Understanding and supporting sustained pathways out of extreme poverty and deprivation: Ethiopia

Research reports and studies
February 2018
The Association of Ethiopian Microfinance Institutions (AEMFI), Tassew Woldehanna, Wolday Amha and Manex B. Yonis

Qualitative study

This report presents the major findings of a qualitative study carried out in four selected areas of Ethiopia. The purpose of the study was to understand the factors in and processes related to sustained escape from poverty. It also aimed to establish the major political, economic and social contextual factors and changes that shape the pathways of different social groups.

The study uncovered the factors leading households to move out of or into poverty. Positive shocks have helped some families break the cycle of poverty. Many households reported that they had moved out of poverty mainly because of remittances gained from a migrant family member. 

This study suggests that, while improving the availability of modern inputs and credit facilities would help some households move out of poverty, it appears that it is timely to design policies that go beyond agriculture. Policies are required to address increased urbanisation, with the employment of young people in urban areas a necessary way to offset the burden on the agriculture sector. Policies and programmes that address the chronically poor and the transitory poor and prioritise moving out of poverty are required. Some households need social protection; others need access to productive resources, job opportunities and support to enhance their productivity. Such interventions need not be just at community level, but can also focus on the household and individual levels.

Quantitative study

Between a quarter and a half of the world’s poor population is living in persistent poverty, and there are varied patterns of mobility. In particular, people who are poor may not have been poor previously. This implies that impoverishment is a serious concern for many countries, and an issue as widespread as chronic poverty. As a result, the aim of the global post-2015 Development Agenda (the Sustainable Development Goals, SDGs) is to eradicate poverty.

Meanwhile, in Africa, since the level of extreme poverty declined from 56% in 1990 to 43% in 2012, the continent needs to shift towards ‘getting to zero’ extreme poverty. This requires revisiting the development plans, policies and programmes of African countries to ensure they focus on the poorest segment of the population.

Ethiopia has registered significant poverty reduction in the past two decades. The level of poverty reduced from 48% in 1990 to 23.5% in 2016. Households have improved their well-being during the past decade (World Bank, 2014). The government has been implementing Growth and Transformation Plans (GTPs) with the long-term objective of reaching middle-income country status in 2025. Poverty reduction has been at the centre of this transformation process. During the first five-year period (GTP I), the country achieved rapid growth (an average rate of about 10.1T%) and maintained macroeconomic stability. The economy has achieved remarkable improvements in terms of saving mobilisation, public and private sector investments, expanding and diversifying exports, infrastructure development, expanding education, health, water and sanitary services, etc. (NPC, 2016).

Despite the two-digit economic growth registered in the past 10 years, however, unemployment and extreme poverty still remain the binding challenges of the country. This study aims to increase the understanding of the factors associated with impoverishment and sustained escapes from poverty and of how policies and programmes can support these escapes in Ethiopia.  The study mainly uses the three-round panel data of the Ethiopian Socioeconomic Survey (ESS). The ESS has the advantage of having been conducted for the same households across time. Moreover, given its consistency and its multidisciplinary nature, it is the most appropriate dataset in the country for studying household dynamics and understanding sustainable solutions for household well-being.