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INTRODUCTION
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Malawi carried out an Integrated Household Survey (IHS) in 1997 and 1998 with a view to understand the conditions under which Malawians are living: That is, a poverty profile of the country. This follows the adoption of the Poverty Alleviation Programme by government in 1994 and the institution of the Poverty Monitoring System to provide information on poverty and poverty trends in Malawi.
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An important economic drive for all individuals is to improve ones living conditions or welfare. Likewise, an appropriate function for many governmental and non-governmental institutions is to assist individuals as they strive to improve their welfare, particularly in assisting those individuals in the nation who are currently unable to meet their basic requirements for living a productive and fulfilling life. In order to assist these people, it is important as a starting point in these efforts to understand the conditions under which these people are currently living. That is the aim of this paper. This poverty profile of Malawi assesses the level and distribution of poverty in the country and highlights the correlation between the wealth or poverty status of individuals and their educational, health, and economic characteristics.
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Poverty is that condition in which the basic needs of a household (or individual) are not met. In order to determine whether or not a household is poor, one must do two things. First, one must establish a level of welfare for the household. That level, whether defined subjectively or objectively, will be compared to a level of welfare above which one assumes the basic needs of a household can be met. Establishing this poverty line is the second step needed to ascertain the poverty status of a household.
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The definition of poverty noted above is necessarily a very broad definition. The working definition of poverty adopted here is considerably more specific and less holistic. Using consumption and expenditure data from the 1997-98 Malawi Integrated Household Survey, a set of daily basic food and non-food requirements of individuals for four geographical areas of Malawi – poverty line areas – were identified. The poverty lines for each are simply the cost in Malawi Kwacha of acquiring this 'basket' of basic items. The total consumption reported by a survey household is then evaluated against the poverty line: If the reported per capita total daily consumption for a household is above the poverty line for the region in which it resides, that household is considered not to be poor (or non-poor); if below, the household is classified as poor.
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POVERTY ANALYSIS
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1. Welfare measure
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The measure of welfare used in this study is the total daily per capita
consumption and expenditure reported by a household. This measure is expressed in Malawi Kwacha deflated to April 1998 prices.
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The welfare measure is made up of four components:
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- Total food consumption.
- Total non-food non-durable goods expenses.
- Estimated use-value of durable consumer goods, e.g. vehicles, furniture, appliances, etc.
- Actual or imputed rental value of housing for the household.
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The sum of all reported expenditure on and consumption of these items for household, adjusted to a daily and per capita basis, constitutes the welfare indicator for a household.
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2. Poverty line derivation
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The poverty line – that level of welfare which distinguishes poor households from non-poor households – is also expressed in the same unit as the consumption-based measure of welfare. The method used for the poverty analysis of the Malawi HIS is the cost-of-basic-needs method. In brief, the following steps were taken to derive the poverty line:
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- The objective core of the poverty line is the per capita recommended daily calorie requirement for the households in the IHS data set used here. These requirements have been established by nutrition researchers.
- This recommended calorie requirement is used to establish the food component of the poverty line by determining what it costs for a poorer household in Malawi to acquire sufficient calories to meet their recommended calorie requirements. The cost for each calorie is determined by calculating the value of each calorie reported consumed by these poorer households.
- More than simply food is needed to meet the basic needs of a household. There is a non-food component to the poverty line as well. Unfortunately, no independent objective criteria exists by which one can establish what should make up the non-food component of the poverty line. The method adopted here is to examine the non-food consumption of the households the value of whose total consumption and expenditure is in the neighbourhood of the value of the food component of the poverty line. Since these households are sacrificing nutritionally necessary food consumption to consume these non-food items, the items can be considered basic necessities for household welfare. The value of these items makes up the non-food component of the poverty line.
- Summing the food and non-food components results in the poverty line. The poverty status of each household can then be assessed by comparing the level of its welfare indicator to the poverty line.
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As noted earlier, poverty lines were constructed for four separate areas of the country. These areas are Southern rural, Central rural, Northern rural, and Urban. The three rural poverty line areas correspond to the administrative regions of the country, but do not include the four urban centers of Blantyre, Zomba, Lilongwe and Mzuzu. These four cities make up the Urban poverty line area. District administrative centers, bomas, are included in the rural poverty line areas, rather than in the Urban.
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The different poverty lines areas were established so that the poverty lines in each would reflect any differences in the consumption preferences of the poorer households in their populations, any possible differences in the demographic make-up of their poorer households, and price differences between the areas. As will be seen, the differences between the three rural poverty line areas are not that great, whereas there are strong differences on these criteria between the Urban poverty line area and the others.
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2.1. The poverty line
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The poverty line is simply the sum of the food and non-food components of the line.
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Table 1 presents the poverty lines, using April 1998 Malawi Kwacha, together with their component food and non-food poverty lines. The proportion of the poverty line made up by food consumption is also presented, showing that a large proportion of rural consumption is on food, whereas, as might be expected, urban dwellers have significantly higher levels of non-food consumption. The poverty lines adjusted to more recent July 2000 prices are presented in Table 2. In April 1998 prices, what we find is that the rural poverty lines are between MK 7.76 and MK11.16 per person per day, while the urban poverty line is over twice that at MK 25.38 In more current July 2000 prices, the rural poverty lines are between MK 14.42 and MK 20.74, while the Urban poverty line is at MK 47.18 per person per day.
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On any given day, most rural Malawians spend far less Kwacha than is indicated by the poverty line. However, this does not necessarily mean that they are poor. It is important to remember how the welfare indicator – total per capita daily consumption and expenditure – was derived. It includes four separate components, several of which are not monetized – non-cash food consumption, non-cash non-food consumption, the use value of durable items, and the imputed house rental value for household living in houses they own.
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In order to portray just how much of the consumption of households in Malawi is never monetized, Table 3 disaggregates into cash, non-cash, and mixed cash and non-cash the total consumption of IHS sample households whose consumption is close to the poverty line. What is seen is that for rural households close to 60 percent of daily consumption does not involve a cash transaction. Production for home consumption remains a very important aspect of the household economy in rural Malawi.
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Once the poverty line is established, households in each region are categorized as poor or non-poor depending on whether their total consumption and expenditure, their welfare indicator, is below or above the poverty line. The poverty head count can then be computed, indicating the proportion of individuals below the poverty line. Making use of the full IHS data set, 65.3 percent of individuals in Malawi are estimated to be poor.
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2.2. The ultra-poverty line
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Given this high level of poverty and the restrictions on resources available for efforts to alleviate poverty in Malawi, a differentiation of the poor into poor and ultra-poor categories would be useful. Knowing the characteristics and the location of the most destitute in society would allow poverty alleviation programs to target their efforts more effectively.
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Although alternative definitions of the ultra-poor were evaluated, the ultra-poor are defined here as those whose total consumption is less than 60 percent of the poverty line. The ultra-poverty line for the four poverty line areas is presented alongside the other poverty lines in Table 1 using April 1998 prices and in Table 2 using July 2000 prices. Making use of the full IHS data set, 28.7 percent of individuals in Malawi are estimated to be ultra-poor.
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In many of the tables which follow, the characteristics of the ultra-poor are presented alongside those of the poor and the non-poor. It is important to note that ultra-poor are a sub-set of the poor: the 'Poor' category is inclusive of the 'Ultra-poor'.
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CONCLUSION
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Poverty in Malawi is deep and pervasive. The consumption level of just over 65 percent of the population of Malawi in 1998 was deemed to be insufficient for them to meet their basic needs. In addition, 28 percent of the poor are considered to be in ultra-poverty where one's consumption is below 60 percent of what is considered necessary to meet basic needs.
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The discussion here is important as a first in addressing poverty in Malawi in that it has provided a needed description of who the poor are in Malawi and what are their characteristics. Many insights important for developing effective poverty reduction policies and programs can be drawn from these findings. However, this document is limited in that it does not provide much insight into what are the key determinants of poverty. It is clear in much of the discussion that welfare levels are conditioned by a range of factors, including whether one lives in the countryside or in an urban setting, whether one is male or female, what sort of educational level one achieved, just to mention a few.
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In this regard, the determinants of poverty analysis is underway on the IHS data set in which the key factors governing the consumption level of a household are being identified. The result of this work will be released by the end of 2000. The analytical model developed will permit one to determine how changing the condition of a household in some area - educational level, agricultural productive, access to services, and so on - will affect the consumption level of that household. Knowing this, planners can then devise poverty reduction programs which specifically target those key poverty-related features of households. Policy makers also will be able to rank possible poverty reduction strategies according to which should provide the largest reduction in poverty. Cost considerations will further allow them to determine where efforts in poverty alleviation should be made.
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The 1997-98 Integrated Household Survey has provided a data resource of considerable value for development planners in Malawi. What is presented in this document is only an initial examination of the data set from the perspective of poverty. However, as might have been observed throughout the document, this analysis raises as many questions as it has answered. Further investigations using the IHS will help answer these questions. The technical solutions to poverty which this sort of study provides are not sufficient in themselves: they must be coupled with the necessary political will for them to have any impact on the poor. Nevertheless, they will advance the effort considerably. As has been made clear in this document, the problem of poverty in Malawi is of such magnitude that it requires all our best efforts.
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