THE lack of adequate financial services, poor governance and feudalism are a stumbling block in economic progress of developing countries and stand in the way of making the poor affluent. Some experts suggest that the world has too many people, too few jobs, and not enough food. But such causes cannot be easily eradicated. In most cases, the causes and effects of poverty interact, so that what makes people poor also creates conditions that keep them poor.
In many developed nations, the number of people living in poverty has increased due to rising disparities in the distribution of resources and assets within these countries. Since the 1970s, for instance, the poorest 20 per cent of all US households have earned an increasingly smaller percentage of the total national income (generally less than five per cent) while the wealthiest five per cent of households have earned an increasingly greater percentage (about 45 percent of the total). The root cause of this increasing disparity is the ongoing trend of financial institutions to facilitate those who are sound and can easily repay the loan.
The financial institutions all over the world having similar credit policies to keep the low income groups away.
Financial institutions are major players in the cycles of poverty. Non-availability of financial assistance to the poor force them to remain poor and dependent on welfare programmes rather than make an independent living.
In many developing nations, women have low social status and are restricted in their access to both education and income-generating work. Without adequate income, they commonly depend on men for support, but often get little.
People who do not work—such as young children, the elderly, and many people with disabilities—depend on families and other support networks for basic necessities. However, neither poor families nor the governments of many developing countries can adequately support the non-working. Poor children in particular suffer the consequences.
Throughout the developing world, ethnic and racial minorities experience prejudice from majority groups and have difficulty attaining an average standard of living.
Asia is known due to its abundant labour force. In 1998 Asia (including South Asia, East Asia, and the Pacific region) accounted for about two-thirds of the world’s 1.2 billion poorest people. These people all lived on less than $1 per day.
South Asia - that includes Pakistan, India, Nepal, and Bangladesh — had about 522 million people living in extreme poverty in 1996. India had the greatest number of poor of any country in the world—more than 300 million people, more than one-third of its population.
In Bangladesh, financial services were very poor since 1971, the poverty rate was as high as 71 per cent, which gradually decreased to 40 per cent in 2000.
Poverty was reduced as growth picked up. The growth was generated by government and non-government organizations’ financial assistance in non-tradable sectors–services, construction, and small-scale industry, with a demand stimulus originating from a quantum jump in crop production, rapid growth in the garments industry and accelerated flow of foreign remittance.
Pakistan: In 1960s during Green Revolution Support Programme, the government took initiative to support small and medium sized farmers. Such other financial assistance programmes in the same era brought about a desirable change in the financial sector of the country. People in the countryside proved themselves competent by well managing the financial support.
Unfortunately, due to lack of consistency in government policies, Pakistan actually saw poverty increase in the 1990s from per cent 24 to 37 per cent in 2000. Exacerbated by a faster population growth than in its neighbours, the absolute number of poor almost exactly doubled–to over 50 million.
The increase in poverty was a consequence of poor growth performance and lack of income distribution policies. But, the situation is now again having a positive change.
Since last few years, the government is working in the SME sector to provide financial services to those who deserve it, thus trying to remove a major obstacle in the way of prosperity.