of the poor live in less poor regions, (ii) the location of projects in poor regions did not guarantee significant poverty reduction, and (iii) the solution to persistent rural poverty in remote and poorly endowed regions lies largely outside them.
Targeting projects may direct the attention of project designers and implementers away from other important matters. The exclusion of non-poor participants may isolate the poor from dynamic actors in society and from the mainstream of economic growth, and forego the opportunity of employment generation that is often led by the non-poor. Also, some productive poor may develop dependence on external assistance.	The study invited ADB to distinguish the productive poor from those without working capacity. The latter should be taken care of by welfare programs, where targeting is an effective mechanism to minimize leakage of public subsidies to the non-poor.	For the productive poor, project interventions need to be tailor-made to tackle squarely the most binding constraints to poverty reduction in project areas instead of locating a standard investment package in poor regions or distributing temporary project benefits to the poor.
Solutions for poverty reduction in poor regions may require public investment in non-poor regions that are naturally attractive to private investors to stimulate economic growth. Poverty reduction projects may require active participation of non-poor individuals or private firms in job creation.	The study recommended that ADB explore alternative interventions that are more likely to lead to effective reduction of rural poverty.	Alternative interventions can include: (i) infrastructure projects in areas with potential for generating sizeable employment—even if they are not poor, (ii) projects facilitating migration or reducing its costs, and (iii) projects enhancing access to non-subsidized loans to facilitate self-employment or employment generation.
Other alternative interventions include: (i) provision of low-cost health services to rural residents, (ii) provision of non-subsidized emergency loans for rural households, (iii) provision of low-cost loans to invest in children's education, and (iv) long-term loans for private investment in small-scale rural infrastructure.