Often, we hear people say the cause of poverty is lack of saving, but it can also very easily be argued that the lack of savings is a result of not having enough to save to begin with.
Effect, cause: Taking caution in understanding development work
By Joel Muhumuza
One of my favourite white stripes songs is effect and cause. An examination, rather cleverly, of how easily we tend to switch around the order of events that have bearing on each other. A section of the song goes as follows.
Well in every complicated situation
Of human relation
Makin' sense of it all
Takes a whole lotta concentration (Mmm)
Well you can't blame a baby
For her pregnant ma
And if there's one of these unavoidable laws
It's that you can't just take the effect
And make it the cause (no)
And nowhere is this truer than in development work. Often seeking to find a panacea to the problems of global poverty, several organisations have sought to find the root cause of poverty. Some say it is the lack of efficient institutions that should provide adequate health, educational and social services to allow people to pursue their trade. Others say it is lack of access to financial services. People are capable, but they lack the resources to transform their lives.
All these hold some merit, but my contention is that we often forget that what we have now is a vicious cycle of poverty. For example, it is often touted that people need to save to protect against financial shocks and meet future needs. However, if someone is earning less than $1 a day, which is about 35% of our population, what can they reasonably save when they have over a dollar's worth of needs to meet?
Often, we hear people say the cause of poverty is lack of saving, but it can also very easily be argued that the lack of savings is a result of not having enough to save to begin with. By way of illustration, I have had the pleasure of working with village savings groups across Uganda, supporting them to get training in formal financial services and eventually getting them connected to banks, with a special mobile wallet service allowing them to send and receive money from their account.
This would solve the issue, we thought. They now have relatively less costly means of accessing a bank service. They can save and send money to the bank, on the back of which they would be able to get loans. But as is often the case, reality is not so neat.
The groups that have so far utilised the service are the lead vulnerable. The ones who are already engaged in trade and earning. The youth groups who had a few people engaged in trade, but most in subsistence agriculture, were barely able to save to begin with. The service was fancy and they thought it was great. But it did not solve the problem. If anything, some groups felt they had taken on a new obligation with the bank. Instead of relief, more headache!
Similarly, when it comes to the problem of effective payment systems faced by multiple out growers producing harvest to sell to multinationals such as BAT or local companies such as SCOUL or Mukwano, the solutions provided, which include the use of bulk mobile money payments have been a relief to the companies.
For the out-growers, a problem remains. They now have money in a form which they do not typically use it. They want paper currency. Because the drug store, the school, the farm inputs supplier all take cash. Not e-money and if they do, it is often expensive. Ideally an ecosystem for mobile money payments in the places the farmers live should be developed so that payment in the form of mobile money is a solution and not just making things easier for one side of the equation.
Issues like this have dogged the development sector, sometimes rightfully so. The challenge for us is to do a much better job analysing the effect and cause of poverty but also of the policies and product innovations we utilise as solutions. Understanding that we are seeking to catalyse change in a complex economic system will give us the humility to keep asking the difficult questions and involving the end users in the process of finding solutions. A proper understanding of effect and cause will prevent us from being the people who have solutions seeking problems.
The writer is the Financial Sector Deepening Uganda's partner support specialist