Poverty Reduction in Aid Organizations:
Danish Policies and Experiences
Birgit Storgaard Madsen
Poverty Reduction in Aid Organizations:
Danish Policies and Experiences
Birgit Storgaard Madsen
This paper should be cited as: Madsen, B.S. 1994. Poverty Reduction in Aid Organizations: Danish Policies and Experiences. IN: Poverty reduction and development cooperation: report from a conference, Copenhagen, 23-25 February 1994. (CDR Working Paper No. 94.6). Copenhagen: Centre for Development Research: pages 69-71. E-mail: cdr@cdr.dk
Poverty reduction has always been an overall objective of Danish development aid. And -as mentioned by the Minister - it will continue to be so in the new development strategy soon to be presented to Parliament. As part of this strategy poverty reduction will rest on three pillars, two of which are identical to the new poverty reduction agenda of the World Bank (economic growth and social sector development). A third "pillar" has been included in the Danish poverty reduction strategy : promotion of public participation in the development process, establishment of a constitutional society and good governance as a procondition for a stable economic, social and political development.
For good reasons I cannot share with you how the new strategy will be operationalized. A working group has been set up to prepare operational guidelines for poverty reduction.
Before sharing with you how Danida has been working with poverty reduction untill now I find it important to place Danish development aid in its proper perspective.
The Danish development aid budget has increased during the 80'es. We reached the target of 1% of our BNI in 1992 equal to 8.262 mio. D.kr. A decision has been taken by the Danish Parliament to increase the aid budget with 0.5% of the BNI between now and the year 2002. The 0.5% increase will cover the expected growing demand for humanitarian aid and cost of handling refugees and it will be used for environment as a follow-up of Agenda 21 from UNCED.
Approximately 50% of our aid budget is spent on multilateral aid, the remaining 50% on bilateral aid. The bilateral aid is distributed on a number of countries. From each recipient country's point of view Danish aid makes up a fraction of the aid to that country. Obviously there is a limit to the impact of only one donor`s aid on reducing poverty in a given country.
Danida, therefore, finds it important to encourage coordinated efforts of all donors to a given country for promotion of poverty reduction.
It should also here be mentioned that aid alone will not do the magic. There is a need to develop and implement a more coherent policy which combines reduction of the debt burden and improvements in trade-relations for the poor developing countries with development aid.
This being said, let me briefly share with you what Danida has been doing for poverty reduction in its bilateral aid programmes:
Danida has been using various instruments, tools and approaches. The most important are 1) different macro-economic instruments, 2) targetting the aid, 3) promoting access and 4) applying participatory methods.
First to the different macro-economic instruments. Danida has contributed to relief of the debt burden and provided balance of payment support to countries in Sub Saharan Africa. An increasing share of the bilateral aid budget is used for these forms of programme aid. To assess the impact of these instruments Danida takes part in the ongoing international dialogue and has a seat in the various working groups set up by the World Bank under SPA.
Now to examples of targetting the aid for poverty reduction. The BNI is being used to select programme countries. All the present 18 programme countries for Danish aid belong to the least developed countries with a BNI of below 1795 US $ per year.
Within programme countries Danish aid is generally being used for development in rural areas. This is where the majority of the poor people has been and are still living. Targetting aid to the rural areas aims at uplifting these areas and reducing migration from rural to urban areas.
Furthermore poor, underdeveloped and hard hit districts or regions have been chosen for Danish aid. I can mention as examples Upper Egypt in Egypt, Madhya Pradesh in India, Rakai in Uganda, Noakhali in Bangladesh. However, targetting underdeveloped geographical areas does not in itself ensure that aid programmes to these areas will automatically directly benefit the poor part of the population of these areas.
Targetting is also used in choosing sectors for Danish aid. Approximately 30% of Danish bilateral aid goes to the socalled social sectors: health, education, and drinking water and sanitation. It should be mentioned that aid to the education sector has increased considerably during the last 4-5 years.
Another rapidly growing "sector" is democracy,human rights,and good governance.
But again, allocating development aid to a certain sector in itself does not imply that the poor automatically will have access to services provided by that sector, or that the benefits from allocations to the social sectors automatically will trickle down to the poor part of the population.
At the micro-level - that is at the project-level - Danida is targetting its aid to specified target groups. In a number of projects the target group will be the poor part of the population of a given area. As examples I can mention agricultural extension service for small scale farmers and for women farmers, fish-ponds for landless rural people, labour intensive road maintenance schemes, where landless people and rural poor women and men are getting employment, credit schemes for rural poor.
We are aware that access of poor people to decision making fora and to participation in and benefits from development programmes more often than not are hampered by a variety of different constraints. We have applied various instruments to promote access. As examples I can mention that we have used cross-subsidization when setting tarifs in water-projects in an effort to combine financial sustainability of the water utility with affordability of safe drinking waterfor the poor. In programmes where demands have been high for individual water connections or individual telephone connections Danida has taken steps to ensure access to these facilities for people who could not afford the individual connections by installing public water taps and public pay-phones. When constructing rural health centres in India efforts have gone into a selection of sites which are accessible also to the harijans and low-caste poor people of the area.
Furthermore, Danida has applied methods of participation of the identified target-group of poor people in a given locality in problem-identification, need-assessment , planning and implementation in several projects. Time does not allow me to go into details.I can just briefly mention various women's projects, drinking water and soil and water conservation projects and some of the health projects as examples of projects where we have progressed more in applying participating methods.
Through these approaches to poverty reduction Danida has gained some useful experience from its bilateral aid programmes. Some of these experiences have been applied in our dialogue with multilateral organizations receiving Danish support.
But we still have a long way to go. One can argue - and I would say rightly so - that poverty reduction efforts of Danida have been somehow "fragmented". There has not yet been a coherent poverty reduction strategy for Danish aid to a given programme- country.
We have also not yet focussed evaluations on the poverty reducing impact of Danish supported programmes and projects. In the absence of measuring results we have unfortunately not even had time to document the processes initiated by us to reduce poverty of selected groups of poor people. Processes which we might even learn more from, than from measuring results.
Finally, if we are on the right track with the economic instruments we apply and the economic development we support, we certainly do lack behind in our dialogue on the social development and in identifiying the social institutions to be established or strengthened to support poverty reduction.
In our poverty reducing efforts we are faced with a number of challenges. One of them has to do with the fact that poverty reduction is only one out of various and to some extent contradictory objectives for Danish development aid. Others have to do with various paradoxes imbedded in providing aid. These challenges and paradoxes have not yet really caught the interest of researchers .It is , therefore, interesting to place them on the researchers' table today and see what answers researchers have. As I know that Gunilla Olsson will present the paradoxes which are quite similar for Danish and Swedish aid I will leave the floor for Gunilla to take us from here.