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Full Text (PDF) Journal of Business & Economic Policy Vol. 6, No. 1, March 2019 doi:10.30845/jbep.v6n1p3 Poverty Alleviation in Bosnia And Herzegovina: An Islamic Approach Dr. Amra Nuhanović Associate Professor Faculty of Economics University of Tuzla Dr. Amra Babajić Assistant Professor Faculty of Economics University of Tuzla Abstract Poverty alleviation is a problem that faces every country in the world, especially underdeveloped and developing countries. In particular, more than half population is under the risk of poverty and social exclusion in Bosnia and Herzegovina (B&H in further text). Furthermore, unemployed people, youth, women and old people are particularly jeopardized. There are a lot of reasons for this situation: high level of unemployment, low level of education, underdeveloped and inefficient health system, aggression on Bosnia and Herzegovina between 1992 and 1995, high level of corruption, slow reforms implementation (economic, legal and political), etc. Therefore this paper is going to give an overview of the state of poverty in B&H, even so it suggests the way it can be alleviated or reduced, leading to principles of Islamic economy and finance. Moreover, descriptive method of research will be used. Authors concluded that if Islamic approaches would be implemented holistically, it would be possible to alleviate poverty to a satisfactory level. The results of research can help government decision makers in formulating poverty alleviation strategies and politics. Keywords: poverty alleviation; Islamic Approach, Bosnia and Herzegovina. JEL Classification: I32, I38. 1. Introduction Researching poverty phenomenon is in the center of interest of traditional economic theorists today. As well, it is huge challenge for Islamic theorists because of the fact they believe that Islam is unique religion which can solve all human problems. Their commitment is based on trying to formulate consistent development concept in the fight against poverty, grounded on Qur’ans principles. Poverty ratio was 18.56% in 2007, according to Household Consumption Survey in B&H. Nevertheless, Survey shows that 22.9% of population is threatened or in risk of poverty, which with 18.56% amount 41.5% population which are poor or very close to be poor in 2007 [DirekcijazaekonomskoplaniranjeBiH, 2012] Statistical Agency of Bosnia and Herzegovina publishes Household Consumption Survey every three year, which is based on household sample, and refers to expenditures for final consumption. This Survey was supposed to be repeated in 2010, but for technical reasons it was not done. It was conducted in 2011 again. In relative poverty was 17.9% of population in B&H in 2011. Every sixth household was poor in this country. [Agency for Statistics of Bosnia and Herzegovina, 2012] Socially the most vulnerable categories of population are families with two or more children, unemployed people, pensioners, war veterans, refuges and Roms. UNICEF Report from 2013 identified and documented serious and growing level of poverty and social exclusion in B&H. It showed that more than half a million people live in relative poverty, and that it is possible it amounts even one million and half in B&H. Over one million other residents live in conditions of difficult material deprivation or in situation of social exclusion which is defined like life in families with very low labor intensity[UNICEF, 2013].Bosnia and Herzegovina was in very high risk of poverty and social exclusion (AROPE-at risk of poverty and social exclusion) which amounts 58.6% of population, and is far away from average AROPE EU-27 which amounts 24.2%, and far away from new EU members which AROPE amounts 30.6%. Reducing poverty and economic inequalities is one of primary goals of Islamic economy. Thus, the main objective of this research is considering Islamic tools in poverty alleviation in B&H. Additionally, authors tried to address the measures taken to alleviate the poverty by the local government. Given the previously defined subject of the research, the study aims to identify the approaches of poverty alleviation advocated by Islam. Through literature review and previous research, this paper focused on defining poverty, causes of poverty, and methods and strategies advocated by Islam. 18 ISSN 2375-0766 (Print), 2375-0774 (Online) ©Center for Promoting Ideas, USA www.jbepnet.com The study also tried to justify the importance and benefits of alleviating poverty, and why Islamic approaches are superior over conventional ones. Hence, general research hypothesis of this paper is: If Islamic approaches, would be implemented holistically - then it would be possible to alleviate poverty to a satisfactory level in B&H. 2. Theoretical background and previous research 2.1 The concept of poverty Poverty can be defined as not having enough money or property to buy a minimum basket of goods and services. Beside low income per capita, measured by purchasing power parity, poor world is characterized with inadequate nutritional status, bad health conditions (high degree of spread of infectious diseases), high mortality rate, especially young people, bad living conditions, a low level of education, weak or no involvement in political and social programs, frequent social unrest and wars, life in ecologically polluted areas, etc. Follows that life under conditions of poverty causes a whole series of problems to the poor on one side, but on the other side it causes potential dangers to all people and countries it the world interms of new threats to peace, contributes to the development of the network of crime and terrorism and increases the general insecurity. According to Zaks V. poverty is manifested through its four dimensions: spiritual and material circumstances; experience of your own state; how others see the poor; and socio-cultural time - a space that affects the different perceptions of poverty [Zaks V., pp. 236.] Thus, concept of poverty refers to the lack of minimum level of material welfare in relation to consumption expenditure level, which is called threshold or poverty line. Such levels of consumption can be defined in different ways, mostly in relative or absolute terms. Relative poverty is defined as consumption expenditure level that is lower than a certain line, depending on the consumption expenditures of the whole population. Absolute poverty can be defined as consumption expenditure level that is lower than a certain line, depending on the price of y certain consumption package (UNDP). Simpler, absolute poverty refers to percentage of population living below a certain line of disposable income. Absolute line of poverty presents a minimum of the standard of living and is based on defined consumer basket. Relative line of poverty defines poverty according to the national standard of living and is determined as percentage of the average income of the population. It presents poverty through comparing different categories of population. Nevertheless, it is possible to note that the World Bank (2008) gave most favored classification of poverty, according to which poverty is divided into: Extremely poverty refers to part of population who lives with less than 1.25 USD a day, measured by the calculation value of purchasing power, and Relative poverty refers to part of population disposes between 1 and 2 USD a day. In assessment and calculation of poverty instead of two lines: extremely and relative poverty, there is unique „global“ line of poverty of 1.9 USD a day From October 2015. According to World Bank analysts’ poverty in underdeveloped countries is calculated referring to consumption, but in developed countries, such as OECD countries, poverty is calculated referring to income [The World Bank, 2018]. If the absolute line is used to measure poverty, poverty will disappear during economic growth, meanwhile poverty measured by the relative line can only be reduced if income inequality is lower, respectively, poverty will not decrease as long as there is income inequality among social groups. Most countries in the world use relative poverty lines, mainly due to the lack of national or official poverty lines. EU countries use official lines, defined as 60% of median national income, and thanks to official lines, poverty indicators can be followed by a unique methodology [Šućur Z., 2011]. 2.2 The concept of poverty from Islamic perspective Poverty is one of the oldest problems encountered by human civilization. However, these problems are interpreted in the scientific literature differently. The atheists tie them to nature, some believers claim that it is God's cadre (predestination), however, a large number of those who claim that the causes of these problems lie in the unjust distribution of the wealth that Allah has bestowed upon to all the people of His goodness. What is common to all Islamic theorists on the issue of poverty is that - they have a very negative perception of the perception of poverty and that this phenomenon is generally badly reflects how on individuals and society, so on the whole people - as a dangerous social problem, the most terrible social disease and the main enemy of economic development, the greatest evilas a threat to the stability of society, the disruption of human dignity and the stability of the nation, and as a social and political problem. On the other hand, they all signal the negative consequences of poverty, in the sense that poverty deteriorates the dignity of Muslims, and that appears together with unemployment, catastrophes, (economic, political and financial) crises, borrowing, inefficient distribution of income, etc. 19 Journal of Business & Economic Policy Vol. 6, No. 1, March 2019 doi:10.30845/jbep.v6n1p3 Islam rejects the restriction to individual charity and voluntary charity in poverty alleviation and starts from the thesis that the solution to the exit from poverty is not to leave the poor to the wealth of the rich and what they share from pity. This gift from pity is an abstract obligation, it is not regular, nor equal amounts.
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