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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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I. Introduction

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I-1 Background and motivation for the study

Without questioning that progress concerning poverty reduction has been made, these achievements cannot hide the fact that still 870 million people are chronically undernourished (FAO, 2012a), nearly 800 million youths and adults are illiterate (UNDP, 2012), 2.6 billion people lack access to basic sanitation and 900 million lack access to clean water (WHO and UNAIDS, 2010), 924 million are not adequately sheltered (UN-HABITAT, 2003), more than 1.4 billion people lack access to electricity (OECD, 2012) and 215 million children are child laborers (ILO, 2013). These numbers leave little doubt that efforts towards eliminating poverty need to be increased.

For a long time the poorest have not benefitted from the successes in poverty reduction but have been left behind (von Braun et al., 2009). In certain parts of the world the number of extreme poor people, i.e. those living on less than $1.25 per day, increased between 1990 and 2008: while some regions, most notably East Asia and the Pacific, saw a decline in the absolute number of extreme poor people, the number of extreme poor people in Sub-Saharan Africa increased by about 96 million, from 290 million in 1990 to 386 million in 2008. Yet, the share of extremely poor in the total population of the region decreased from 56.5% to 47.5% (Ahmed et al., 2007a; von Braun et al., 2009).

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