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The Private Sector and the Marginalized Poor

An Assessment of the Potential Role of Business in Reducing Poverty and Marginality in Rural Ethiopia

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Christine Husmann

The book examines the role that the private sector can play in reducing poverty and marginality in Ethiopia by providing improved agricultural inputs to marginalized poor farmers. By creating a marginality map the author analyzes who and where the marginalized poor are. Data from a household survey about purchasing behavior, demand and needs indicates that this group can be a promising market segment for the private sector if adequate business models are applied. Yet, an analysis of the institutions governing agricultural input markets shows that investments by the private sector are discouraged by de facto monopolies of the government on crucial elements of the different supply chains, including seed breeding, fertilizer imports and finance.
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The present research analyzes the role that the private sector can play in reducing poverty and marginality in Ethiopia by providing improved agricultural inputs to marginalized poor farmers. Two important insights motivate the present research: one is the rise of various innovative business approaches in the last years that aim at reducing poverty or contributing to the solution to other societal problems. These innovative business approaches add social returns to a firm’s bottom line and thus provide additional reasons for companies to invest in agricultural markets in poor countries like Ethiopia apart from pure profit seeking.

The other insight motivating this research is that the very poorest have long not benefitted from poverty reduction efforts. In that context, marginality has been identified as a root cause of poverty and its persistence. Marginality helps to explain why certain groups are left behind while other parts of a society prosper. Thus, the concept of marginality is presented and applied to the context of Ethiopia. Using Geographic Information System (GIS) software, a marginality map of Ethiopia is created by overlaying seven indicators capturing different aspects of marginality. Results show that marginality is a severe and widespread problem in Ethiopia with more than 40 million people being severely marginalized. Marginality hotspots are found in Amhara and SNNP. Interestingly, marginality hotspots are not correlated with agro-ecological zones and are ethnically more homogeneous than non-hotspot areas. Furthermore, areas posing specific business opportunities and challenges are identified based on information on population density,...

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