RWANDA Poverty Assessment April 2015 Public Disclosure Authorized Poverty Global Practice Africa Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized April 2015 1 ׀ RWANDA Poverty Assessment April 2015 ׀ RWANDA Poverty Assessment 2 RWANDA Poverty Assessment Poverty Global Practice Africa Region April 2015 3 ׀ RWANDA Poverty Assessment Table of Contents ABBREVIATIONS AND ACRONYMS ................................................................................................10.... I ACKNOWLEDGEMENTS ........................................................................................................................... VIII11 EXECUTIVE SUMMARY ..............................................................................................................................12 IX 1. A Snapshot of Poverty in Rwanda ..........................................................................................................................12ix Rwanda‘s Poverty Profile: The Expected… ............................................................................................................13 x And the Rather Unexpected … .............................................................................................................................15 xii Inequality is high, driven by location, education, and occupation .......................................................................16 xiii Strong performance in health and basic education ................................................................................................17 xiv 2. 2001-2011: Pro-Poor Growth and Strong Poverty Reduction ...............................................................................17 xiv Poverty Reduction was driven by Agriculture and Diversification… ................................................................. 20xvii …and Helped by a Drop in fertility and a Boost in Transfers and Remittances ................................................ xviii21 Education and Income Diversification Drive Drop in Inequality since 2006 .......................................................22 xix 3. Ending Extreme Poverty and Boosting Shared Prosperity .....................................................................................23 xx INTRODUCTION: FRAMING RWANDA‟S PROGRESS .................................................................................26 23 CHAPTER I. A DECADE OF POVERTY REDUCTION ..................................................................................31 28 1. Introduction ............................................................................................................................................................32 28 2. Strong Household Consumption Growth and Poverty Reduction ..........................................................................32 28 2.1. Strong Reduction in the Poverty Headcount ...................................................................................................32 28 2.2. No Change in the Number of Poor ..................................................................................................................35 31 2.3. Absolute Gains for Everyone, but Largest for the Very Poor .........................................................................37 33 2.4. A Small Decrease in Inequality ......................................................................................................................38 34 3. Different Patterns in Both Parts of the Decade ......................................................................................................40 36 3.1. 2001-2006: Pro-Rich Growth and Anemic Poverty Reduction .....................................................................41 37 3.2. 2006-2011: Strong Growth, Decreasing Inequality and Impressive Poverty Reduction ...............................42 38 4. How Real is the Reduction in Poverty? .................................................................................................................45 41 4.1. Assets Increase and Human Development is Improving.................................................................................45 41 5. How Did the Extreme Poor Fare? ..........................................................................................................................49 45 6. The Geography of Poverty Reduction....................................................................................................................52 48 CHAPTER II. WHO ARE THE POOR? .........................................................................................................57 52 1. Introduction ............................................................................................................................................................58 52 2. The 2011 Poverty Profile .......................................................................................................................................58 52 2.1. Poverty has a strong regional dimension .......................................................................................................58 52 2.2. The poor live in large households with high dependency rates .....................................................................59 53 2.3. Younger and male-headed households less likely to be poor ........................................................................61 55 2.4. The poor are largely unskilled .......................................................................................................................62 56 2.5. The poor depend on agriculture .....................................................................................................................64 58 2.6. The poor are relatively isolated .....................................................................................................................65 59 3. Correlates of poverty..............................................................................................................................................67 61 3.1. Demographic correlates ................................................................................................................................69. 63 3.2. Returns to education are high ........................................................................................................................72 66 3.3. Agriculture is correlated with lower living standards ....................................................................................72 66 3.4. Land – size matters, but only marginally ......................................................................................................73 67 3.5. Isolation is associated with lower consumption levels ..................................................................................74 68 3.6. Location matters – even after controlling for other factors ...........................................................................75 69 4. Conclusions ............................................................................................................................................................77 71 CHAPTER III. THE DRIVERS OF POVERTY REDUCTION .........................................................................79 73 1. Introduction ............................................................................................................................................................80 73 2. What were the Key Evolutions during the Past decade? ........................................................................................80 73 2.1. Increased Agricultural Production and Commercialization ...........................................................................80 73 2.2. Diversification of Income Portfolios Marked by a Move towards Non-Farm Activities ..............................82 75 2.3. A Sharp Drop in Fertility...............................................................................................................................84 77 2.4. The Boom in Transfers and Remittances ......................................................................................................85 78 3. And How Have they been related to Consumption Growth and Poverty Reduction?............................................87 80 ii April 2015 ׀ RWANDA Poverty Assessment 4 3.1. Agriculture Main Driver of Rural Consumption Growth .............................................................................. 8289 3.2. Diversification into Non-Farm Activities Boosted Growth for both Rural and Urban Households .............. 8289 3.3. Fertility Drop Associated with Consumption Growth across the Board ....................................................... 8592 3.4. Transfers and Remittances Major Driver of Consumption Growth, Especially for the Wealthiest Households .................................................................................................................................................... 8794 3.5. Under- and over-explanation of consumption growth: Diminishing returns to non-farm employment and easing of gender-effect .................................................................................................................................. 8895 4. Drivers of Growth at the Province Level ............................................................................................................... 8996 4.1. The Northern Province: Agriculture and Fertility ........................................................................................