How to solve poverty?

Our world is a place of many contrasts. We observe extremely rich people, then we face extreme poverty. It can be quite disturbing when we read that more than half of the world have less than $2 per day to survive. We usually would like to help, but on the other hand, we do not know how to solve poverty effectively. It is our huge problem, fortunately, it is possible to overcome.

Dr. Dennis Labayen has been working on creating the best way to fight poverty in the poorest communities around the world. It is crucial to understand that the right quality of our help is indispensable, since interim solutions have already proved to be ineffective. Bearing this in mind, Labayen and his team created Participatory Human Development – a process aimed at fighting poverty, which includes five important elements and strategies.

  1. Those who need help must have voice. The members of communities affected by poverty should be enabled to take part in the process of improving their situation. Consultations with them, their active participation, looking for ideas to solve their own (best known by them) problems will make the whole process more specific and thus, more effective in this certain group. Other important aspect here is the positive impact of this approach on the affected people. They would feel engaged and truly able to change their lives.
  2. Working with a few individuals should be changed into collective and organized actions aimed at empowering those in poverty. We need to create organized groups within communities. Firstly, it is much easier to provide help by organization. Apart from this, a collective organization enables us to address problems better and still makes every individual benefit from the process by his or her development.
  3. Issues and problems should be identified by the people in poverty. So as to make the process sustained, we need the people’s involvement and systematic problem identification. They will be systematically gaining self-confidence and also developing skills of working in a group to solve issues. Their experience will be next used to address more complex problems.
  4. The people in poverty must realize that they can often identify and solve their problems themselves. It is a very important goal of the process, since such awareness will enable the people to sustain the efforts, results and then address other problems.

The process of fighting poverty needs to be long. If we want to see lasting and satisfying results we must be aware that this kind of transformation just demands quite a long period of time to be finished. What we need is the people affected by poverty taking an active part in their process of development and change. We must think prospectively, helping not only here and now, which would mean just supporting financially and disappearing with the feeling of fulfilled duty. People in poverty must be taught how to be involved, influence and improve their reality on their own.


What do you think are the reasons why poor people need to be financially educated?

Poverty remains a huge problem for the governments. Looking for an effective policy which would cure this social “ailment” leads us usually to the discussion about the necessity of some financial education for the poor. It seems justified, as often these are those generally less educated people who find it hard to deal with financial matters.

People mostly judge you looking at how much you own, and frequently they have their ready judgments. If you have a little, you are probably some kind of an addict or just know nothing about finances. Thus, most of the “financially well-educated” wealthier part of society believe that poor people definitely need financial education. Why do people think the poor need it? There are some popular beliefs:

1. The poor spend money irresponsibly

Some of us may think in this way when asked about the main source of poverty. Maybe it is true, maybe we just do not look at spending money from a poor man’s point of view and we just assume things too quickly. The truth is that being poor does not mean you cannot buy sweets or other small treats for your family, or buy something, let us call it, “not necessary to survive”, if it is this “family thing” which in other, wealthier family could be a trip or other more expensive gift.

2. The poor waste money on their addictions

This is the next argument we often give, and actually, it is obviously true in many cases. However, firstly, not in ALL cases, and secondly, how can the financial education help poor people stop drinking alcohol or smoke heavily? It is very doubtful that this would help anybody in such a situation, just because the core of the problem is hidden somewhere else, not in the lack of the financial knowledge.

3. Poor people take too much credit

The truth is that having too much credit is the problem of not only the poor, we all are in the same danger. Whose fault is this that poor people are given the next credit in the situation when they have already lots of debt? Nowadays, there are plenty of credit options and bad credit loans. Aren’t the lenders and the lending companies’ marketing too aggressive and pushy? Maybe the financial education could solve one part of the problem, yet the responsibility lies on the both sides – borrowers and lenders.

4. Poor people do not use financial products because they do not know how

It is true that poor people tend to avoid making their money “electronic”. They do not seem to trust new technologies. Educating about formal financial possibilities they have and already know about ( but do not want to use), is not enough. It would be probably more effective to create the formal financial products and money management apps  which would be suitable for the poor’s mindset.

Adult financial education programs have not turned out to be very effective as for now. It is easy to create a program and at least “do something” to change the situation basing on common biases, but we need more desirable results and proof that it really works. Nevertheless, it is not senseless to implement some financial education help, but why not to start at the school education level?