Poverty Reduction In Sub-Saharan Africa Research Articles

Re‐evaluating Africa's growth, poverty and inequality nexus

AbstractThis study evaluates the role of growth in poverty reduction within the sub‐Saharan Africa (SSA) region in direct comparison to other global regions along time‐delineated thresholds. The study's results show (i) A significant gulf in the performance of SSA economies in comparison to their global cohorts; (ii) An improved role played by growth after the mid‐2000s for poverty reduction in SSA; (iii) A less deleterious impact of rising income inequality on poverty reduction within the SSA sub‐region relative to other global regions, and (iv) An improved performance of resource‐dependent SSA economies in translating growth to poverty reduction since the mid‐2000s. The convergence in growth‐induced poverty reduction between SSA and its global cohorts energizes prospects for attaining the Sustainable Development Goal of eradicating global extreme poverty by 2030; it however also calls for renewed strategies toward improving the efficacy of growth in future poverty reduction within the sub‐region.

Empirical Analysis of Financial Inclusion's Role in Economic Growth and Poverty Reduction in Sub-Saharan Africa

This research aims to investigate the correlation between financial inclusion (FI), economic growth (EG), and poverty reduction in several Sub-Saharan African (SSA) countries throughout the period of 2014-2021. The research used the generalized method of moments (GMM) econometric methodologies. A financial inclusion (FI) composite index was constructed using principal component analysis (PCA) to include the many attributes of FI indicators. The findings indicate a positive and significant impact of financial inclusion on economic development and a reduction in poverty in Sub-Saharan Africa. These results emphasize the crucial significance of legislators and governments giving priority to policies that enhance the availability, utility, and accessibility of financial goods and services. The outcome will include a reduction in poverty and an increase in equitable economic progress throughout Sub-Saharan Africa.

Does governance matter to ensure significant effect of foreign direct investment on poverty reduction? Evidence from developing and emerging countries

This paper examines the moderating role of governance in the effect of Foreign Direct Investment (FDI) on poverty using simultaneous equations models for sub-Saharan African, Asian, Latin American and Eastern European countries over the period 1996–2017. The main objective of this study is to examine the role of governance as a moderator of the FDI effect on poverty. Our analyses support a positive significant impact of FDI on poverty reduction in sub-Saharan Africa and Latin America but a negative effect in Eastern Europe, while it is not significant in Asian economies. In addition, we detect a positive conjoint impact of FDI and governance quality on poverty in all African, Latin American and Eastern European economic communities. However, this interactive effect is negative and not significant in Asia. This means that FDI reduces poverty in the presence of governance quality. Our results support that in the poorest countries (sub-Saharan Africa, Latin America), poverty is more sensitive to interactions between governance and FDIs than in the richest countries (ASIA). As policy implications of this study, governments in less developed regions must give great importance to improving the quality of governance. In this way, it becomes possible to attract foreign direct investment and increase household consumption reducing poverty as main purpose of Sustainable Development Goals (SDGs) for 2030.

The Impact of Financial Inclusion on Economic Growth and Poverty Reduction: Empirical Evidence from sub-Saharan Africa

This study examines the impact of financial inclusion (FI) on economic growth (EG) and poverty reduction in 18 sub-Saharan Africa (SSA) over the period from 2014 to 2021. The study employs fixed effects, random effects, panel-corrected standard errors (PCSE), Driscoll Kraay standard errors, the generalized method of moments (GMM), and quantile regression. A FI composite index was created using principal component analysis (PCA). According to the findings from all the models, FI has a significant positive effect on EG, and it also reduces poverty in SSA. The findings from the quantile regression indicate that countries with a higher Human Development Index (HDI) have a more significant decline in poverty. Therefore, governments and policymakers must prioritize the implementation of policies that facilitate the accessibility, availability, and usability of financial products and services. Such measures will contribute to fostering inclusive economic growth and poverty reduction in SSA.

Revisiting the Role of Institutional Structures in the Relationship Between Trade Openness and Poverty Reduction in Sub-Saharan Africa

ABSTRACT The study investigates the conditioning effect of institutions in the relationship between trade openness and poverty reduction in Sub-Saharan African economies. Employing generalized method of moments, it was revealed that institutions influence the relationship between trade openness and poverty reduction in SSA. Thus, to reduce poverty in the region, SSA economies must first start by opening their economies to international trade. This could be achieved by reducing import and export taxes, focusing more on exporting value-added products and providing relevant training and information for importers and exporters. However, such attempts will be more fruitful in the presence of sound institutions.

Financial inclusion and energy poverty reduction in sub-Saharan Africa

This study examines the relationship between financial inclusion and energy poverty reduction, proxied with access to electricity and clean cooking technologies and fuels, using data from 23 Sub-Saharan African (SSA) countries from 2004 to 2019. Evidence from dynamic ordinary least squares, fully modified ordinary least squares, and canonical correlation regression techniques showed that financial inclusion significantly reduces energy poverty in SSA. However, financial inclusion's impact on energy poverty reduction differs significantly among individual SSA countries. We recommend that policies promoting financial inclusion would reduce energy poverty.

Structure, conduct, and performance of beans marketing in Malawi: A case study of Lilongwe District

Poorly performing markets are one of the major limitations to achieving high farm income and ultimately poverty reduction in sub-Saharan Africa. Using the structure, conduct, and performance approach applied to bean markets in Malawi, we bring to light the status and performance of the smallholder marketing system. Multiple methods were employed in this study: the Herfindahl-Hirschman Index to evaluate the market structure; adopted pricing strategies and affiliation with large companies or associations to assess conduct; and marketing margins to measure market performance. Our results show that 39 percent of markets are imperfectly competitive. Also, the lack of reliable markets, purchase prices, access to credit, operating capital, and transaction costs were major factors that undermined the potential for bean traders to operate at a higher scale. The commonly adopted pricing mechanisms include cost-plus pricing, dynamic pricing, and quality-dependent pricing. Very few bean traders (7%) are affiliated with large trading companies and associations. Seven bean marketing channels were observed. We recommend that policies favoring improvements in rural road networks and market infrastructure should be encouraged to reduce transaction costs. In order to eliminate barriers to increasing quantities of beans handled by traders, the government should provide soft loans with low interest rates to traders. Deliberate actions to promote the affiliation of small traders with larger companies and associations involved in bean trading should be promoted.

Does Infrastructure Development Contribute to Poverty Reduction in Sub-Saharan Africa?

Does Infrastructure Development Contribute to Poverty Reduction in Sub-Saharan Africa?

Is democracy pro poor in Sub-Saharan Africa?

This study examines if democracy reduces poverty in 40 Sub-Saharan African countries for the period 1999–2018. For this purpose, we employ the Generalised Method of Moments. The results show that democracy is not directly associated with poverty reduction in sub-Saharan Africa. However, this observation hides important non-linearities and an interesting pattern of policy complementarities. Indeed, democracy is associated with poverty reduction in countries where economic growth is strong and human capital high. The robustness tests carried out do not change these results. This means that poor economic growth and weak human capital not only have a direct negative effect on the well-being of SSA countries, but also prevent the poor in those countries from benefitting the gains of democracy. Therefore, in order to reduce poverty in SSA, policy makers should continue the process of democratization while simultaneously adopting policies of economic development and human capital building. Democracy in isolation is useless for the poor in SSA.

Information and communication technologies (ICTs): The potential for enhancing the dissemination of agricultural information and services to smallholder farmers in sub-Saharan Africa

The transformation of smallholder farming is poised to be one of the key drivers of achieving the dual objectives of food security and poverty reduction in Sub-Saharan Africa (SSA). Smallholder farmers account for between 60–80% of the food produced in the region but face many challenges that impede their productivity. Such challenges include a lack of timely access to appropriate agricultural information and services, which results in poor decision-making, particularly in addressing challenges and responding effectively to opportunities. In that context, the effective use of Information and Communication Technologies (ICTs) in improving accessibility to appropriate agricultural information and services presents substantial prospects for transforming the productivity and livelihoods of the farmers. Currently, the region experiences massive penetration and propagation of mobile and web-based applications. However, there is a dearth of compelling, comprehensive reviews evaluating their importance in enhancing agricultural information and services dissemination to smallholder farmers. Therefore, the current review explores the potential of enhancing agricultural information and services dissemination to smallholder farmers through ICTs and highlights gaps in their development and deployment in SSA. Five existing mobile applications used to disseminate agricultural information and services to smallholder farmers were identified, and their advantages, limitations, and opportunities were discussed. These were Esoko, iCow, Community Knowledge Workers, WeFarm and DigiFarm. The development and deployment of user-driven mobile applications that provide curated skill-sharing platforms, encourage farmers to give feedback to extension systems in real-time and promote the participation of women and youth in agriculture are recommended.

Remittances, financial development and poverty reduction in Sub-Saharan Africa: Implications for post-COVID-19 macroeconomic policies

To design and implement effective post-COVID-19 macroeconomics policies to tackle poverty in sub-Saharan Africa (SSA), policymakers need to understand the factors shaping poverty in the region. This paper investigates the effect of international remittances and financial development on poverty alleviation in 44 sub-Saharan African SSA countries from 2010 to 2019. The instrumental variable generalised method of moment technique results indicated that while remittances increase poverty, financial development contributes significantly to poverty reduction. The results consistently revealed that remittances increase both male and female poverty rates, while financial development significantly reduces male and female poverty rates. Other factors such as economic growth, foreign direct investment, and trade openness contributed significantly to reducing poverty. In contrast, government expenditure and foreign aid were found to increase poverty rate in SSA. These results are robust to the Lewbel two-stage least squares estimator. The practical implications of these findings for post-COVID-19 macroeconomic policies in SSA are discussed.

Poverty reduction in sub-Saharan Africa: The mixed roles of democracy and trade openness

This paper examines the impact of democracy and trade openness on poverty. To this end, we estimate a poverty model using the generalized method of moments (system-GMM) on a sample of 24 sub-Saharan African countries during the period 2005–2016. The econometric estimates provide two main sets of results. On the linear effects side, we find that democracy increases income poverty in non-oil producing countries and has no effect in oil producing countries, while trade openness has no impact on poverty. On the non-linear side, we find that imports improve household living conditions in democratic oil-producing countries on the one hand, and contribute to reducing monetary poverty in democratic non-oil-producing countries on the other. Our results are robust to estimates by different democracy indicators. Democracy and trade openness should therefore not be considered in isolation, and simultaneous policies are needed to enhance their impact on poverty in sub-Saharan Africa.

Foreign direct investment and poverty reduction in sub-Saharan Africa: does environmental degradation matter?

This paper investigates the threshold effect of environmental degradation on the FDI-poverty nexus in sub-Saharan Africa for the period 1986–2018. The study used panel threshold regression for the empirical analysis. The evidence from threshold regression using different measures of poverty and environmental degradation shows that the poverty reduction effect of FDI is not eroded by environmental degradation. The study found overwhelming evidence that at the higher level of environmental degradation, FDI contributes significantly to poverty reduction except when Household final consumption is used to proxy poverty and FDI produces an insignificant effect on poverty reduction at the higher level of methane emissions and nitrous oxide emission. Based on this finding, any attempts to reduce environmental degradation by reducing the inflow of FDI will worsen poverty rates in the region.

The Role of Public Goods Provision in Reducing Poverty in Sub-Saharan Africa: Quantile Regression and Fixed Effect Models

The poverty situation in sub-Saharan Africa continues to be a major concern to the world due to the increasing rate of population. The study investigates the impact of institutional investments on poverty reduction in sub-Saharan Africa using panel data from 2000-2018. The study employed fixed effect and quantile regression models to investigate the relationship between institutional investment and poverty reduction. The results revealed that investment in education contributes significantly to the fight against poverty in the sub- region as compared to health investment. Also, investment in the energy sector also contributes significantly to the fight against poverty in the sub-re- gion, however, the security investment has no significant effect on poverty reduction. The results from the quintile regression confirm the earlier results. In conclusion, the study discovered that investing in infrastructure, health, energy, technology, sanitation, and water supply, and education sectors in the sub-region has a consequential effect on poverty reduction in the sub-region.

The effect of financial inclusion on poverty reduction in Sub-Sahara Africa: Does threshold matter?

This paper investigated the threshold effect of financial inclusion on poverty reduction in sub-Saharan Africa (SSA). Using an annual dataset spanning 2010 to 2017, the Hansen’s estimation and Diff...

The Contribution of Absolute Income Towards Poverty Reduction in Sub-Saharan Africa: The Case of Rwanda

The study portrays current worldwide empirical facts on the progress of economic growth and poverty relief in developing countries of the world. It’s well known that in most developing countries, the lives of citizens are not always very pleasant. There are usually lots of inconveniences in the ways of life for the citizen of these countries. Whenever the government of such a country responds to the inconveniences of life by formulating developmental programs to alleviate the problems of the people, such programs in most cases, do not work, making such government to be frustrated and discouraged. However, the government of Rwanda plays an important role in a number of areas including agriculture, education, and the health sector in order to reduce the mortality rate to its citizens and promote entrepreneurship. The aim of this study is to evaluate the level of absolute poverty and the appropriate methods that Rwanda has applied to curb down poverty levels, at the same time, picking key lessons and guidelines that can be of assistance in curbing down poverty in parts of sub-Saharan countries, Rwanda inclusive. In order to achieve its aim, the paper was put into four sections. Section one explains the poverty profile of Rwanda before and immediately after the genocide while the second part describes the short strategies that Rwanda took to reduce poverty. Section three elaborates the work the country puts to ensure it achieves its goals of achieving long-term goals of becoming a middle-income country by 2020. The fourth section describes the environment that the state has created to ensure that its strategies work as planned. The research work also relies on other related secondary documents from the mentioned institutions.

Sustainable Agricultural Intensification in Four Tanzanian Villages—A View from the Ground and the Sky

Agricultural intensification based on smallholders is among many economists viewed as a necessary developmental path to ensure food security and poverty reduction in sub-Saharan Africa. Increasingly, a one-sided focus on raising productivity in cereals has been questioned on environmental grounds, with the concept of sustainable agricultural intensification (SAI) emerging from the natural sciences as a way of advancing environmental and social needs simultaneously. SAI approaches have, however, been criticized for being both conceptually and methodologically vague. This study combines socioeconomic survey data with remotely sensed land productivity data and qualitative data from four villages in Tanzania. By triangulating and comparing data collected through ground level surveys and ground-truthing with remote sensing data, we find that this combination of methods is capable of resolving some of the theoretical and methodological vagueness found in SAI approaches. The results show the problems of relying on only one type of data when studying sustainable agricultural intensification and indicate the poor environmental outcomes of cereal monocropping, even when social outcomes may be forthcoming. We identify land use practices that can be considered both socially and environmentally sustainable. Theoretically, we contribute to a further problematization of the SAI concept.

After the lockdown: macroeconomic adjustment to the COVID-19 pandemic in sub-Saharan Africa

The COVID-19 pandemic is ripping around most of the world, but not in Africa; at least, not yet. At the same time, the policy response is remarkably uniform: most of sub-Saharan Africa went into lockdown from the second week in March. What happens next for the pandemic across Africa is uncertain, but the March lockdowns are unlikely to have contained the epidemic by themselves.What is clear is that the combination of domestic lockdowns and the spill-over from the global recession means immediate and severe hardship. This paper looks beyond the public health aspects of the pandemic to examine the medium-term macroeconomic adjustment challenge confronting domestic policy-makers and international donors. We combine epidemiological and macroeconomic models to calibrate the scale of the combined shock to a representative low-income African economy and to show how alternative policy options for slowing transmission of COVID-19 impact on public revenue, and on GDP in the short run, and hence shape the path to recovery. Noting that the first lockdown, however costly, does not by itself eliminate the likelihood of a re-emergence of the epidemic, we then frame the agenda for key macroeconomic and public finance policies to sustain recovery, growth, and poverty reduction in sub-Saharan Africa.The initial hit to consumption will be up to one-third. All the public policy options are grim. International donor finance of US$40–50 billion, together with domestic reform to accelerate recovery, would make a significant difference to the outlook for poverty.

Harnessing foreign aid for the poor: role of institutional democracy

PurposeThis paper examines the relationship between foreign aid, institutional democracy and poverty. The paper explores the direct effect of foreign aid on poverty and quantifies the facilitating role of democracy in harnessing foreign aid for poverty reduction in Sub-Saharan Africa (SSA).Design/methodology/approachThe paper attempts to address the endogenous relationship between foreign aid and poverty by employing the two-stage least squares instrumental variable (2SLS-IV) estimator by using GDP per capita of the top five Organization for Economic Co-operation and Development (OECD) countries sending foreign aid to SSA countries scaled by the inverse of the land area of the SSA countries to stimulate an exogenous variation in foreign aid and its components. The initial level of democracy is interacted with the senders’ GDP per capita to also instrument for the interaction terms of democracy, foreign aid and its components.FindingsThe results suggest that foreign aid reduces poverty and different components of foreign aid have different effects on poverty. In particular, multilateral source and grant type seem to be more significant in reducing poverty than bilateral source and loan type. The study further reveals that democratic attributes of free expression, institutional constraints on the executive, guarantee of civil liberties to citizens and political participation reinforce the poverty-reducing effects of aggregate foreign aid and its components after controlling for mean household income, GDP per capita and inequality.Research limitations/implicationsThe methodological concern related to modeling the effects of foreign aid on poverty is endogeneity bias. To estimate the relationship between foreign aid, democracy and poverty in SSA, this paper relies on a 2SLS-IV estimator with GDP per capita of the top five aid-sending OECD countries scaled by the inverse of land area of the SSA countries as an external instrument for foreign aid. The use of the five top OECD's Development Assistance Committee (OECD-DAC) countries is due to the availability of foreign aid data for these countries. However, non-OECD-DAC countries such as China and South Africa may be important source of foreign aid to some SSA countries.Practical implicationsThe findings further suggest that the marginal effect of foreign aid in reducing poverty is increasing with the level of institutional democracy. In other words, foreign aid contributes more to poverty reduction in countries with democratic dispensation. This investigation has vital implications for future foreign aid policy, because it alerts policymakers that the effectiveness of foreign aid can be strengthened by considering the type and source of aid. Foreign aid and quality political institution may serve as an important mix toward the achievement of the Sustainable Development Goals 2030 and the Africa Union Agenda 2063.Social implicationsAs the global economy faces economic and social challenges, SSA may not be able to depend heavily on foreign partners to finance the region's budget. There is the need for African governments to also come out with innovative ways to mobilize own resources to develop and confront some of the economic challenges to achieve the required reduction in poverty. This is a vision that every country in Africa must work toward. Africa must think of new ways of generating wealth internally for development so as to complement foreign aid flows and also build strong foundation for welfare improvement, self-reliance and sustainable development.Originality/valueThis existing literature does not consider how democracy enhances the foreign aid and poverty relationship. The existing literature does not explore how democracy enhances grants, loans, multilateral and bilateral aid effectiveness in reducing poverty. This paper provides the first-hand evidence of how institutional democracy enhances the poverty-reducing effects of foreign aid and its components. The paper uses exogenous variation in foreign aid to quantify the direct effect of foreign aid and its components on poverty.

The impact of microcredit on agricultural technology adoption and productivity: Evidence from randomized control trial in Tanzania

Abstract Adoption of technology is indispensable for increased agricultural productivity and poverty reduction in Sub-Saharan Africa. Lack of access to credit is often identified as a constraint on the adoption of agricultural technology. Recently, microcredit has generated considerable enthusiasm and hope for ensuring sustainable financial inclusion of the poor. We conducted randomized control trial (RCT) to examine the impact of microcredit on the adoption of technology and productivity of rice cultivation in Tanzania. Collaboratively with BRAC, a globally-known microfinance institution, we offered microcredit specifically designed for agriculture to randomly selected farmers. We estimate the intention-to-treat effect (ITT) as well as the local average treatment effect (LATE) of microcredit, by using the treatment status as an instrumental variable (IV). Overall, we find no evidence that the BRAC program increases the use of chemical fertilizer. Also, credit use does not result in an increase in paddy yield, profit from rice cultivation, or household income. Our results from sub-sample analyses suggest that credit does not increase the fertilizer use by those who have better access to irrigation water as they have already applied the amount of fertilizer near to the recommended level. On the other hand, credit increases the fertilizer use by those who have limited access to irrigation water and have previously used little fertilizer. However, possibly due to the poor yield response to fertilizer, the increase in chemical fertilizer use does not result in higher yield for them. We also observed similar phenomenon for the comparison between trained and non-trained borrowers before the intervention. Our study suggests that improving credit access may not be enough to increase small-scale farmers’ technology adoption, agricultural productivity, and welfare.