Development Programs for Poverty Alleviation: Comparative
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DEVELOPMENT PROGRAMS FOR POVERTY ALLEVIATION: COMPARATIVE STUDY OF MICROFINANCE PROGRAM IN TWO AREAS OF TAJIKISTAN A thesis presented to the faculty of the Center for International Studies of Ohio University In partial fulfillment of the requirements for the degree Master of Arts Ravshan Grezov June 2008 2 This thesis titled DEVELOPMENT PROGRAMS FOR POVERTY ALLEVIATION: COMPARATIVE STUDY OF MICROFINANCE PROGRAM IN TWO AREAS OF TAJIKISTAN by RAVSHAN GREZOV has been approved for the Center for International Studies by ________________________________ Ann R. Tickamyer Professor of Sociology _________________________________ Jieli Li Director, International Development Studies _________________________________ Drew McDaniel Interim Director, Center for International Studies 3 Abstract GREZOV, RAVSHAN, M.A., June 2008, International Development Studies DEVELOPMENT PROGRAMS FOR POVERTY ALLEVIATION: COMPARATIVE STUDY OF MICROFINANCE PROGRAM IN TWO AREAS OF TAJIKISTAN (87 pp.) Director of Thesis: Ann R. Tickamyer This study analyzes the macro- and micro-level development programs for poverty alleviation in the Republic of Tajikistan. At the macro-level, this study examines the International Monetary Fund's macroeconomic stabilization programs and the World Bank's structural adjustment programs in collaboration with the Government of Tajikistan to highlight the challenges that the International Financial Institutions face in building sound economic development. At the micro-level, it analyzes a case of the UNDP program on microfinance to see if there is a statistically significant correlation between micro-loans and improved livelihoods. This research shows that poor governance and high corruption are widespread at the macro-level and thus policies should take a different approach through building strong capacities of local institutions and politicians. At the micro-level, however, the study concludes that microfinance is a more efficient and effective way to reach and empower the poor. Still there are fewer opportunities for women to control financial resources that also should be tackled through capacity building programs on the ground. In general, strong commitment of politicians at all levels of government and increased participation of civil society are vital to the success of poverty alleviation programs. Approved: Ann R.Tickamyer Professor of Sociology 4 Acknowledgements I would like to express my gratitude to my thesis advisor, Dr. Ann Tickamyer, for her continuous help and support during the writing process. I particularly enjoyed and benefited from her class “Poverty, Development and Social Welfare Policy (Inequality),” which I found very useful for this research. I would like to thank her for her timely feedback and ideas injected in this study, which made this a more interesting and enjoyable experience. Special thanks go to Dr. Bob Walter and Dr. Risa Whitson. Dr. Walter’s class, “Theories of Underdevelopment (Seminar on Development Issues and Africa)” and Dr. Whitson’s class, “Gender and Development” provided me with valuable insight into the content of this study. I also would like to thank my former colleagues and friends at the World Bank Tajikistan and the United Nations Development Program Tajikistan for their support, feedback, and assistance with relevant data utilized in this thesis. 5 Table of Contents Page Abstract 3 Acknowledgement 4 List of Tables 7 List of Figures 8 List of Maps 9 Acronyms 10 1. Introduction 11 1.1 Overview 11 1.2 Statement of the Problem 12 1.3 Significance of the Problem 14 1.4 Purpose 15 1.5 Structure of the Study 15 2. Literature Review 16 2.1 Literature Review on Poverty and Development 16 2.2 Literature Review on Empowerment, Microfinance and Gender Development for Poverty Alleviation 19 2.3 Literature Review on Poverty and Development in the Republic of Tajikistan 20 3. National Approaches to Poverty Alleviation and Sustainable Development: Analysis of the Contribution of International Agencies towards Building a Road out of Poverty 21 3.1 Tajikistan and Poverty: Are They Synonyms? 22 3.2 Why International Donors Give Aid to Tajikistan? 26 3.3 The International Monetary Fund and the World Bank’s Contribution to Poverty Reduction and Sustainable Development 29 3.3.1 Macroeconomic Stabilization Programs of the International Monetary Fund 30 3.3.2 Structural Adjustment Programs of the World Bank 35 3.4 The Role of the United Nations Development Program in Tajikistan 38 3.4.1 Women and Poverty Reduction 39 3.4.2 Why Are Women More Financially and Socially Vulnerable? 40 4. Fighting Poverty at Grassroots Level: Microfinance Program 43 6 4.1 Characteristics of Microfinance 43 4.2 Microfinance as Empowerment Tool 44 4.3 Comparative Study of Microfinance Program in Two Areas of Tajikistan 45 4.3.1 Research Design/Methods 46 4.3.2 Site Selection 46 4.3.3 Profile of Areas: Sughd Region and Rasht Valley 47 4.3.4 Sample/Population and Analysis 49 4.3.5 Data Results and Discussion 50 4.3.5.1 Background Characteristics 51 4.3.5.2 Microfinance/Microloan 60 4.3.6 Summary and Lessons Learned 65 5. Conclusions and Recommendations 67 References 71 Appendix A. Map of the Republic of Tajikistan 76 Appendix B. List of Figures 77 Appendix C. Questionnaire for the Microloan Beneficiaries of the United Nations Development Program 83 7 List of Tables Page Table 1. Poverty and Human Development in USSR 23 Table 2. The World Bank Projects in Tajikistan 36 Table 3. Income Distribution in 2006 41 Table 4. Marital Status 51 Table 5. Household Type Within Areas (per 100 respondents) 51 Table 6. Education Level 52 Table 7. Health 53 Table 8. Food Intake/Clean Water 54 Table 9. Agricultural Income vs. Non-Agricultural Income 57 Table 10. Employment Status in Agriculture and Off-Farm 58 Table 11. Land Ownership 59 Table 12. Training on Microfinance 60 8 List of Figures Page Figure 1. Regional Distribution of the Population, the Poor, and the Extremely Poor, 2003 (adjusted for regional prices) 24 Figure 2. Share of the Population Living below Different Poverty Lines, 1999 and 2003 (national prices) 25 Figure 3. Human Development Index Trends in Tajikistan 77 Figure 4. Human Poverty Index Trends in Tajikistan 77 Figure 5. Official Development Assistance and Official Aid to the Central Asian Region (current USD) 27 Figure 6. United States Aid Allocation in Central Asia in 2001 versus 2002 (Million USD) 28 Figure 7. GDP Growth (annual percent) from 1990 to 2006 33 Figure 8. Answers to Schooling in Sughd Region 54 Figure 9. Answers to Schooling in the Rasht Valley 55 Figure 10. Working Hours in Sughd Region and the Rasht Valley 56 Figure 11. Source of Agricultural Income in Sughd Region 78 Figure 12. Source of Agricultural Income in the Rasht Valley 78 Figure 13. Value of Animals in Sughd Region 79 Figure 14. Value of Animals in the Rasht Valley 80 Figure 15. Communication Medium in Sughd Region 81 Figure 16. Communication Medium in Sughd Region 82 Figure 17. Repayment Rate in Sughd Region 61 Figure 18. Repayment Rate in the Rasht Valley 61 Figure 19. Entrepreneurial Skills/Sughd Region 62 Figure 20. Entrepreneurial Skills/Sughd Region 62 Figure 21. Control of Loan in Sughd Region 63 Figure 22. Control of Loan in the Rasht Valley 63 Figure 23. Tension/Violence in Sughd Region 64 Figure 24. Tension/Violence in Sughd Region 64 Figure 25. Living Standards in Sughd Region 65 Figure 26. Living Standards in the Rasht Valley 65 9 List of Maps Page Map 1. Map of the Republic of Tajikistan 76 Map 2. The UNDP Targeted Areas in Tajikistan 47 Map 3. Sughd Region 48 Map 4. Rasht Valley 49 10 Acronyms ADB Asian Development Bank CAWMP Community Agriculture and Watershed Management Project EMP Education Modernization Project FSU Former Soviet Union GDP Gross Domestic Product GoT Government of Tajikistan HDI Human Development Index HPI Human Poverty Index IFI International Financial Institution IBRD International Bank for Reconstruction and Development IDA International Development Agency IMF International Monetary Fund JRC Jamoat Resource Center MDGs Millennium Development Goals NBT National Bank of Tajikistan NGO Non-Governmental Organization NDS National Development Strategy PMU Project Management Unit PRGF Poverty Reduction and Growth Facility PRSP Poverty Reduction Strategy Paper RLF Revolving Fund RRS Regions of Republican Subordination PSI Policy Support Instrument RT Republic of Tajikistan SDR Special Drawing Rights UN United Nations UNDAF United Nations Development Assistance Framework UNDP United Nations Development Program UNDP CP United Nations Development Program Communities Program UNFPA United Nations Fund for Population Activities UNIFEM United Nations Development Fund for Women UTO United Tajik Opposition USSR Union of Soviet Socialist Republics WB World Bank 11 1. Introduction 1.1 Overview The existence of poverty is widespread in Tajikistan. This research examines the effectiveness of both macro- and micro-level development policies for poverty alleviation and underlines micro-level development as an important way to bring in changes in the livelihoods of the poor. In general, local politicians link poverty to many factors such as historical background of colonization, cultural and religious barriers, lack of natural resources, tyranny of geography (landlocked country), continuous natural calamities, ravaging military conflicts or civil unrest and, perhaps most debatable, the laziness of the poor. Another view focuses on the system, structure, and policies that are made by politicians and development practitioners both in governmental and non-governmental institutions. This approach highlights poor governance, corruption, and nepotism that create an environment with virtually no value to laws and regulations. Eventually, this results in inability of policies and programs to fight poverty. This thesis is partly based on personal experience of the author who worked as a development practitioner in the Education Modernization Project funded by the World Bank and the Ministry of Education. Working on this project provided many examples and information on the activities of the World Bank in Tajikistan. Also, this study is based on his field experience at the United Nations Development Program in the Republic of Tajikistan.