Poverty in Pakistan and its Eradication by AsadMazhar



   Poverty in Pakistan and its Eradication

                Prepared By

           RAM GUPAL SINGH


       Course Code     :    MKT-606

        MBA (Banking and Finance)

         FACULTY OF
          FALL - 2010
                                                                       Poverty in Pakistan and Its Eradication


I first of all - thank Allah, the Almighty, for making the achievement of this
endeavor possible. It has been a great experience and a time I was given the
opportunity to put to practice what I have been taught.

I would like to thank my Project instructor Dr. Noor Ahmed Memon for the
Guidance and support he gave me through my journey of writing this project,
though I am finance student I decided to write something about Poverty
eradication, Its my dream to eradicate poverty or at least reduce to some extent if
I had the chance to do so. then I submitted to my instructor for giving permission
though I was worried what would be his answer, but he gave me the permission
and I was so excited for chance I was given.

This report is the product of teamwork and cooperation; a team that included
everybody who has contributed to this research in one way or the other - from
the individuals who generously accepted to respond to my questionnaires and
interview questions to those who gave their constructive criticism about the
content of the report.

At the head of this very long list of individuals to whom I would like to extend our
most sincere thanks and appreciations goes my Research Project instructor Dr.
Noor Ahmed Memon           who has guided me during the research. Your
constructive criticism has helped shape this report into something I feel so proud
of. Special thanks also go to Mr and Mr for their support while working on this

The following individuals were a good source for the information presented in this
report – which is also the basis of the conclusion and recommendations. They
have helped me with information that one could hardly find in published material.
I thank you all for your selfless contributions.
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   ABSTRACT SUBMITTED BY:                    Kamal Guled Mohamed

   DISCIPLINE:                               MBA (BANKING AND FINANCE)

   TITLE OF PROJECT REPORT:                  Poverty in Pakistan and its eradication

   MONTH OF SUBMISSION:                       April, 2010


The project about is about poverty eradication. This work – which i consider a
success under the circumstances – will discuss topics
Such as poverty measurement, factors that impact poverty rates, poverty
reduction, and strategies that have been proved effective in combating poverty. It
will present an analysis on the findings from our research as well as suggest
methods to reduce or eradicate poverty. Other interesting perspectives on
The topics as well as those we have just mentioned are presented in this report.
The report might be used as another reference material on the subject of poverty
in Pakistan and its eradication. However, it might also be used as a blueprint for
a poverty reduction strategy that might be put to work in not only Pakistan but the
world at large
The important points of my article are:
1. Understanding Poverty
2. Poverty Factory
3. Measurement of poverty
4. Poverty: prevention, reduction or eradication

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                   CHAPTER 01: INTRODUCTION

1.1   Introduction…………………………………………………………………... 04
1.2   Research Objectives…………………………………………………………05
1.3   Literature Review …….………………………………………………………06
1.4   Research Methodology ……………………………………………..............07

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                                 1. INTRODUCTION

1.1 Introduction

According to a UNDP-published glossary, this report, which is the product of a
research I have conducted, revolves around the issue of poverty and the
possibility of its eradication. It explores the means of poverty reduction and their
effectiveness. The objective is to facilitate the formulation of initiatives and
strategies to counter poverty, eradicate it (if possible) or at least reduce its rate.

The coverage of this report is geographically limited to Pakistan; it takes into
account the poverty factors in that area and the social
issues that impact the poverty rate. It does not discuss or
compare poverty facts in the other poverty-stricken                           Poverty is the state of being
                                                                              deprived of the essentials of
regions of the world; however, poverty combating                             well-being such as adequate
scenarios and strategies in other parts of the world will                       housing, food, sufficient
                                                                             income, employment, access
be show-cased as examples or models to be followed.                            to required social services
                                                                                    and social status.
The research whose fruit/culmination is this report has
been assigned to me as part of the coursework for the Research Project course. .
Noor Ahmed Memon – the course instructor - has authorized its initiation and
given me till the end of the semester as the deadline for its submission. The
completion of this task - including all its subtasks – has taken us approximately
four months.

The sources of information and facts in the report include primary ones such as
questionnaires and interviews, as well as secondary ones mostly comprising of
material published on the Internet or printed in research papers or magazines.
For the questionnaire, we have selected a sample size of 100 individuals
randomly chosen as respondents. Five scholars who have knowledge of the

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economic state of Pakistan and poverty in the country have been interviewed to
get their valuable insights.

The report might be used as another reference material on the subject of poverty
in Pakistan and its eradication. However, it might also be used as a blueprint for
a poverty reduction strategy that might be put to work in not only Pakistan but the
world at large.
In the process of carrying out the research and writing this report, we have faced
some challenges whose struggle to overcome taught us a lot and helped us gain
hands-on experience on research methodologies. The language barrier was the
most obvious of these challenges. Most of those people with whom we had to
interact during the data gathering phase could not speak English. With the help
of some native friends, we eventually resolved this issue. Other obstacles
included the vast amount of published material on the subject we had to go
through to get to the information that was relevant to our research purposes.
Filtering all that information was time consuming but worthwhile.
The product of this work – which we consider a success under the circumstances
– I will discuss topics such as poverty measurement, factors that impact poverty
rates, poverty reduction, and strategies that have been proved effective in
combating poverty. It will present an analysis on the findings from our research
as well as suggest methods to reduce or eradicate poverty. Other interesting
perspectives on the topic as well as those we have just mentioned are presented
in this report.

1.2 Research Objectives

The main objectives of this project ―poverty in Pakistan and its eradication ‖ are
to find solutions and ways for eradication poverty or at least a strategic ways of
reducing poverty, poverty is the mother of crime, not only poverty means we
lack money or the life's necessities, but our hearts are poverty, Such as we lack
the legal consciousness, moral consciousness or something else. So getting
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solution poverty will help the world to live in peace and prosperity, so the main
goal is to find any sign that we can eradicate poverty

1.3 Literature Review

Different researchers and authors on the subject have different opinions about
poverty, its current status in the country and the strategies for its reduction or
eradication. They subscribe to different schools of thought that end up with
different strategies for poverty combating. The most common areas of the subject
that have had their share of controversy are poverty measurement and poverty
reduction schemes.

In the light of poverty measurement, Dr Akmal Hussein, a prominent researcher
on the topic of poverty, believes that unless we develop an effective paradigm for
poverty measurement and unless we view poverty as
occurring when the individual household in a fragmented
community is locked into a nexus of power that
systematically perpetuates poverty., we will not be able to                      Unless we develop an
                                                                                 effective paradigm for
solve the poverty crisis. In reducing poverty, thus the                       poverty measurement and
analysis and evidence within this new poverty paradigm                        unless we view poverty as
                                                                                  occurring when the
suggest that the key to overcoming poverty is to empower                       individual household in a
the poor to get better access over markets, governance,                        fragmented community is
                                                                                 locked into a nexus of
and the institutions that provide public services such as                      power that systematically
health care, education and justice.                                             perpetuates poverty., we
                                                                              will not be able to solve the
                                                                                     poverty crisis.
Empowerment in this specific sense means establishing
autonomous community based organizations of the poor at
the local level. According to his study, Mr Hussein suggests that the poor lose as
much as one-third of their income due to unequal access over input and output
markets and extortions by the local administration.

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Many other researchers agree with him in this respect, and the details follow in
the rest of our report. What most of these researchers fail to recognize is the use
of other poverty combat scenarios that have been successful as role models
upon which to base their long term solutions. The other shortcoming of the
solutions proposed by them is the implementation of the projects and poverty
solutions which mainly focus on urban areas, thereby disregarding and ignoring
the neediest of the community.

1.4 Research Methodology

In this study/research, we used two methods for gathering primary data. We also
had to go through earlier studies of the subject and used already printed material
as a secondary information.
Primary Data Collection
Two important tools for data collection has been used:

   1. A Questionnaire (a copy is included in the appendix) which collects
      information on the individuals and their poverty related issues. This
      questionnaire is intended to serve as a tool to collect information for the
      study on Poverty Eradication in Pakistan. It is to facilitate the gathering of
      reliable, unbiased facts about the actual poverty status in the country.
   2. Interviews conducted with scholars and academicians in the area of
      poverty fighting.

The Sample Size:
I have distributed 120 questionnaires to be filled out by representatives of
households or any individual who is in the capacity of providing reliable
information about his/her household. 105 were responded to, and the remaining
15 have been wasted.

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Sample Unit:
The sample unit in this survey is an individual household represented by each
respondent to our questionnaire.
Secondary Data
The Secondary data mostly involved reading already printed material and
searching for what has been said about the subject earlier. We had to go through
a junk of reports and studies from the past.

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2.1     Understanding the Poverty………………………………….10
2.2     Voices of Poor…................................................................13
2.3      Poverty Cycles ……………………………………………..18
2.4      Poverty and Power ……………........................................21
2.5      Pacts on Poverty in Pakistan…………………………….23

                   2. THE PERCEPTION OF POVERTY

2.1 Understanding Poverty

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Poverty is defined as a state in which a family‘s income is too low to be able to
buy the quantities of food, shelter and clothing that are deemed necessary. For
some people, the term 'poverty' is relative; it has a specific meaning to each
group or individual since some people are poorer than others. However, there is
a universal conception of poverty which is determined by the lack of sufficient
food and other very basic human needs such as shelter. Scientifically, poverty is
defined with reference to a poverty-line which is measured considering factors
such as family size, age composition, educational level, etc. Families below the
poverty-line are assumed to be poor.
Although poverty is a factor of a number of issues such as educational level and
employment, some families tend to be poor and still remain so for generations
and generations. This phenomenon, known as the poverty live cycle, has been
observed far too commonly, and is an indicator that if we really want to eradicate
poverty and eliminate anything to do with it, we should go to the root of the
problem and find what generates these cycles.

Being poor does not only cause inability to eat something decent or edible. Most
poor people face other difficulties that make recovering from this inability almost
impossible. Poor people are often discriminated which in turn deprives them from
rights including earning decent wages or even getting employed. It deprives them
from being accepted at educational institutions which discourages them from
studying further or joining schools. In more than one region of this world, poverty
has created other worse circumstances and unfair social class systems that
exaggerate discrimination.
Discrimination and social classes shift the power balance in societies, making a
group of people inferior to another only because of their economic statuses.
These class systems give power to the richer class or classes, letting these
classes make all their decisions.

Two basic ―levels‖ or ―types" of poverty are identified in the development
literature: absolute poverty and relative poverty. Simply put, absolute poverty is
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defined as the cost of the minimum necessities needed to sustain human life.
The World Bank currently regards people earning less than US$ 1 a day (in 1993
purchasing power parity) to be absolutely poor. Relative poverty is defined as the
minimum economic, social, political and cultural goods needed to maintain an
acceptable way of life in a particular society. The European Union defines the
relatively poor as ―... persons, families and groups of persons whose resources
(material, cultural, social) are so limited as to exclude them from the minimum
acceptable way of life in the member state in which they live.‖

Terms such as poverty eradication and poverty alleviation are often used
interchangeably in the development literature. Before discussing causes,
aspects, policies and approaches to either eradicating or alleviating poverty, it is
important to distinguish what these terms imply. While absolute poverty can be
eradicated, relative poverty can only be alleviated, because what is minimally
accepted today may vary over time, from villages to urban areas and from
country to country.1 Relative poverty also varies with levels of economic
development, and the perceptions and expectations of the majority on what is
minimally acceptable. For example, while clean piped water may be a minimum
acceptable standard of living in a city, it may not be a minimum requirement in a
village. Similarly, while possessing a telephone may be a minimum necessity in a
country like the United States, it may not be a minimum requirement in a country
like Pakistan.

The essence of this chapter and the rest of the ensuing subtopics in it, revolve
around poverty and the poverty cycle, and social classes and the impact of
poverty on social power.

1      Regional High-Level meeting on Asia and Pacific region development, October 2000
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Poverty in Pakistan is a major economic issue. Nearly one-quarter of the
population is classified poor as of October 2006. The declining trend on poverty
in the country seen during the 1970s and 1980s was reversed in the 1990s by
poor Federal policies and rampant corruption. This phenomenon has been
referred to as the "Poverty Bomb". The government of Pakistan has prepared an
"Interim Poverty reduction Strategy Paper" that suggest guidelines to reduce
poverty in the country. According to the World Bank, the program has had
tangible success, with the World
Bank stating that poverty has fallen                 “... persons, families and groups of persons
by 5 percent since 2000.2                            whose resources (material, cultural, social)
                                                     are so limited as to exclude them from the
                                                     minimum acceptable way of life in the
As of 2006, Pakistan's Human                         member state in which they live.”
Development Index is 0.539, higher
than that of nearby Bangladesh                       The European Union defines the relatively
(0.530), which was formerly a part
of Pakistan, but lower than that of neighboring India (0.611).
Incidences of poverty in Pakistan rose from 22–26% in the Fiscal Year 1991 to
32–35% in the Fiscal Year 1999. They have subsequently fallen to 25-26%
according to the reports of the World Bank and UN Development Program
reports. These reports contradict the claims made by the Government of
Pakistan that the poverty rates are only 23.1%. The CIA fact book places the
2006 poverty rate at 24 percent.

2      Wikipedia the Free Encyclopedia, Poverty in Pakistan
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2.2 Voices of Poor
At the turn of the new millennium, the World Bank collected the voices of more
than 60,000 poor women and men from 60 countries, in an unprecedented effort
to understand poverty from the perspective of the poor themselves. Voices of
the Poor, as this participatory research initiative is called, chronicles the
struggles and aspirations of poor people for a life of dignity. Poor people are the
true poverty experts. Poor men and women reveal, in particular, that poverty is
multidimensional and complex -- raising new challenges to local, national and
global decision-makers. Poverty is voicelessness. It's powerlessness. It's
insecurity and humiliation, say the poor across five continents.

The immediate impetus for the Voices of the Poor study was to prepare the
World Development Report 2009/01. Published every year by the World Bank,
the World Development Report is a leading resource on development strategies.
In the World Development Report 2009/01 on" Attacking Poverty", the World
Bank wanted to make sure the voices of the poor - their experiences, priorities,
and recommendations - would be taken into account.

The poor view wellbeing holistically

Poverty is much more than income alone. For the poor, the good life or wellbeing
is multidimensional with both material and psychological dimensions. Wellbeing
is peace of mind; it is good health; it is belonging to a community; it is safety; it is
freedom of choice and action; it is a dependable livelihood and a steady source
of income; it is food.

The poor describe ill-being as lack of material things - food especially but also
lack of work, money, shelter and clothing -- and living and working in often
unhealthy, polluted and risky environments. They also defined ill-being as bad
experiences and bad feelings about the self. Perceptions of powerlessness over
one's life and of voicelessness was common; so was anxiety and fear for the

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"Poverty is like living in jail, living under bondage, waiting to be free" — Jamaica

"Poverty is lack of freedom, enslaved by crushing daily burden, by depression
and fear of what the future will bring." — Georgia

"If you want to do something and have no power to do it, it is talauchi
(poverty)." —Nigeria

"Lack of work worries me. My children were hungry and I told them the rice is
cooking, until they fell asleep from hunger." — An older man from Sialkot, Sindh.

"A better life for me is to be healthy, peaceful and live in love without hunger.
Love is more than anything. Money has no value in the absence of love." — a
poor older woman in Somalia.

"When one is poor, she has no say in public, she feels inferior. She has no food,
so there is famine in her house; no clothing, and no progress in her family." — a
woman from Uganda.

"For a poor person everything is terrible - illness, humiliation, shame. We are
cripples; we are afraid of everything; we depend on everyone. No one needs us.
We are like garbage that everyone wants to get rid of." — a blind woman from
Tiraspol, Moldova.

"I repeat that we need water as badly as we need air." — a woman from Tash-
Bulak, The Kyrgyz Republic.

"The waste brings some bugs; here we have cockroaches, spiders and even
snakes and scorpions." — Nova California, Brazil.

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Insecurity has increased. Violence is on the rise, both domestically and in
the society. And the poor feel they have been bypassed by new economic

By and large poor people feel they have not been able to take advantage of new
economic opportunities because of lack of connections and lack of information,
skills and credit. Unemployment and lack of food and money appear as problems
in many communities. The poor, who work primarily in the informal sector, report
experiencing life as more insecure and unpredictable than a decade or so ago.
This is linked to unpredictability of agriculture, jobs that are unreliable and with
low returns, loss of traditional livelihoods, breakdown of the state, breakdown of
traditional social solidarity, social isolation, increased crime and violence, lack of
access to justice, extortion, and brutality from the police rather than protection.
Illness is dreaded and lack of affordable health care pushes many families into
indebtedness and destitution.

"Everyday I am afraid of the next" — Russia

"Wasta (nepotism or connections) is the most important thing. If one has wasta
then one can work." — Egypt

"Life in the area is so precarious that the youth and every able person has to
migrate to the towns or join the army at the war front in order to escape the
hazards of hunger escalating over here." — a discussion group in rural Ethiopia

Gender inequity is widespread, domestic violence pervasive and gender
relations stressed.

With increased economic hardship and a decline in poor men's income earning
opportunities, poor women across the world report "swallowing their pride" and
going out to do even demeaning jobs to bring food to the family. In their struggles
to adapt to changing economic roles in the household, women widely report
greatly increased work burdens; and men in many communities express
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frustration and humiliation with the lack of livelihood opportunities. This loss of
traditional male "breadwinner role" and female "caretaker role" is traumatic for
both genders, and family breakdown, domestic violence and increased
alcoholism among men are often mentioned. In some communities, awareness
raising by NGOs, churches and women's groups is contributing to changing
social norms and eventually to harmony and equity within the household.

"Sister, if you don't beat them they'll stop being good. And if they're good and you
beat them, they'll stay that way." — Bangladesh

"Men rape within the marriage. Men believe that paying dowry means buying the
wife, so they use her anyhow at all times. But no one talks about it." — Uganda

"When my husband died, my in-laws told me to get out. So I came to town and
slept on the pavement." — a middle-aged widow in Kenya,

"Rather than suffering from poverty, we should better go sweep up the garbage
in other people's houses." — a woman in Moldova

The poor want governments and state institutions to be more accountable
to them. Corruption emerges as a key poverty issue.

Corruption emerges as a core poverty issue. Poor people engaged in the study
reported hundreds of incidents of corruption as they attempt to seek health care,
educate their children, claim social assistance, get paid, and attempt to access
justice or police protection, and seek to enter the marketplace. In their dealings
with officials, poor men and women are subject to insults, rudeness, harassment,
and sometimes assault by officials. Harassment of vendors in urban areas is
widespread. Poor people's evaluations of institutions that are important in their
lives show that while politicians, state officials and public servants are sometimes
viewed as important they rarely show up as effective, trustworthy, or
participatory. There are exceptions. Provision of basic infrastructure is valued
and has made a difference.
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"The municipal Congressmen are all thieves … they do not solve anything, there
are no schools, no health care. They do not vote issues that interest the people."
— Brazil.

"Nobody is able to communicate our problems. Who represents us? Nobody." —
discussion group in Foua, Egypt

"If you have no relatives among high government officials, people treat you as
second rate. If you have any problems with your business, or get in trouble with
the police, you will lose your case and won't have your problems resolved. Those
who have power and money will always win." — At Bashi, The Kyrgyz Republic

"We keep hearing about monies that the government allocates for projects, and
nothing happens on the ground." — South Africa

"People place their hopes in God, since the government is no longer involved in
such matters." — Armenia


"Before everyone could get healthcare, but now everyone just prays to God that
they don‘t get sick because everywhere they just ask for money." Vares, Bosnia-

"If you don‘t know anyone, you will be thrown to the corner of a hospital!" – India

"[I]n the hospitals they don‘t provide good care to the indigenous people like they
ought to, because of their illiteracy they treat them badly … they give us other
medicines that are not for the health problem you have." -- a young man from La
Calera, Ecuador

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"Teachers do not go to school except when it is time to receive salaries." –

"The school was ok, but now it is in shambles, there are no teachers for weeks….
There is no safety and no hygiene." Vila Junqueira, Brazil

"If parents do not meet these payments, which are as high as Rs. 40 to 50 per
month, the teachers were reported to beat the student or submit a failing grade
for her/him." – Pakistan

2.3 The Poverty Cycle
This creates some kind of poverty chain or cycle that continues or generations
due to the lack of the necessary resources to get out of that cycle or loop. These
resources include but are not limited to financial capital, education and
connections that enable them to access these resources.
The nature of the income of the families or individuals in this category can be
described as ―hand to mouth‖. This means that most or all of what they earn in
the form of wages are not more than what they consume or spend in a single day
or payment period; therefore they become unable to make savings or spend in
their own development.
The poverty cycle is an impediment to human development. It reduces the
potential   for   skill-based   and     knowledge-based              development              since       the
impoverished cannot invest anything in education. They have to work for a living
and can hardly get the time to invest in education. On the other hand, they
cannot afford to invest in education since whatever they earn can barely cover
their nutritional requirements.
As to the reasons or causes of the poverty cycle, there exist different schools.
Some belief that the poverty cycle is created and promoted by racism, social
injustice and social inequality. This leads to a situation where the wealthy keep
earning more wealth and the poor are not able to create enough of it. Another

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school has it that the poverty cycle is the product of the strong presence of the
state (i.e. Government regulatory agencies, etc) in the economy erodes property
rights thus killing the incentive to create wealth. The two major factors in the
creation of poverty are:

   1. Unbalanced distribution of wealth:

       Lack of education, or human capital, is thought by many to be one of the
       biggest causes of the poverty cycle. Education in a modern knowledge-
       based economy is one of the conditions to achieving economic growth, as
       it increases skill. A maximized education would require devoted time and
       energy, or extra-curricular reading. Children who are from poor families
       and have to work cannot maximize their education, even if the education
       is free. It would also require a conducive and hygienic environment, which
       is often not available to the poverty-stricken. Tertiary education is often not
       free. Some theorists believe that children often will not be able to break
       out of poverty because their reduced skill-set reduces their potential
       income. With no means to provide a conducive educational environment
       for       their     own     children,          the         cycle          begins             again.

   2. Excessive intervention by state or government:
       Many neoliberals attribute certain cycles of poverty to insufficient
       protection or recognition of property rights. To be more exact, in an
       environment where one's property can be stolen at any time, such as
       countries with a weak rule of law, there is very little incentive to save and
       Free market proponent Hernando De Soto argues that poverty is
       sustained by government over-regulation that generates high costs to
       property ownership through bureaucracy and big government. He argues
       that many of the poor in the world economy are unable to own or develop
       property because this regulation is too costly to overcome. As a result,

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      they argue they are unable to generate wealth in a legal market that is full
      of regulation and are forced to resort to operate in an extralegal market
      that hampers wealth creation, thus hampering their ability to be pulled out
      of poverty.3
      Economists such as Milton Friedman argue that tariffs, income taxes,
      payroll taxes, savings tax and tax on investments all provide perverse
      incentives toward wealth creation that hurt the poor the most. He further
      argues that some of these arrangements are also wealth transfers from
      poor to rich; such as tariffs and social security. He argues that these
      regressive tax burdens encourage low productivity and little savings and
      investment that would otherwise lift the poor out of poverty.
      Others have argued that welfare perpetuates poverty by providing
      incentives counter to wealth creation. Proponents of the Fair Tax and
      economists such as Milton Friedman favor eliminating welfare programs
      that prevent benefits from those earning above a certain income. They
      believe that these income caps as eligibility to receive benefits provide an
      incentive for laborers to earn less than they actually could in order to gain
      free benefits from government programs. In the same way, incentive to
      find work can be reduced by the effect of income tax on low-income
      earners. As money is earned by a person receiving welfare, the amount of
      welfare they receive is reduced. This money earned - for example, through
      part time work - may also be taxed. Thus, there is reduced incentive for
      those who are part of the cycle of poverty to find work.

The solutions to the poverty cycle vary. Some modern governments have taken
to the improvement of public education and welfare as methods to break the
poverty cycle. In many places the rule of law also needs to be strengthened, by
creating efficient legal systems that protect the acquired capital of the poor.
Mixed-income housing is being implemented in more and more cities as a

3     Wikipedia, the free encyclopedia
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possible solution to poverty issues. It is an attempt to bring middle and lower
class families together in the same neighborhoods. This interaction between low
and middle-income families, according to supporters, helps the low-income
Others who believe in free markets disagree with the above theory. Free market
economists argue that planned economies and welfare will not solve poverty
problems but only make them worse. They believe that the only way to solve
poverty is not by shuffling and sharing existing wealth through redistributing
wealth but by creating new wealth. They believe that this is most efficiently
achieved through low levels of government regulation and interference, free
trade, equal property rights, money systems, wages, and tax reform and
reduction, thus converting even the poor members of society into capitalists.
All in all, poverty essentially has three closely interrelated aspects: ―poverty of
money‖, ―poverty of access‖ and ―poverty of power.‖ These make the working,
living and social environments of the poor extremely insecure and severely limit
the options available to them to improve their lives. Without choices and security,
breaking the cycle of poverty becomes virtually impossible and leads to the
marginalization and alienation of the poor from society.

2.4 Poverty and Power

The poor suffer from both traditional and modern environmental health risks in
urban areas. They suffer from diseases associated with poor sanitation, lack of
clean water, overcrowded and poorly ventilated living and working environments,
as well as from modern risks caused by air and industrial pollution. While the
poor suffer the most from dysfunctions in cities, they are the least able, as
individuals, to influence how cities are governed.4
In many Asian cities, both the formal structures of government and the culture of
governance tend to exclude the poor from decision-making and tend to

4. Unites Nations Economic and Social Commission for Asia and the Pacific, paper on urban poverty
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concentrate decision-making among a small number of formal and informal elite.
The poor have a greater possibility to influence decision-making under conditions
of good governance, i.e., a system of government and a culture of governance
that is participatory, inclusive, consensus-oriented, based on the rule of law,
responsive to the needs of the population, efficient, transparent and accountable.

Another important aspect of power is information. The poor often lack access to
information that they can use to advance their case when dealing with other
actors in the city. Even when information is available, it is often in media and
forms that are neither not accessible to nor understandable by the poor.

How do we alleviate the poverty of power?

1. Supporting Collective Mechanisms: Experience from the region has shown
that whenever the poor have been organized, united and in possession of
technical and managerial skills, they have improved their own conditions and
broken the cycle of poverty. They have resisted stronger groups, been able to
influence decision-making and build equitable partnerships with governments and
other actors in society. Several non-governmental organizations have made
valuable attempts to catalyze coalitions of the poor in the form of slum and
squatter dwellers‘ federations, rickshaw pullers‘ associations and hawkers‘
welfare cooperatives. These coalitions have strengthened the bargaining
positions of the poor and have assisted them in building beneficial partnerships.

Experience has also shown that many of the collective mechanisms of the poor
have been short-lived, particularly those that developed in response to external
threats such as evictions, or around a particular issue such as provision of water
or housing. Often once the external threat was resolved, these community-based
organizations   disintegrated. While        making        important        contributions,            such
organizations are often transitory in the struggle to break the cycle of poverty. On
the other hand, community-based organizations and collective mechanisms that
are developed around issues of long-term concern, and that are able to engage

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the poor continuously and sustainably, such as community or trade-based
savings and credit schemes, have a greater potential for empowering the poor
and breaking the cycle of poverty. This is because they create a core, organized
group within communities around which other issues of common concern can be
discussed and addressed by activating other community members.

Another reason for the failure of organizations of the poor is a lack of skills in the
operational and financial management of organizations, in group interaction and
in negotiation and consensus-building. Governmental and non-governmental
organizations that assist the urban poor in acquiring such skills help to empower
them. In contrast, those who speak on behalf of the poor or provide them with
services, while doing valuable short-term work, often tend to make the poor
dependent on them.

2. Increasing Access to Information: One of the key components of power
and wealth creation is access to information and knowledge and the ability to use
that information or knowledge for economic or social gain. Programms and
initiatives that seek to provide information to the poor in easily understood media
and forms greatly contribute to their empowerment.
A free flow of information also contributes to transparency in decision-making.
Some governments in the region, for example, now require public hearings
before large infrastructure projects are initiated. Even where such public hearings
are impartial, the poor are often unable to participate or influence decision-
making because they do not have the financial or human resources to interpret
the information provided. Some non-governmental organizations and academic
institutions are working to fill this gap. Most notable among these initiatives are
urban resource centers (URCs). The URC approach links non-governmental
organizations and academic institutions to analyze and evaluate trends and the
feasibility and impacts of programmes and projects in the city, and where
needed, to work out alternative solutions to governmental proposals. This
information is then provided in an understandable form to the groups and

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communities that would most likely be affected. Equipped with such information,
several poor communities have been successfully able to resist projects that
were either unnecessary or whose negative impacts would have been far greater
than their potential benefits.

2.5 Facts on Poverty in Pakistan
An analysis of poverty by socio-economic groups, focusing on key demographic and
economic characteristics, reveals the following stylized facts of poverty in Pakistan.

    Poverty in Pakistan has remained fairly stable during the 1990s, from
       29.3% in 1993- 94 to 32.2% in 1998-99.
    Poverty is considerably higher in rural as compared to urban areas.
       According to calculations by FBS based on PIHS data poverty headcount
       in 1998-99 was 36.3% and 22.4% for rural and urban areas of Pakistan,
       respectively. Poverty incidences vary significantly between provinces.
       NWFP has the highest rural as well as urban poverty followed by Punjab.
       Baluchistan data for 1998-99 shows relatively low poverty; however,
       poverty in Baluchistan is as high as in NWFP as in other years.
    Poverty is strongly related to lack of basic needs, especially education and
       cultivable land
    The poor have a higher dependency ratio, as households with a large
       number of children, and single earning member, are more likely to be
       poor. On average the poor have almost five household members less than
       18 years of age, while the number for the non-poor is three. Average
       number of births by a poor woman (married and of age 15-49) is almost
       five, compared to four for a non-poor woman.
    More than one third of the poor households are headed by aged persons
       who are
    Dependent on transfer incomes, such as pensions and other forms of
       social support.

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    Education is the most important factor that distinguishes the poor from the
      non-poor. The percentage of literate household heads is 27 in poor
      households while for non-poor households it is 52.
    The poor are also characterized by relatively low access to health related
      infrastructure, like sanitation. While 76% of the poor live in households
      with no toilet with flush, compared to 53% of the non-poor. The poor are
      also less likely to have access to electricity and gas – 60% and 10% of the
      poor live in households with electricity and gas connections, compared to
      75% and 24% of the non-poor, respectively.
    Relatively poor communities also seem to have less access to health
      facilities and immunization coverage. 45% of the children in poor
      households aged one to five years have been fully immunized as against
      58% in non-poor households.
    Poverty is (relatively) higher when head of the households are unskilled
      agricultural workers, engaged in services, transport, production, and sales
    The non-poor own 0.84 acres of cultivable land per capita, while the poor
      own only 0.27 acres per capita. In addition the poor are less able to
      diversify their agricultural production and are thus more susceptible to
      economic shocks.

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3.1      Poverty Factor………………………………………………27
3.2      Causes of Poverty………………………………………….29

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                                  3. POVERTY FACTORS

3.1 Poverty Factors
According to an ADB Poverty Assessment, there was a declining trend in poverty
in Pakistan during the 1970s and 1980s was reversed in the 1990s. The
incidence of poverty is estimated to have increased significantly after 1997,
coinciding with the onset of a period of slow growth in the country. It increased
from 26.6 percent in 1993 to 32.2 percent in 1999 and the number of poor
increased by over 12 million people during this period. Since 1999, economic
growth has slowed further, development spending has continued to decline, and
                                             the country has experienced a severe drought.
              ●     ●     ●
         Poverty in Pakistan has             It is therefore estimated that the incidence of
    historically been higher in rural        poverty in Pakistan today is higher than in
             than urban areas.
    Poverty rose more sharply in the         1999.
     rural areas in the 1990s, and in        The identification of vulnerable elements
       1999 the incidence of rural
       poverty (36.3 percent) was            within the poor has also received little
     significantly higher than urban         attention in Pakistan. While poverty manifests
         poverty (22.6 percent).
              ●     ●     ●                  itself as material deprivation, studies on
                                             poverty in Pakistan stress that the poor rarely
speak of lack of income per se, but tend to focus on the constraints that they face
in managing their assets, whether human, material, social or political. The
capacity of the poor in Pakistan to access public entitlements like political
processes or goods and services which determine human development contrasts
strikingly with that of the rich - for example, 52 percent of the population in the
highest income quintile will have attended school at some stage, but this
proportion falls to 27 percent for the lowest income quintile. 5

Poverty in Pakistan has historically been higher in rural than urban areas.
Poverty rose more sharply in the rural areas in the 1990s, and in 1999 the

5        Mr Mushraq Ali Shah presentation on Poverty Alleviation in Pakistan
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incidence of rural poverty (36.3 percent) was significantly higher than urban
poverty (22.6 percent). Inequality also increased in Pakistan during the 1990s, in
both urban and rural areas, which enhanced the negative impact on poverty of
the slowdown in growth during this period. While agriculture is the predominant
activity in rural society, a substantial proportion of the rural labor force, estimated
at more than 40 percent, depends entirely on non-farm activities. The growth of
non-farm activities appears to have been severely affected by low economic
growth, decline in public sector development spending, and lower worker
remittances during the 1990s.

There are a number of attributes, besides location, which characterize the poor in
       Education is the most important factor that distinguishes the poor from the
        non-poor, for example the proportions of literate household heads in poor
        households are almost half that in non-poor households.

       Second, poor households on average had 75 percent more children that
        the non-poor households. Most of these children are not receiving any
        education, and thus the cycle of poverty is perpetuated.

       Third, more than one third of the poor households were headed by aged
        persons who were dependent on transfer incomes, such as pensions and
        other forms of social support.

       Fourth, the poor had few physical assets, and according to one study, if a
        rural household possesses physical assets (land/livestock) the probability
        of it being poor declines by 55 percent.

       Fifth, the poor rely disproportionately on informal sector employment. The
        incidence of poverty is the highest among household heads with
        occupations such as day laboring in agriculture, construction, trade and
        transport sectors. Incidence of poverty is also high among self-employed,
        which includes street vendors in urban areas, and sharecroppers in rural
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       Gender discrimination is another key attribute that characterizes the poor.
        Incidence of poverty among women in Pakistan is higher compared with
        men, and is characterized by low endowment of land and productive
        assets, unemployment, discrimination in the labor market, and limited
        access to economic options and political processes.

       The poor are also characterized by their vulnerability to environmental
        degradation and deterioration of the natural resource base, given that they
        tend to be strongly dependent on the exploitation of such resources.

3.2 Causes of Poverty
A number of factors explain the existence of and increase in poverty in the last
decade. Poor governance has been identified as the key underlying cause of
poverty in Pakistan. Poor governance has not only enhanced vulnerability, but is
the prime cause of low business confidence, which in turn translates into lower
investment levels and growth. Governance problems have also resulted in
inefficiencies in provision of social services, which has had serious implications
for human development in the country. The lack of public confidence in state
institutions, including the police and judiciary, have eroded their legitimacy and
directly contributed to worsening conditions of public security and law and order
observed throughout most of the 1990s.
With regard to economic factors, decline in GDP growth is the immediate cause
of the increase in poverty over the last decade. In the 1990s, growth declined in
all sectors and was slower than average in labor intensive sectors. However, the
causes of the slowdown in growth may be divided into two categories, i.e.
structural and others, with the former being more long-term pervasive issues,
which have persisted because of deteriorating governance. Among the structural
causes, the burgeoning debt burden and declining competitiveness of the
Pakistan economy in the increasingly skill-based global economy are the most
important. While the former occurred due to economic mismanagement, the latter
was because of Pakistan's low level of human development.

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With regard to the debt burden, increasing debt service requirements resulted in
a growing fiscal squeeze, which in turn led to a declining proportion of GDP being
spent on development and social sectors in the 1990s. Falling public investment,
together with unsuccessful attempts at macroeconomic stabilization also
adversely affected private investment. At the same time, reduction in tariffs,
exhaustion of simple import substitution opportunities, and elimination of export
subsidies in the 1990s meant that international competitiveness became an
increasingly important determinant of investment opportunities in Pakistan.
Because of the low level of human development and poor state of physical
infrastructure, areas where Pakistan was competitive were not many. As a result,
investment declined significantly, bringing about a fall in the economic growth
rate. The effects of poor governance, furthermore, served to reinforce the
adverse impact of structural factors.
In a rapidly integrating global economy, countries need to diversify their export
base, and encourage low cost production of more value added high technology
products to stay competitive. This in turn requires the mobilization of a highly
skilled and specialized labor force. If this key resource has not been developed,
as is the case in Pakistan, the economy tends to be mired in a low value
production mode.
The adverse impact of structural factors was reinforced by other problems such
as ethnic and sectarian violence, poor state of law and order, and a high degree
of economic and political uncertainty because of the many changes in
government. Throughout the 1990s, the Government was implementing a series
of medium term structural adjustment programs under the aegis of the
International Monetary Fund (IMF). However, because of frequent changes in
government, adherence to the adjustment program was unsatisfactory, and as a
result, the 1990s can be characterized as a decade of stop-go stabilization
policies, with the attendant negative impact on growth, but without the desired
improvement of macroeconomic fundamentals.
Economic factors can explain primarily short-term fluctuations in poverty indices.
The existence of pervasive poverty, wherein a significant proportion of the
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population remains poor over an extended period of time is, however, attributable
more to social than to economic factors. For example, cultivated land is highly
unequally distributed in Pakistan. About 47 percent of the farms are smaller than
2 hectares, accounting for only 12 percent of the total cultivated area. Access to
land, which is the basic factor of production, is crucial to reduce poverty in rural
areas. Pervasive inequality in land ownership intensifies the degree of
vulnerability of the poorest sections of rural society, because the effects of an
unequal land distribution are not limited to control over assets. The structure of
rural society, in areas where land ownership is highly unequal, tends to be
strongly hierarchical, with large landowners or tribal chiefs exercising
considerable control over the decisions, personal and otherwise, of people living
in the area of their jurisdiction, as well as over their access to social infrastructure

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4.1     Poverty Measurement……………………………………………...33
4.2      Method of Measurement…………………………………………..33
4.3      Measuring Poverty at Global Level………..................................36
4.4     New direction in Poverty Measurement........................................36
4.5     Types of Data…………………………………………………………37
4.5.1   Administrative Data…..................................................................40
4.5.2   Population Census……...............................................................40
4.5.3   Household Survey.......................................................................41
4.5.4   Qualitative Data…….....................................................................44

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                               4.MEASUREMENT OF POVERTY

4.1 Measurement of Poverty
Discussing the issue of poverty measurement is a key to its eradication or reduction. It is
also crucial for accurate and reliable reporting on the subject to facilitate the formulation
of strategies to combat poverty. It has been found out that the estimates of poverty are
very sensitive to the measure used to calculate poverty lines.

The extent and nature of poverty, as defined by its three aspects and its impact on
marginalizing and alienating segments of the urban society, are difficult to measure.
UNDP‘s Human Development Index is an attempt to compile and compare all the above
aspects of poverty. As the Human Development Report of 1999 shows, the extent and
nature of poverty vary considerably in countries of Asia and the Pacific, and that of urban
poverty varies considerably between countries, between rural and urban areas, among
urban areas within a particular country, among neighborhoods of a given urban area and
even within neighborhoods.6

Poverty also has a gender dimension. In most countries, the poorest of the poor tend to
be households headed by women. Even within the family unit, the poverties of money,
access and power vary based on gender, with women and female children suffering
more     than their     male    counterparts. Thus to meaningfully measure                              poverty,
disaggregated data and information are often needed, which in many countries do not

4.2 Methods of Measuring Poverty

Poverty is a global problem being faced by nations around the world and
happens to have no common definition which is generally accepted. However,
researches have looked at poverty at two perspectives as we mentioned in the
first chapter of this report. These are the relative poverty and the absolute
poverty. Giving an exact and accurate measure of poverty has never been easy,

6        UNDP paper on poverty alleviation in urban areas
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        and comparing poverty data or information from different regions of the world has
        even been more difficult. The following methods are used to measure poverty: 7
            a. Head Count Ration: the individuals who earn income which cannot meet
                the daily intake of a certain amount of calories are considered to fall below
                the poverty line. For example, in Pakistan this certain amount of calories is
                approximately 2350 calories. Accordingly, a person whose earn is less
                than $874 per year is considered to have fallen below the poverty line.
                According to the head count ratio, the percentage of population living
                below the poverty line in 2005 has decrease from 34.46% in 2001 to
                23.9% in the period 2004-2005, a decrease of 10.6 percent.
            b. Poverty Gap: This is an aggregate measure of the spread of the poor
                below the poverty line. It indicates the distance of all the poor individuals
                from the poverty line. A lower value indicates that most of the poor are
                circling around the poverty line. In Pakistan the value of the poverty gap
                has fallen from 7.03 in 2001 to 4.76 in 2005.

            c. Severity of Poverty: This indicator also shows the remoteness or
                distance of the poor individuals from the poverty line. Accordingly, the
                lower value shows that the majority of the poor persons are hovering
                around the poverty line. The severity of poverty in the country has
                decreased from 2.13 in 2001 to 1.48.

        Table 1: The following table shows the above poverty indicators from 2001 to 2005 as published by
        Nasir and Hyder.

                 Head Count                        Poverty Gap                            Severity of Poverty
                 2001       2005                   2001        2005                       2001         2005
Pakistan         34.46           23.90             7.03               4.76                2.13                   1.48
Urban            22.69           14.90             4.55               2.87                1.35                   0.84
Rural            39.26           28.10             8.04               5.64                2.44                   1.77

        7       Economics of Pakistan textbook, Nasir & Hyder
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Earlier studies on poverty in Pakistan simply estimated the headcount rations i.e.
The proportion of the poor in the population for single years based on the
available household income and expenditure survey (HIES) data. These studies
were limited by the grouping of published data from these surveys and by the
selection of somewhat arbitrary poverty lines. The resulting estimates were very
sensitive to the choice of the poverty line.

By the mid 1970's and 1980's the focus shifted to estimating the extent of poverty
and trends in poverty based on absorption of minimum diet for meeting nutritional
requirements. Later work used the basic needs approach to estimate poverty
lines. This approach refers to the position of the individual or a household in
relation to the minimum cost of a set of basic needs and food consistent with the
spending patterns of the poor.

Measuring poverty at the country level
A common method used to measure poverty is based on incomes or
consumption levels. A person is considered poor if his or her consumption or
income level falls below some minimum level necessary to meet basic needs.
This minimum level is usually called the "poverty line". What is necessary to
satisfy basic needs varies across time and societies. Therefore, poverty lines
vary in time and place, and each country uses lines which are appropriate to its
level of development, societal norms and values.8

Information    on    consumption       and      income        is    obtained         through         sample
surveys, with which households are asked to answer detailed questions on their
spending habits and sources of income. Such surveys are conducted more or
less regularly in most countries. These sample survey data collection methods
are increasingly being complemented by participatory methods, where people are
asked what their basic needs are and what poverty means for them. Interestingly,
new research shows a high degree of concordance between poverty lines based
on objective and subjective assessments of needs.

8      World Bank, Paper on Understanding Poverty
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4.3 Measuring poverty at the global level

When estimating poverty worldwide, the same reference poverty line has to be
used, and expressed in a common unit across countries. Therefore, for the
purpose of global aggregation and comparison, the World Bank uses reference
lines set at $1 and $2 per day (more precisely $1.08 and $2.15 in 1993
Purchasing Power Parity terms). It has been estimated that in 2001, 1.1 billion
people had consumption levels below $1 a day and 2.7 billion lived on less than
$2 a day. These figures are lower than earlier estimates, indicating that some
progress has taken place, but they still remain too high in terms of human
suffering, and much more remains to be done.

The Global Poverty Monitoring Database, by Chen and Ravallion at the World
Bank contains global and regional poverty estimates for the years 1981, 1984,
1987, 1990, 1993, 1996, 1999 and 2001 as well as data on the share of people
living below the national poverty line by country for the years when household
surveys are available. The methodology used for the Global Poverty Monitoring
Database is explained by Ravallion and Chen in "How did the worlds poorest fare
in the 1990s?" (2000).

4.4 New directions in poverty measurement

While much progress has been made in measuring and analyzing income
poverty, efforts are needed to measure and study the many other dimensions of
poverty. Work on non-income dimensions of poverty -- defining indicators where
needed, gathering data, assessing trends -- is presented in the World
Development Report (WDR) 2000/01: Attacking Poverty . This work includes
assembling comparable and high-quality social indicators for education, health,
access to services and infrastructure. It also includes developing new indicators
to track other dimensions -- for example risk, vulnerability, social exclusion,
access to social capital -- as well as ways to compare a multi-dimensional
conception of poverty, when it may not make sense to aggregate the various

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In addition to expanding the range of indicators of poverty, work is needed to
integrate data coming from sample surveys with information obtained through
more participatory techniques, which usually offer rich insights into why programs
work or do not. Participatory approaches illustrate the nature of risk and
vulnerability, how cultural factors and ethnicity interact and affect poverty, how
social exclusion sets limits to people‘s participation in development, and how
barriers to such participation can be removed. Work on integrating analyses of
poverty based on sample surveys and on participatory techniques is presented in
the WDR. An example of participatory work is given by the Voices of the Poor

4.5 Types of Data
Many sources of data can be useful for poverty analysis and the evaluation of
policy interventions. Some data, such as central public finance data and national
accounts, exist only at the national level. Often, these data are collected centrally
by the statistical institute or the central bank. Local-level data are often collected
through local offices of the statistical institute or the Ministry of Finance. Such
data -- for example, data by region, province, or district -- often include
availability and use of services, such as education, health, water, and electricity,
and may include economic and price information, such as regional inflation. Few
countries produce national accounts at the sub-national level. 9
Household or individual-level data on welfare components, such as income,
consumption, illness patterns, and household priorities and perceptions, present
the most disaggregated data. These data are typically gathered through
household surveys, and they can be summarized at higher levels (at the local or
national level) to produce aggregate statistics. For example, household-level data
are needed to determine whether the members of a particular household are

9      Coudouel et al. (2002) paper on Poverty Measurement and Analysis
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          income poor. Aggregation across households will provide regional or national
          estimates of poverty.
          Along with providing national averages, local-level data can be important
          because local realities vary, and so do the key dimensions of poverty and the
          indicators that are useful to analyze and monitor. Moreover, some decisions—
          increasingly more as decentralization advances—are made at the local level and
          require local information. In many instances, however, the collection and
          monitoring of local level data will be set up differently, since local capacities vary
          and there is greater potential for community involvement

DATA                              AGENCY                  SOURCE                                   FREQUENCY
National-level data :
National     accounts:     GDP, Central statistical System                of       National Monthly or quarterly
Consumption,         Investment, agency                   Accounts, trade statistics               where possible--trade
Exports, Imports, and so on                                                                        statistics, for example;
                                                                                                   at least yearly
Public       finance       data: Ministry            of Budgets and actuals                        Monthly or quarterly
revenues,      spending       by Finance,       central                                            where possible--trade
category                          statistical agency,                                              statistics for example;
                                  sectoral ministries                                              at least yearly
Consumer       and      producer Central statistical Price surveys                                 Monthly; CPI basket
prices                            agency,       central                                            updated at least every
                                  bank                                                             five years
Social Indicators                 Management              Administrative systems                   Yearly where possible
                                  systems (MIS) of
                                  sectoral ministries
Local-level data:
Consumer       and      producer Central statistical Price surveys, systems of                     Monthly; CPI basket
prices,      climatic      data, agency,        central national accounts                          updated at least every
national accounts at regional bank                                                                 five years

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Availability of services           Local                    Multi-topic household                     Yearly
                                   administration,          surveys; employment
                                   sectoral ministries      surveys, qualitative studies
Use of services                    Local        service Rapid            Monitoring          and Yearly
                                   providers                Satisfaction Surveys
Individual and household-level data:
Household consumption and          Central     statistical Household budget,                          Every three to five
income; living conditions,         agency, Ministry of expenditure, income                            years
social indicators                  Labor/Employment          surveys, multi-topic
                                                             household surveys,
                                                             demographic and health
Population statistics, access      Central     statistical Population census                          Every five or ten years
to services—no                     agency
consumption or income;
Household living standards         Central statistical       Rapid Monitoring Surveys, Yearly
—no detailed consumption           agency, Ministry of       demographic and health
or income; illness patterns,       Labor/Employment          surveys
malnutrition, education            , others
Household              priorities, Central     statistical Qualitative studies; Rapid Every one to three
perceptions of        well-being, agency,       sectoral Monitoring Surveys                           years
user satisfaction                  ministries, others
           Table 2: Data Types and Agencies

           The role of administrative data and the population census are worth commenting

           4.5.1 Administrative Data
           In many countries, administrative data are the most accessible data source.
           Usually provided by line ministries and specialized agencies, these data describe
           specific activities and programs such as school enrollment, disease prevalence,
           malnutrition information, hospital expenses, road network information, and
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income and expenditure for decentralized units. This information is important in
assessing levels of public and private inputs, outputs, and outcomes, as well as
their distribution within the country. For example, it is possible to compare how
the distribution of enrollment rates matches spending on primary schools; how
the structure of health spending-- primary versus tertiary care --reflects disease
patterns; or how agricultural productivity of main crops varies with land tenure
Administrative data can often provide an important entry into poverty analysis,
especially if it they are used to compare need and demand for services.
However, administrative data do not allow for cross-tabulating or analyzing
poverty across different dimensions. For example, it is generally not possible to
look at enrollment rates of children by the income group of their parents. (Multi-
topic household surveys, which are discussed below, differ from administrative
systems in that they allow the analyst to relate indicators with each other.)

4.5.2 Population Census
A population census contains basic information on all citizens of a country. The
census is carried out for all households to obtain basic information on the
population, its demographic structure, and its location. The census is typically
carried out by the national statistics institute, which then provides data to lower
levels of government tailored to local information needs. Since the census covers
the whole population, it is costly, and most countries conduct a census only once
a decade. The census can provide policymakers with important data for planning
in the years directly following its implementation, but its usefulness diminishes
after that.
Since the census is carried out across millions of households, the information
gathered      is,   by   necessity,     limited.      Information            on   household            income,
consumption, disease patterns, and poverty perceptions are generally not
included. However, the census usually contains descriptive statistics of the
housing stock, access to basic services such as water, electricity, and sanitation;
information on education and employment patterns, and population statistics.

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The census has the advantage of being able to provide information at low levels
of aggregation, such as the municipality level. Census data are also an important
tool to check how representative other surveys are. The usefulness of sample
surveys can be increased substantially if they are combined with census
information, for example for providing poverty maps.

4.5.3 Household Surveys
Household surveys are essential for the analysis of welfare distribution and
poverty characteristics. At the same time, aggregate household-level analysis
can provide only limited understanding of the intra-household distribution of
resources, especially of income and consumption. Moreover, while the census
covers the whole population in the country, surveys interview only a subset,
generally a small fraction, of all households. This sample of households must be
carefully chosen so that the results of the survey accurately describe living
conditions in the country, and different parts of the country.
Sampling should be based on mapping of actual settlements, including newly-
formed informal urban settlements. Sampling is most often informed by a recent
population census. The sample size -- the number of households interviewed --
will vary with several factors, including:
       the indicator that is to be measured (a survey that aims to measure
        countrywide averages of income may require a larger sample than a
        survey designed to measure the percentage of the population with water
        connection, in part because the later is easier to measure);
       the level at which the policymaker needs the information (a national
        electricity connection rate will require fewer households to be interviewed
        than regional or district rates).

Different types of household surveys are presented directly below.
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Household Survey       Advantage                                              Limitations

Multi-topic surveys    Measurement and analysis of different Time-intensive (collection and
                       poverty       dimensions,         their      inter- evaluation)
                       relationships, and correlates
Demographic and Health-poverty              measurement,           health Measurement                     of          other
health surveys         behavior      analyses,        basic      poverty dimensions of poverty limited,
                       diagnostics                                            diagnostics limited
Employment             Analysis of employment patterns, wage Limited                          use       for      poverty
surveys                income analysis (link to education)                    measurement                              and
Single-topic           Income-poverty measurement (or one Limited diagnostics possible
surveys                other dimension)
Rapid     monitoring Quick and cost-effective monitoring of Income-poverty measurement
surveys          and key welfare indicators                                   not           possible,             limited
service satisfaction                                                          diagnostics

Living Standard Measurement Study (LSMS) surveys and other multi-topic surveys
Multi-topic welfare surveys, like the LSMS, are geared towards measuring and
analyzing poverty and are important instruments for poverty diagnostics. LSMS
surveys collect information on household expenditures and income, health,
education, employment, agriculture, the ownership of assets such as housing or
land, access to services, and social programs. Dozens of countries have
implemented multi-topic surveys and many now have several rounds of surveys
that allow rich comparisons across time. Multi-topic surveys can also be used to
measure the impact of public policies and programs on poverty.
Demographic and Health Surveys
These are special household surveys geared to exploring the incidence of
diseases and use of health facilities. They collect anthropometric data—height,
weight, and age of children, that can be used to calculate malnutrition rates--and

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many other health and health behavior-related variables that enable such factors
as survival rates, birth histories, and disease incidences to be computed. The
surveys also contain basic data about housing conditions, educational
attainments, and employment patterns. Although they do not include income or
expenditure data, they can be used to calculate household wealth and carry out
important poverty diagnostics.
Employment surveys
Labor ministries use employment surveys to gather information on employment
and wages. These surveys include questions about household income,
demographics, and housing features. They can be good sources for employment
statistics, income-based poverty indicators—if the income module is good—and
input indicators such as access to basic services. Employment surveys tend to
be more important information sources for heavily urbanized countries.
Expenditure and income surveys
Contrary to multi-topic surveys, expenditure and income surveys are narrower in
scope. They are useful instruments to measure different dimensions of poverty—
such as income- or education-poverty—but are limited in their ability to relate
household well-being to underlying causes such as asset distribution or
productive activities.
Rapid Monitoring and Satisfaction Surveys
These surveys are generally large, contain relatively short questionnaires, and
include predetermined data entry packages. They are easy to implement and
have a rapid turnaround time. The Core Welfare Indicator Questionnaire
(CWIQ)—widely applied in Africa—is one example. Unlike other surveys, the
CWIQ is not designed to serve as a tool for measuring whether poverty levels are
increasing or decreasing. It is intended only to measure whether or not public
services and development programs are reaching the poor and benefiting them,
and to monitor selected indicators—those that contain advance warnings of the
future impact of policies and events—and assess household living conditions,
access to basic social and infrastructure services, and the satisfaction of the
population with these services. Satisfaction surveys are best viewed as
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complements to multi-topic household surveys and have been used in many
countries to monitor access to and quality of basic services.
Specialized Surveys
Many other, specialized surveys exist that can be used for poverty diagnostics.
These can range from violence surveys--for example, in Lima, Peru--to opinion
surveys--for example, those conducted by the Social Weather Station in the
Philippines. Several countries also have surveys of health centers, schools, or
other public institutions. Firm surveys can be essential to understanding the
impact of crisis on employment and specific groups at risks and were used
extensively in understanding the impact of the East Asian crisis. Food security
assessments identify high-risk groups and are often used by relief organizations.
Typically, the websites of national statistical institutes and international
organizations will provide information about the availability of such data.

4.5.4 Qualitative Data
Qualitative research tools range from participatory assessments to ethnographic
and sociological case studies, and institutional to political investigations. Some of
these tools are described below. These tools help in gathering information that
household surveys are not able to capture, or can capture only partially,
       Subjective dimensions of poverty and variations in perceptions along
        gender, urban/rural, or ethnicity lines;
       Barriers that poor people themselves believe are stopping them from
       Intra-household inequalities; poor people‘s priorities for action;
       Cultural factors determining poverty, such as gender roles and some
        traditional beliefs;
       Political factors determining poverty, such as trust, corruption, and conflict;
       Certain social factors determining poverty, such as the role of community

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          The tools may also help in the design appropriate household survey
          questionnaires-- for example, in the section on reasons for use or non-use of
          health and education facilities. Finally, the tools may help for assessing the
          validity of survey results at the local level and to evaluate how much general
          policy design should consider the heterogeneity of local conditions.

          Data Collection Methods for Qualitative and Participatory Assessments

Data Collection in:     Methods

Beneficiary            Participant observation and more systematic data collection methods like
Assessments            structured interviews over a limited time span.

Ethnographic           Anthropological research techniques, especially direct observation, to
Investigations         analyze the influence of ethnicity, gender, and village stratification on the
                       household and group well-being and behavior.

Longitudinal     Village Wide variety of methods ranging from direct observation and recording
Studies                (tabulation), periodic semi-structured interviews with key informants (for
                       example, health center staff) and village population, to survey interviews
                       in several different observation periods.

Participatory          Ranking, mapping, diagramming, and scoring methods are prominent
Assessments            besides open interviews and participant observation. The time horizon of
                       participatory assessments is often short. They build on local populations
                       describing and analyzing their own reality surrounding poverty and well-

          Participatory assessments can help policy makers determine the type of
          indicators important for the poor—is it housing, employment, or income?. They
          can also capture information that other sources cannot capture, for example, the
          incidence and effect of domestic violence.
          Beneficiary and participatory assessments, which can take different forms, also
          involve the population more than household surveys. In town-hall or village
          meetings, citizen groups or their representatives can discuss poverty problems
          and policies, rank what they consider the causes of poverty, and map out new

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infrastructures in actual planning exercises. Individual interviews can investigate
the problems of women or children in households. Participatory methods do not
necessarily guarantee, though, that all groups in the community are given an
equal voice. There is a danger that women may be under-represented. This
danger may be even more present for the very poor. Whenever possible, it is
important to link participatory and qualitative investigations with household
surveys and population censuses in a formal way. This can be done by:
       Collecting variables in participatory studies that allow for easy comparison
        with regional or national averages obtained from quantitative sources;
       Designing qualitative case studies so that they are done on sub-samples
        of larger surveys; and
       Following formal sampling and data recording procedures that allow for
        systematic analysis and reliability of qualitative results.

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CHAPTER NO. 5 Study result and the household income
expenditure report

5.1   Study Results and the HIES Report……………………….48
5.2   Household Income and Expenditure Survey…………...52
5.3   Survey Methodology………………………………………...54
5.4   Data Collection, Concept, Definition and Classification…55
5.5   Data Processing, Analysis and Dissemination. …………58
5.6   The result of our survey……………………………………. 59

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                       5. STUDY RESULT AND THE HIES REPORT

         5.1 Study Results and the HIES Report

         The following data published by the World Bank points out the status quo of the
         economic situation in Pakistan and poverty related issues. One of the major
         reasons almost always cited for poverty is the ever-increasing population of the
         subject countries; Pakistan is no exception to that. It happened that many
         authors and researchers include the population phenomena in their list of poverty
         causes in Pakistan. However, it is believed by others that this is not the case,
         and there are always far more realistic causes of poverty and the poverty life
         cycle. These people cite the case of China as an example; China which has a
         population much more than that of Pakistan has managed to fight and reduce the
         poverty rate significantly.

POVERTY and SOCIAL                              Pakistan               South Asia                  Low-income
Population, mid-year (millions)                 159.0                  1,470                       2,353

GNI per capita (Atlas method, US$)              800                    684                         580

GNI (Atlas method, US$ billions)                126.7                  1,005                       1,364

Average annual growth, 2000-06

Population (%)                                  2.4                    1.7                         1.9

Labor force (%)                                 3.8                    2.1                         2.3

Most    recent    estimate     (latest   year
available, 2000-06)
Poverty (% of population below national
                                                ..                     ..                          ..
poverty line)
Urban population (% of total population)        35                     29                          31

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Life expectancy at birth (years)                65                       63                          59

Infant mortality (per 1,000 live births)        79                       66                          80

Child malnutrition (% of children under 5)      38                       45                          39

Access to an improved water source (% of
                                                91                       84                          75
Literacy (% of population age 15+)              47                       60                          62
Gross primary enrollment (% of school-age
                                                87                       110                         104
 Male                                           99                       116                         110

                                                75                       105                         99

          Key Economic Rations and Long-term Trends

          The economic condition of the country is what defines the rate of poverty, and
          determines to a large degree the living conditions of the people. The GDP of
          Pakistan has increased significantly since the 1980s (232%). This data is also a
          publication of the World Bank Group. This table was prepared by country unit
          staff; figures may differ from other World Bank published data. The data is as it
          has been adapted from their website.

                                           1986               1996                2005                 2006

GDP (US$ billions)                         38.1               76.2                109.5                126.8

Gross capital formation/GDP                18.5               18.9                19.1                 21.7

Exports of goods and services/GDP          10.3               14.0                15.7                 15.3

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Gross domestic savings/GDP             6.7                12.0                15.2                 13.7

Gross national savings/GDP             16.5               15.2                25.6                 23.6

Current account balance/GDP            -2.0               -6.0                -1.0                 -4.3

Interest payments/GDP                  1.5                1.6                 0.7                  0.7

Total debt/GDP                         39.3               39.1                30.8                 28.4

Total debt service/exports             25.0               28.3                10.9                 8.8

Present value of debt/GDP              ..                 ..                  25.8                 ..

                                       ..                 ..                  125.9                ..
Present value of debt/exports

1986-96                                1996-06            2005                2006                 2006-10
(average annual growth)
                                       4.2                7.7                 6.9                  6.6
GDP per capita
                                       1.8                5.1                 4.7                  4.5
Exports of goods and services          8.2                9.6                 9.9                  4.1


          The Structure of the Economy

                                                       1986             1996                2005                 2006
          (% of GDP)

          Agriculture                                  27.6             24.7                21.5                 19.4

          Industry                                     23.4             23.5                27.1                 27.2

          Manufacturing                                16.3             15.2                18.6                 19.5

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Services                                        49.0             52.2                51.4                 53.4

Household final consumption expenditure 77.3                     74.4                76.9                 75.5

General       govt   final   consumption
                                                10.7             10.5                7.8                  10.9
Imports of goods and services                   16.9             17.8                19.6                 23.3

                                                1986-96          1996-06             2005                 2006
(average annual growth)

Agriculture                                     4.3              2.4                 6.5                  1.6

Industry                                        5.8              5.5                 12.1                 5.0

 Manufacturing                                  5.2              7.1                 15.5                 10.0

Services                                        5.1              4.8                 8.5                  9.6

Household final consumption expenditure 4.7                      3.7                 12.1                 3.3

General       govt   final   consumption
                                                3.0              4.5                 1.7                  48.3
Gross capital formation                         4.3              2.2                 16.7                 12.1

Imports of goods and services                   4.3              3.1                 40.5                 18.7

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5.2 Household Income and Expenditure Survey

The Information in this section was acquired and is available from
the Federal Bureau of Statistics, Statistics Division. Data have been
collected by household survey since 1963.

Purpose and coverage

The following purposes are considered to be very important or of some
      To estimate household expenditure for national accounts
      To study the general structure of household incomes/expenditures
      To study income/expenditure patterns of disadvantaged groups, including
       pensioner households, single parent households, etc
      To study income/expenditure disparities among socio-economic groups
     To study consumer behavior among socio-economic groups
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        For general poverty and/or income distribution studies
        To study effects on income and expenditure of policy changes, especially
         tax changes
        For market research purposes

Geographic coverage: National with the following geographic areas excluded:
military restricted areas and protected areas of NWFP are excluded .
Population coverage:

The following types of household are included in the data collection:
        One person private households
        Private households with more than one person

The following types of household are excluded in the data collection:
        Those in collective housing (such as long term hospitals, prisons,
         monasteries, military quarters)
        Non-resident households of nationals (households of nationals located
        Diplomatic households in the country
        Households of other foreigners in the country
        Armed forces residing in private housing within military base
        Armed forces residing in private housing outside military base

Dwelling units are used in the sample selection and are characterized by:
        Single structure - detached housing unit

Data are recorded for the household unit which is characterized by:
        Two or more people living together:
                sharing meals
        One or more persons living together and sharing meals

Data are recorded for the family unit which is characterized by:
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       Two or more people:
              living in the same household
              sharing a single dwelling unit or compound
              sharing meals

Data are recorded for the income unit which is characterized by:
       Two or more people:
              living in the same household
              pooling their income to some extent

Unit members: Usual residents temporarily living away from the dwelling are
included, if away continuously for less than 9 months. Visitors (not usual
residents) temporarily living in the dwelling are not included as unit members.
Domestic staff living in same dwelling/compound are included in the unit. Renters
living in same dwelling/compound are not included in the unit. Boarders living in
same dwelling/compound are not included in the unit.
Head of unit:
The concept of head of household/other unit is used in this survey and is
characterized by:
       Acknowledged as such by other household/unit members

Reference periods
The time period to which income and/or expenditure statistics refer when
released/published is from 01/00 to 12/00. This survey is conducted annually.
The statistics are published annually.

5.3 Survey Methodology

Sample design
The Primary, Secondary and Ultimate Sampling Units are enumeration
area/district, none and household respectively.
Areas/districts were stratified using the following criteria:

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       Rural/urban

Households/Consumption Unit, Income Unit, Family Unit were stratified using the
following criteria:
       Income class

The sampling frames for the Primary Sampling Unit (PSU) and Ultimate
Sampling Unit (USU) were the list of Census enumeration areas and none

respectively.1 Primary Sampling Units (PSU) were selected using probability
proportional to size and Ultimate Sampling Units (USU) were selected using
systematic random sampling.. Errors/biases were minimized by using an updated
sampling frame.
Enumeration procedure: Enumeration uses a single round survey design in
which each reporting unit is enumerated only once. The sample is not divided
into representative sub-samples. No action is taken to select a smaller set of
reporting units for more detailed questioning.

5.4 Data collection, concepts, definitions and                          classifications

Income data
Income data are collected. Receipts do not have to be regular and recurring to be
considered as income. Income excludes receipts resulting from the sale or
reduction of assets and/or from incurring liabilities. Income includes receipts that
are not currently available to the unit.

The following receipts are collected separately:3
       Wages and salaries
       Cash bonuses and gratuities
       Employee income in-kind provided free or subsidized: housing
       Employee income in-kind provided free or subsidized: meals
       Services from owner-occupied dwellings

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       Interest received
       Dividends
       Other pensions
       Free government dwelling
       Subsidized government dwelling
       Other social insurance benefits
       Other social assistance benefits
       Regular support received from non-profit institutions serving households:
        goods and services
       Regular support received from non-profit institutions serving households:
        free dwelling
       Regular support received from non-profit institutions serving households:
        subsidized dwelling
       regular inter-household transfers received from: free dwelling
       Regular inter-household transfers received from: subsidized dwelling

The following receipts are collected but not separately:3
       Commissions and tips
       Remuneration for time not worked, e.g. leave pay
       Goods produced for own consumption
       Rentals (payment received for produced assets e.g. house)
       Rousing allowances
       Food subsidies
       Medical reimbursements
       Regular support received from non-profit institutions serving households:
        cash, e.g. scholarships
       Regular inter-household transfers received from: family, e.g. alimony,
        child/parental support
       Regular inter-household transfers received from: regular cash gifts
       Regular inter-household transfers received from: regular in-kind gifts
       Regular inter-household transfers received from: regular free services

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       Social transfers in kind: medical services

The following receipts are classified as income from paid employment:
       Wages and salaries
       Cash bonuses and gratuities

The following receipts are collected using the last month as the reference period:
       Wages and Salaries
       Cash bonuses and gratuities

Income data were collected separately for each person receiving income.
Components of income for an individual were collected directly from the
individual. Negative values (business losses) were included when computing
self-employment income.

Expenditure data
Data collection method:
Diaries are not used to collect expenditure data.
Interviews are used to collect expenditure data with the respondent completing
the interview by recall only.

Data for the following expenditure items are collected by referring: 2
       To expenditures in last one month:
               other household non-durable goods
       To expenditures in last 12 months:
               clothing, footwear
               housing
               other durable goods
               households services
               personal services

Other Data Collection Issues
The following other topics are covered:
       Demographic characteristics

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       Education attainment of members
       Employment status of members
       Occupation of members
       Ownership of selected durable goods
       Savings
       Indebtedness

Households are not requested to indicate whether durable goods are new or
second-hand when their acquisition is recorded.
Non-response: There is no substitution for non-response, whether by non-
contact or by refusal.
Non-response is reduced using more than one repeat visits.

5.5 Data processing, analysis and dissemination
Answers are pre-coded on data collection forms to the extent possible.
The responses are edited field supervisors.
Extreme values are deleted. Consumption of own production is included in the
estimates, but in-kind receipts are not. Consumption of own production is valued
using: the imputed by field staff using market prices.
Treatment of owner-occupied housing: Values of owner-occupied housing are
included in the total income/expenditure estimates and are valued using the
current market value. ( )
Treatment of selected groups/values in analysis: Some households/units are
excluded from analysis because of incomplete response. Missing values are
imputed only on some occasions possible correct the values otherwise treat as
missing values. Supplementary sources are not used to adjust estimates for
under- or over-reporting. none are excluded from data analysis.
Weighting factors are used to adjust for:
       Sampling
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Sampling errors: Sampling errors are computed for for Internet analysis but
these sampling errors are not available.
Tabulation and Analysis: Statistics are presented showing averages per month
and statistics are analyzed and tabulated for households only.
The following classifications are used for tabulation and analysis of income
       Age of reference person or head of household
       Sex of reference person or head of household
       Occupation of reference person or head of household
       Absolute income groups
       Principal source of household income
       Household size

5.6 The Results of Our Survey
This study - which focused on poverty and its status in Pakistan as well as the
possibility of its eradication or at least its reduction – depended on two activities
as its source for information. The previous sections covered what other surveys
and studies have said about the subject; the following section is going to discuss
our small survey – its outcome and indications.
Although the objective of the study was to cover all Pakistan, the survey was
conducted only in Karachi due to obvious reasons and obstacles most important
of which is the fact that I am one student and do not have the manpower to
execute such a large-scale research and study . Another reason is the limitation
of our mobility and the fact that we cannot travel to other areas of Pakistan which
should have been visited if a comprehensive information was to be gathered; a
result of our being students with other binding commitments.
The scope of the study have been restricted in different perspectives. The first is
the geographical one and the second is the sample size restriction. Around
above hundred individuals responded to the questionnaire, most of who where

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were considered victims of poverty, especially in financial terms, who live in the
most poverty-stricken areas of the city. This was another limitation in the
information presented in the study.

The Questionnaire/Survey Outcome

According to our survey, 70 percent of respondents said that their family size was
between four to five members, while 15 percent said they belonged to families of
seven to ten members. On the other extreme was those who said they belonged
to families of two members; these formed around 10%.????
It was also apparent from the survey that most of the families were supported by
male members. Only 13 percent of the respondents said their families were
supported by female members (mothers or elder sisters mostly).
The gender ratio part of the questionnaire has been included because of the
impact of gender issues on the welfare of societies and their poverty rates. The
ratio of male to female members according to the respondents was
approximately 2 to 1. While almost the same ratio should have been maintained
in the gender ratio in education, our results show otherwise; the results were
almost the reverse claiming that the female members who are have been
educated or are studying at the moment outnumber the number of male
members in the same respect.

In terms of the dependency ratio, the data shows that roughly 5 people depended
for leaving on every working individual; that is to say that the ratio is 5:1.
79 percent of the respondents said that the working members of their family were
self-employed, while the rest said they worked for the government in the civil
service and armed forces sectors. 60 percent of these people worked for the
government, while 31 percent worked in the business sector, and 9 percent were
in the agriculture industry.

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The study showed that there is a strong relationship between education and the
poverty condition of households; households with educated members seem to be
in a better condition and less susceptible to poverty. According to our statistics,
50 percent of the total members of the families of the respondents are
The average income of 60 percent of the respondents' families were between
10,000 rupees to 30,000 rupees; whereas their average expenditure was about
6000 to 10000 rupees. 70 percent of the members lived in rented houses while
the remaining 30 percent lived in their own houses.

The Interview Results

Members of the academia who have conducted earlier researches and who
happen to be very knowledgeable about the poverty status in Pakistan have
been requested to give one-on-one interviews to share their views and ideas
towards poverty eradication in the country. The following is the sum of what they
had to say as a response to the questions listed in the appendix.
The micro-finance approach to fighting poverty has worked in different places
around the world, and it is agreed that in those scenarios and cases it has been a
success, however that same success cannot be duplicated in every other
environment. There are certain other factors that that have a great influence on
poverty and its rate in a community. A mostly cited example case is that of
Bangladesh. The interviewees agree that micro finance is a temporary solution to
the poverty crisis; and to ensure its success as a viable long term solution certain
measures which involve the social behavior and the monetary should be taken.
Consideration should be given to who is to be given the loan in a micro financing
scheme. It is believed by some of the interviewees that women have a high
probability of paying back the loans which makes the micro financing scheme
more viable and effective since the loan money will be circulated among many
individuals and groups, thereby increasing the number of beneficiaries from the
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Micro financing schemes to combat poverty in Pakistan have been launched.
Among the well-known of these projects are the Yellow Cab scheme and the
Presidential scheme for Rickshaws.
The solutions to the poverty crisis as cited vary a lot. The common solution as
suggested by the interviewees is working on the educational sector, improving
educational development, and skill development.
The government has done a lot about the education to fight illiteracy and
ignorance, indirectly combating poverty. It has launched such schemes in Sindhi
and Punjab in the form of scholarships and cash payments. In Sindhi the
government has increased the money it used to give the students from 200 to
300 rupees.
As to the causes of poverty, they have mentioned un-productivity on the side of
the people and the fact that they do not consider saving for tomorrow, the ever-
increasing inflation, and the lack of proper governance of resources.
Many NGOs are working in Pakistan at the moment under the theme of Poverty
Reduction. These NGOs including Orel, AQWA and Rahim work in developing
the individual capacity, creating job opportunities, dealing with social problems
that exaggerate poverty, and building independent lives for the members of the
Foreign Direct Investment (FDI) was a controversial issue among the
interviewees. Some believe that it has benefited the economy of the country and
hence helped reduce poverty to some degree. In addition to bringing investment
into the country, the concerned companies have brought a long corporate culture
and liberated the minds of the people.
On the other hand, others believe that foreign direct investments have no impact
whatsoever on poverty eradication or reduction since the profits mostly go to the
pockets of the already-rich portion of the community.
Privatization is agreed that if applied to certain institutions, it might affect the
poverty rate and reduce it; however it must not be applied to the public service
sector and should be in the hands of the government. Examples of these

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services include the utilities companies such as the gas, water and electricity
They [the interviewees] agree that the development and deployment of long-term
plans and strategies and their implementation in a pilot approach on an area by
area basis is the key to poverty reduction and eventually its eradication.

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CHAPTER NO. 6 Poverty: Prevention, Reduction or Eradication

 6.1     Prevention, Reduction or Eradication……………...... 65
6.2      Poverty Combat Paradigms…………………………… 68
 6.2     The Task force of Poverty Eradication………………… 70

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6.1 Poverty: Prevention, Reduction or Eradication
In earlier chapters we have discussed poverty and the creation of poverty cycles.
We have also seen the determinants and factors that cause poverty and its
propagation. Considering all those given factors, can poverty be eradicated? Or
we can only reduce its rate? It is said that prevention is better than cure; a
relevant question under this theme would be: can we prevent poverty in the first

Knowing the factors that help poverty to spread and its cycles to create is one
important step forward to finding solutions to the poverty crisis and finding
answers to the questions above. Many countries and states have devised
strategies to fight poverty; they have there own merits as well as their issues and
opponents. Overcoming poverty means shifting the location of the poor in the
local power structures from being victims to active subjects in achieving equitable
access over markets and over institutions.10

About two-thirds of Pakistan‘s population and almost 80 percent of the country‘s
poor live in rural areas. According to the 1998 census, 89.3 million people lived in
rural areas of Pakistan in that year. Household incomes are lower and poverty
rates are higher in rural areas than in urban areas. Average per capita
expenditures of rural households in 2004-2005 were 31 percent lower than those
of urban households (Rs 1259/month and Rs 1818/month, respectively). The
poverty rate in rural areas is estimated at 34.0 percent, about 15 percentage
points higher than the 19.1 rate in urban areas (World Bank 2006b).
Rural, as well as total population growth rates are declining, which bodes well for

10       Dr Akmal Hussein, paper on Poverty in Pakistan
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per capita income growth. Average fertility rates (the average number of births
per woman over her lifespan) have declined sharply since the mid-1980s from
about 6.8 children per woman to 4.1 in 2001, although this is still high compared
to that of Bangladesh (3.3) and India (3.2). Rural population growth rates have
also fallen from 3.5 to 2.6 percent. Nonetheless, the rural population is likely to
continue to grow, reaching 122 million in 2015 (64 percent of the total population)
at historic rates of migration of 1.2 percent per year. The urban population would
reach 70 million in this scenario, and 82 million (43 percent of the population) if
net migration rates doubled to 2.4 percent per year (See the Annex to Chapter
one). During the 1970s and 1980s, agricultural growth was accompanied by
substantial reductions in rural poverty, but rural poverty rates in Pakistan did not
decline in the 1990s despite substantial growth in agricultural GDP. Even though
real agricultural GDP rose by 4.6 percent per annum, the percentage of the rural
population living below the poverty line remained essentially unchanged between
1990-91 (36.9 percent) and 1998-99 (33.8 percent).
Several factors explain the non-correlation between relatively rapid agricultural
growth and rural poverty reduction, including a possible overestimate of
agricultural GDP growth and an increase in real consumer prices of major staples
since the mid-1990s. In addition, because of the skewed structure of ownership
and access to factors of production in rural Pakistan, 46 percent of the rural poor
in non-farm households do not share directly in incomes derived from agricultural
crop production. Moreover, even accounting for growth linkage, effects from
increases in traditional crop agriculture are relatively small in comparison with the
sector‘s large size.
Positive developments in agricultural output, rural poverty reduction and social
indicators in 2004-05 represent a sharp break with 1990s trends. These
improvements have been achieved through a combination of increased overall
development expenditures and improved service delivery at the local level (in
some localities at least), supported by a sound macro-economic environment
including a liberalized trade and exchange-rate policy regime with relatively low
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inflation. The latter in turn spurred high GDP growth and increased demand for
construction and other labor-intensive services. Factors that are likely to be more
transitory also played a role, including increased increases in workers‘
remittances and bumper crops related to good weather
The challenge now will be to extend the success of recent years to the medium
term so as to further reduce still-high rates of rural poverty in Pakistan. The
strategies adopted to achieve these goals will need to take into account gradual,
but increasingly important long-term changes 2 ―Rural‖ here is defined according
to administrative definitions at the time of the 1998 census. Since the 2002
devolution, there has been no formal administrative distinction between urban
and rural areas. Official government estimates show poverty at 35.9 percent in
1998-99 (Pakistan Economic Survey, 2005-06). Poverty estimates vary,
however, because of changes in definitions of poverty lines over time
and methodological issues related to price de-flators. Though levels of
remittances and crop yields may be maintained, growth rates are likely to fall.
In Pakistan‘s economy, particularly rural-urban migration, a declining share of
agriculture in total economic output and increasingly severe environmental
constraints (particularly related to growing water demand in urban areas and
environmental degradation due to drainage problems).
Most importantly, a rural poverty-reduction strategy should focus not on rural
sectors, but
on rural people. Many of today‘s rural poor may migrate to small towns and large
cities or be employed outside of rural areas for all or part of the year. Because of
this, reducing rural poverty rates will not be merely a function of agricultural and
rural non-farm growth, but also of development in urban areas (including small
towns) and overall economic growth. Investment in rural and small-town
infrastructure can facilitate these economic linkages. Likewise, investments in
human capital (education and health) can increase the productivity and welfare of
the rural poor irrespective of whether they remain in rural areas or not.

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6.2 Poverty Combat Paradigms
Those who are trying to find solutions to poverty have their own paradigms to
analyze and take action against poverty. Dr Akmal and proponents of his ideology
state that the current paradigm for poverty analysis and eradication is not
effective. Organizations and other entities combating poverty mostly follow the
approaches of providing micro-credit to the poor or increasing resources. He
argues that the poor in Pakistan cannot simply be seen (as much of the literature
does) as free individuals suffering from merely adverse ‗resource endowments‘,
and making choices in more or less ‗free markets‘. It is such a paradigm, which
induces the government to think that all it needs to do to reduce poverty is to
allocate more resources to the poor or to the local governments who are
supposed to ‗represent‘ them.

By contrast one can propose an alternative paradigm within which one can
understand poverty occurring when the individual household in a fragmented
community is locked into a nexus of power that systematically perpetuates
poverty. Within such a paradigm it is possible to understand a fact that eludes the
conventional paradigm: The poor face markets, state institutions and local
structures of power that discriminate against the poor and deprive them of a large
proportion of their actual and potential incomes.
This is documented for the first time on the basis of new survey data in the just
published National Human Development Report. The data set is new simply
because the underlying questions have not been asked before. Some of the
questions one has raised are: How do distorted markets for inputs and outputs of
goods and services result in the loss of the actual or potential income of the
poor? If this is indeed the case then what is the magnitude of the income loss?
How do local structures of power with respect to landlords, local administrative
officials, and institutions for the provision of health, credit and dispute resolution
deprive the poor of their income, assets and the fruits of their labor?
Most studies on poverty in Pakistan have examined the problem simply in terms
of measuring the number of people below certain poverty lines. However if
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poverty is to be overcome what is required is to understand the processes of
poverty creation and to identify the points of intervention in the poverty process
through which the poor can be enabled to overcome poverty on a sustainable
basis. That is what one has attempted to do in the Report.
The new survey evidence shows that the poor lose as much as one-third of their
income due to unequal access over input and output markets and extortions by
the local administration. For example, as much as 51 per cent of the extremely
poor tenants, borrow money from the landlord. The leverage of power available
to the landlord on the basis of tenants‘ dependence for both operation of the land
and loans from the landlord, enables the latter to appropriate the only resource
which the poor have, namely their own labor.
The evidence shows for example that of those tenants who borrow from the
landlord as many as 57.4 per cent work on the landlord‘s owner cultivated portion
of the land without any wages at all, and 14 per cent work for a daily wage of only
Rs 28 which is substantially below the market wage rate for unskilled labor.
Similarly the extremely poor sections of the rural population when they are locked
into a dispute related with land, water or theft, are forced to spend as much as Rs
18,333 in trying to resolve the dispute through local structures of power and yet
only 38.5 per cent of the disputes get resolved. Since the expenditure on dispute
resolution by the extremely poor is more than their annual income, involvement in
disputes means borrowing money and getting into a debt trap.
The evidence shows that health is a major trigger that pushes people into poverty
and the poor into deeper poverty. As many as 65 per cent of the poor were ill at
the time of the interview and lost as much as three months of the year to illness.
Given the inadequacy of the government‘s health facilities as many as 85 per
cent of the poor go to private allopathic medical practitioners for treatment.
The expenditures on such treatment are so high that poor households are
obliged to borrow mostly from informal sources to finance the medical expenses
of their families. Consequently they gradually lose whatever few assets they have
(such as farm animals) and being unable to earn a livelihood for long periods due
to illness, they are then forced to borrow money even for food expenses. Access
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over good quality health services is a question not just of money but also of
power and influence to get hold of a proper doctor or a hospital bed.
Thus the analysis and evidence within this new poverty paradigm suggest that
the key to overcoming poverty is to empower the poor to get better access over
markets, governance, and the institutions that provide public services such as
health care, education and justice. Empowerment in this specific sense means
establishing autonomous community based organizations of the poor at the local
level. These organizations would be quite distinct from the ‗village organizations‘
set up by large cross-district NGOs.

6.3 The Task Force on Poverty Eradication

In the 1990's a task force on poverty eradication has been established with the
purpose of formulating a strategy to combat poverty and eradicate it. To be more
specific, on 25th March 1997, the Federal Finance Minister, Mr. Sartaj Aziz
constituted the Task Force on Poverty Eradication (D. O. No. 25-FM/97, see
Annexure 3). The Task Force completed its work and submitted the draft report
on 30th May 1997. Within days of its submission the government adopted some
of the major proposals of the Report and the
Federal Finance Minister announced them in his budget speech on June 13,
1997. (See relevant extracts in Annexure 2). Subsequently, the government of
Punjab initiated the process of establishing regional support organizations in the
Punjab province as proposed in the Report. This is part of a major initiative by
the Chief Minister, to alleviate poverty in the Punjab. As various departments and
personnel in the federal and provincial governments begin to focus their energies
on the task of facilitating the process of overcoming poverty in Pakistan, it is
important to achieve clarity on the methodology and institutional mechanism of
this process.
The central goal of the institutional strategy articulated in this report is to enable
over 4 million households (approximately 29 million people) who are currently

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living below the poverty line, primarily in the rural areas, to overcome their
poverty. The strategy has five broad programs:
  I.      A program for overcoming poverty over the next five to ten years through
          Participatory Development at the village and mohalla levels.
 II.      A program for micro-credit to the poor in both rural and urban areas
          through which the poor would be able to develop an asset base which
          could increase their regular income earning capability.
III.      A mass training program in basic skills combined with an employment
          provision program through the proposed National Reconstruction Corps.
          This would enable the poor to make use of the employment opportunities
          which are expected to be available over the next decade. It should help
          generate the following types of employment:
       a) Employment in village based development projects.
       b) Self-employment in the urban informal sector.
       c) Employment as technicians in the formal large scale manufacturing
          i) sector and the large scale infrastructure construction projects expected
          ii) be initiated over the next five years.
          iii) Jobs in the rural off-farm sector.
          iv) Employment in the computer software service industry.

IV. A program for eliminating the practice of employing child labor in hazardous
IV.       A food security safety net for ensuring availability of food for the indigent
          and the handicapped in urban areas, and free lunch for school children in
          poor rural schools.

6.4 The Government's Poverty Reduction Strategy
The Government's poverty reduction strategy affirms that Pakistan is faced with
the twin challenges of reviving growth and reducing poverty. The Strategy has

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identified five major areas of intervention for poverty reduction in the country.
These are
        Revival of economic growth
        Income generation
        Creation of employment opportunities
        Human development
        Strengthening of social safety net programs to reduce vulnerability
        Improvement in governance

The Strategy also focuses on reforming formal institutions of governance while
working towards attainment of specific human development goals in the areas of
education, health, population welfare, water supply and sanitation. It incorporates
the key features of the education and health reform programs launched in 2001,
while addressing a broader agenda of structural reform.
An increase in GDP growth rates will, however, only lead to appreciable
reduction in poverty levels if growth is broad based. To generate employment
opportunities on a scale needed for long-term poverty alleviation, it is necessary
to create an environment conducive for private economic activity, and encourage
domestic and foreign investment. That requires significant improvements in
management of public resources, establishment and enforcement of the rule of
law, and a move to a less intrusive system of economic regulation. 11
For the longer term, it is imperative to not only bring about a significant decrease
in the incidence of poverty, but also to reduce vulnerability to economic
fluctuations, and alleviate the feeling of powerlessness that is the most important
intangible that shapes the lives of the poor. Poverty alleviation thus has to be
effected not only through macroeconomic policies, but also by bringing about
significant improvements in the structure and functioning of systems of

11      Asian Development Bank paper presented at the Institute of Public Administration in Lahore on
Poverty Alleviation in Pakistan
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7.1        Conclusion…………………………………......................................75
7.2        Recommendations……………………………………………………75


7.1 Conclusion
Poverty rates in Pakistan have been decreasing lately but not to a satisfactory
degree. The measurement of poverty and the techniques used in that process
have a great impact on the formulation of viable strategies to counter poverty and
its aftermath. It is imperative to consider the social factors that accelerate poverty
and create the poverty cycle.

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The factors affecting the poverty rate in the country are mostly ones caused
themselves by poverty? The most obvious of these factors is education and the
lack of it. If someone is poor, access to education (schools, educational material,
etc) is limited, thereby discouraging education since the family has more pressing
issues do deal with such as working for the daily living. This creates a cycle that
is very hard to break out of. Good governance of resources is another commonly
cited factor that impedes the poverty reduction efforts.
The micro finance approach to fighting poverty has become somewhat
controversial as a viable means of poverty combating. To make it work in
Pakistan, this method that has become successful in some regions of the world,
we should not merely copy it, but should shift ourselves and the attitude of the
people in a way that it can operate effectively and produce tangible results.
Privatization has been seen as another effort to fight poverty if the proper
measures are taken to ensure that the advantages and profits reach those areas
and portions of the community that has the most need for the resources.

7.2 Recommendation
After conducting this research and perusing all the means we could put our
hands on to find as much possible information on the subject of poverty
eradication in Pakistan, we would like to present the following recommendation:
   1. Reforms in the educational sector and syllabi in educational institutions
       should be made to teach the students not only about their subject matters
       but to be productive. The system should concentrate on skill development
       and vocational and technical training.
   2. Amendments should be made to the governance policy of the resources to
       make it reach those who need it most.
   3. Proper family planning and population control should be exercised since
       poverty is also a matter of fewer resources and more consumers.
   4. Implementing micro finance in a more controlled setting by the
       government, non profit organizations and the business sector; and giving
       more attention to the really poverty stricken areas of the country.
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   5. Passing new resolutions and amendments to the national constitution that
      disallow land lordship since it is the source the unequal distribution of
      wealth in the country. If the individuals working for the landlords are given
      their share of the land as they deserve, their productivity might be
      increased, and they might generate an income more than the hand to
      mouth one they get at the moment under the land lordship system.
   6. Allow privatization but in a restricted way, preventing the application of
      privatization to public services such as electricity and gas.
   7. Allow foreign direct investment ensuring that the investment and their
      profits are distributed rationally across the country, thereby giving the
      poverty stricken areas the opportunity to take their share of the products of
      these investments.
   8. Formulate long term strategies for poverty reduction or eradication and
      performing periodic evaluation of progress for effectiveness.

7.3 References & Bibliography
    Altaf Zafar (2004), Poverty (practical solution to Pakistan‘s economic
      problems), Ushba Publishing International, Pakistan
    Malik, S. (1992) A Study of Rural Poverty in Pakistan w.s.r. to Agricultural
      Price Policy. Ph.D. Dissertation submitted to the University of Sussex,
    Mr Mushraq Ali Shah (2002), Poverty Alleviation in Pakistan
    Naseem, S. M. (1973) Mass Poverty in Pakistan: Some Preliminary
      Findings. The
    Pakistan Development Review 12:4 317–360.
    Regional High-Level Meeting on Asia and the Pacific (2000), Report on
      Poverty Reduction in South Asia
    SDC (2000), Social Development in Pakistan – the Poor
    World Bank (2005), World Development Indicators

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    Zaidi & Iftikhar (2003) Poverty Environment Nexus, series on Poverty
      Reduction and Human Capital – Best Investment for Future

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   1. Respondent Name (Optional):
   2. Role in family:
          Father
          Mother
          Elder brother
          Elder sister
          Other ___________________________
   3. In which area do you live?

              Town/Area                 City                         Province

   4. How many members does your immediate family consist of? (family size)
          2 members
          4 – 5 members
          5 – 7 members
          7 – 10 members
          More than 10 members

   5. Who supports your family (in terms of living expenses, etc)? [Please tick
      all that apply]

          Father
          Mother
          Elder brother/sister
          Relatives
          Other _________________
   6. How many of your family's members are female and how many are male?

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                Male                      Female

   7. How many members of your family work? _____________________

   8. Please specify whether the members supporting the family are:

          Self-employed             OR
          Employed by another entity (i.e. Company or individual)
   9. What area of profession do they belong to (if any)?***

          Business
          Agriculture
          Government service
          Civil service
          Other _______________
   10. What is the educational level of your family members? [Please indicate
      the number in each category below.]

      Never gone to school
      Elementary school
      College/ Undergraduate
      Graduate and Higher education

   11. What is the average income of your family?

          Below 3000 PKR
          3000 – 10000 PKR
          10000 – 30000 PKR
          30000 – 60000 PKR
          60000 – 100000 PKR
          Above 100000 PKR
   12. Do you live in your own house or in a rented house?
          Own house
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           Rented house
   13. How much do you spend on living expenses?
           Less than 2000 PKR
           2000 – 6000 PKR
           6000 – 10000 PKR
           10000 – 20000 PKR
           20000 – 50000 PKR
           Above 50000 PKR
                                 APPENDIX II
                            INTERVIEW QUESTIONS

These sets of questions are for individuals, scholars and social workers who
have knowledge of the Pakistani economy. The questions revolve around the
possibility of poverty eradication, the causes of poverty in Karachi and other
poverty related factors that affect its rate in the region. They also explore ideas
that can be part of a greater initiative to combat poverty and its effects.
   1. Do you believe that poverty can be eradicated?
   2. What, in your opinion, are the major causes of poverty in Pakistan? What
       factors affect the rate of poverty in the country?
   3. Some countries have devised plans to counter poverty; examples include
       the Micro-financing initiative started by Mohamed Yussuf – a banker in
       Bangladesh. What do you think about the possibility of devising and
       implementing plans such as this one in Pakistan? If possible, what would
       you say, are the critical success factors of an initiative like this one?
   4. Could you think of any similar plans to fight poverty in the country?
   5. Are there any organizations doing something about the poverty issue in
       the country? Can you give examples?
   6. Has the government done anything about the poverty in the country? If
       not, then what do you think might be the reason? Is it corruption, the very
       large population of the country, or simply that the government chooses to
       ignore the existence of poverty?
   7. Do you think that foreign direct investments in Pakistan might help reduce
       poverty in the country?
   8. What impact, in your opinion, does privatization have on poverty in
       Pakistan? Do you think it is a positive factor for the struggle against

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