Conceptualization and Poverty Alleviation Policy

By Karima Korayem & Neamat Mashhour

The most popular way of estimating poverty in secular economics is the estimation of the poverty line.

Introduction

The conceptualization of poverty and the means for its eradication differ in many aspects in Islamic economics as compared to secular economics. While in secular economics we conceptualize the needy person as the poor and the destitute (the ultra poor), in Islamic economics they add to the two groups (calling them the Fuquera and Masakin) two other groups: the Algharimun, who are overburdened with debts or lost their properties due to natural disaster, and Ibn al sabil (wayfarer) which denotes any person far from home who lacks sufficient means to meet his needs on the journey or stay. Differences exist, also, in the estimation of poverty in Secular and Islamic economics. Poverty in Secular economics is estimated by those who are living at the poverty line and below, while poverty in Islamic economics is estimated by the sufficiency level; those who are living below it are the poor. Moreover, while there is, more or less, a unified method for estimating the poverty line, this is not the case for the sufficiency level. The policy measures for poverty eradication differ, also, in several aspects, including the role of the state. Both types of policy, Secular and Islamic, are applied in Egypt for poverty eradication.

The objective of this study is to point out the identification of poverty in both Secular and Islamic economics. Three questions will be addressed in this respect: First, how is poverty defined and estimated in Secular and Islamic economics? Second, what are the main poverty eradication policies in both economics? Third, what are the types of poverty eradication policies applied in Egypt?

Accordingly, the study consists of four parts including the Introduction, which forms part one. Part two includes the definition of poverty and its estimation methods in both Secular and Islamic economics. 1 Both are Professors of Economics at Al-Azhar University, Cairo, Egypt. Topics in Middle Eastern and African Economies Vol. 16, No. 1, May 2014 2 Part three discusses the poverty alleviation policy measures in both economics. Finally, part four examines the types of poverty alleviation policy applied in Egypt.

Poverty Definition and Estimation in Secular and Islamic Economics:

• In Secular Economics:

There are different ways of defining poverty and measuring it. One may classify those definitions into three types (Korayem, 1993): The first type includes what we may call the objective definitions of poverty. This definition specifies a specific level of income (expenditure), or index, or ratio which represents the borderline between the poor and the non-poor. The individuals who are at the borderline or below will be defined as poor whereas those above the borderline are the non-poor. This borderline, which is called the poverty line, may represent the minimum income (expenditure) needed to meet the necessary expenditures on food and non-food items for the individual or household (the basic need approach); or the borderline may be specified as a certain level of relative income, e.g. 30% of the average society’s income (Lipton, 1983; Glewwe & Van Der Gaag, 1990); or it may represent a certain level of food/income ratio following Engel’s law, e.g. the household that spends 30 percent or 1/3 of its budget on food will be defined as poor (Hagenaars & de Vos, 1988; Van Praag & Baye, 1990). Welfare indices are also used in defining poverty borderline. The borderline is specified as a certain proportion of optimal attainable level of a chosen welfare index. Examples of these indices are the physical quality of life index (Lipton, 1983), the medical indicators of health and nutritional status (Glewwe & Van Der Gaag, 1990) and the durable consumption goods index (Hagenaars & de Vos, 1988).

The second type of definition is the subjective definition of poverty, which defines poverty from the perspective of the individual himself. If he feels that he does not get what he needs, no matter how he defines his basic needs, he will be defined as poor (Hagenaars & de Vos, 1988; Paul, 1989; Van Praag & Baye, 1990). This subjective definition of poverty usually gives a high poverty income level. The third type is the sociological definition of poverty. It defines the poor as those who take welfare assistance from society (Jones, 1990). Another definition that falls within this category is taking the poverty borderline as the official minimum income level; this is the income that the individual receives when he is on social assistance (Hagenaars & de Vos, 1988). According to this definition, people are poor when they are recognized “officially” as poor.

The most popular way of estimating poverty in secular economics is the estimation of the poverty line. This is done in two steps: First, estimating the annual household’s expenditure on food, based on planned low-cost balanced diets that ensure safe level of calories and protein intake for the household, given its size, age and gender structure. Second, estimating the expenditure (income) poverty line by estimating the household’s annual expenditure on non-food items. This can be done by using the ratio of food/total expenditure of the average household’s member in the expenditure brackets in the Households’ Survey, where the household’s expenditure on food is equal to what has been estimated in the first step above (Korayem, 1994).

Estimating poverty by specifying the borderline between the poor and the non-poor at a certain level of relative income (e.g., 30% or 40% of the average income on the national level) is also used frequently in the literature. However, specifying the borderline of poverty as 30% or 40%, etc., is quite subjective and depends on the author’s personal view. To have an objective criterion for the relative income borderline that separates the poor and the non-poor, a methodology has been developed based on the economic theory concept of equal-income distribution criterion (Korayem, 2002). Conceptually, income is equally distributed among the population if a given percentage of the population receives an equal percentage of the national income, e.g. ten percent of the population receives ten percent of the national income, twenty percent of the population receives twenty percent of the national income, etc. Accordingly, in the decile income distribution, one may differentiate between three groups: the low-income households (including the poor), the medium-income households, and the high-income households. The first group is the household deciles whose shares of the national income are less than 10 percent for each decile; the household deciles whose share of the national income are around 10% for each decile represent the second group; and the third group is those household deciles whose relative shares are greater than 10% of national income for each decile.

• In Islamic Economics:

In Islamic economics, we have more than one definition of the poor: (1) The Quranic; (2) The Prophet’s Hadith and (3) The Islamic Thinkers.

(1) The Quranic Definition: The Quran gives the objective definition. The verses denote two levels of poverty which virtually represent all such groups of individuals potentially present in any economy at any time: (a) those living at or below the poverty level defined as the poor (al fuquara), and (b) those living very much below it, defined as the destitutes (al masakin).

(a) The poor are the persons who lack material means, possessions or income to support them. The poor (fakir) finds himself in involuntary poverty, unable to satisfy his necessary needs. He may be disabled, handicapped, or having no assets or income, landless, unskilled, old, orphan or a poor widow. (UlHaq, 1996).

(b) The destitute (miskin) is in misery, dependent on others, either unable to work or not earning enough to maintain himself and his family. As compared to the poor (fakir), he is in a worse economic condition, much below the poverty level. Both groups cannot survive healthily without monetary or inkind assistance, temporarily or permanently, to fill the inadequacy gap and to help ensure their need fulfillment with dignity.

While the state of being miskin implies a state of involuntary poverty, the Quran mentions one category of masakin who chose poverty voluntary. Those were the people, who, in the Prophet’s time, had completely devoted themselves to learning, education, teaching and meeting priority social needs. As a consequence, they could not work and support themselves (Quran 2:273). They are entitled to be helped to reach their sufficiency level, considering the importance Islam attaches to the elimination of ignorance through literacy and education (UlHaq, 1996).

Beside the destitute and the poor, the Quran points out two other groups who need temporarily monetary assistance. They fall below their sufficiency level due to hazardous unexpected causes. Those are: (c) the overburdened and (d) the wayfarer.

(c) The overburdened (al gharimun) include two kinds: The first are those overwhelmed by debts contracted in good faith, for consumption needs or for business needs, and who are unable to repay it; they are simply in chronic debt. They become poor and get poorer while trying to pay back their debts, with no resources available to them or their families. The second are those who lose their properties due to natural catastrophes: fire, agricultural epidemic, etc.… Losing their properties gets them below the sufficiency level, to join the poor.

(d) The wayfarer (ibn al sabil), literally son of the road, denotes any person far from home, who lacks sufficient means to meet his needs on the journey and, consequently, faces hardship. Nowadays, the wayfarer is the category of people who, for some valid reason, are unable to return home, temporarily Topics in Middle Eastern and African Economies Vol. 16, No. 1, May 2014 5 or permanently. They are, thus, unable to use their resources at home to meet their needs. This would include people facing religious or racial persecution, political exiles or refugees and those pursuing knowledge or education far from home (UlHaq, 1996). They are considered permanently or temporarily poor until they reach their means to fulfill their sufficiency level (Mashhour in Spicker (ed.), 2007).

(2) The Prophet’s Hadiths: The Prophet’s Hadiths add to the Quranic objective definition the subjective definition of poverty. He indicates that poverty is a danger and threat for both individuals and societies. It is an unwanted situation from which every Muslim should protect himself. He himself prayed “O my Allah, I refuge to you from the evils of poverty” (IbnHanbal, 1953); and he advised his friends the following prayer: “Refuge to Allah from the evils of poverty, famine, degradation, oppressing and oppressed” (IbnHanbal, 1953).

(3) The Islamic Thinkers: Muslim thinkers – namely al Ghazali , al Shatibi, al Mawardi and ibn Ashourcame to the conclusion that fulfilling needs must be through conserving and protecting the five objectives of Islam (Makased El Shari’a), which form the foundation of the well-being of man in this life and in the hereafter. These objectives are: protection of religion, life, mind, property (wealth), and posterity (offspring). These objectives are divided into a three-level hierarchy: Necessities, (b) Conveniences, and (c) Refinements. (Zarqa, 1980; UlHaq, 1996).

(a) Necessities, or necessary needs, comprise all things and activities that are essential to the preservation of the five foundations or requirements of good individual and social life according to Islam. They form the subsistence level.

(b) Convenience of sufficiency needs comprise all things and activities that are not vital to the preservation of the five foundations, but rather are needed to relieve or remove impediments and difficulties in life. They include matters that alleviate constraints or facilitate performing duties. They form the sufficiency level. The sufficiency level is defined by the khaliphs (especially Umar) who followed the Prophet and were guided by the teachings of the Quran and Sunnah, as: ration of food, necessary pensions for the needy, the poor and the handicapped (Asad, 1980). These practices continued through the rule of the third and the fourth khaliphs and for several years during the later period as well. As an example, sufficiency needs were fulfilled in town planning by taking into account 3 An example of Necessities, or necessary needs, is basic food; like taking proteins from vegetarian sources (e.g., beans in Egypt, which is heavily used by the poor). 4 An example of Convenience of sufficiency needs is taking proteins from animal sources (e.g., chicken and meat). the requirements of mosques, offices, roads, markets, houses, shops, bath-houses, water supply, communications and grazing fields for cattle. Trade and travel roads were provided with amenities like rest and meal houses. (Zaman, 1981). Further Muslim societies succeeded in providing the sufficiency level to all their members; some experiencing abundant wealth even managed to meet some of their luxury needs in those days. (AbouObayd, 1975).

(c) Refinements include things that go beyond the limits of conveniences. They include matters that complement, brighten or adorn life. (Zarqa, 1980). They form the richness level and the luxury needs.

Needless to say that fulfilling these needs must be in accordance with the Muslim principles. They must follow the scale of Islamic precedence (al awlawiyat), be licit (halal), and make no harm to the Muslim or his fellow men (la darar wa la dirar).

Poverty in Islam is living below the sufficiency level. As described above, the sufficiency level is the level for adequate human life in a given place and time. It is different from the subsistence or minimum vital. Estimating the sufficiency level can be done through estimating the cost of the items of each of the five Makased . For preserving life, for instance, we estimate the cost of basic food, clothing and properly furnished shelter, etc. Another possible way of measuring the sufficiency level is by deriving it from the “nisab” level. It is the border line between poor and rich (Mashhour, 1993); between those who have their sufficiency and those who lack it. The one who have sufficiency are obliged to pay their duty of Zakah to those who are still in need for it. This sufficiency level is higher than the subsistence level accepted in Islam, only in case of lack of resources.

A more direct way in measuring the sufficiency level is by evaluating 93 gr. of gold 21 carats in current prices. This measure is applicable to all times and places because it responds to the changes in the price level, while its constituent covers the items preserving the five Makased with no definite quantity or quality. Each person has full freedom to choose those goods that will fulfill these specific needs (El Qaradawi, 1981).

The state/government has a responsibility in fulfilling the sufficiency level for every member in the society. An example to that is the Khaliphat Omar ibn el-Khattab’s attempt to measure human needs of food in his time. He ordered a specified quantity (garib = 22.7 kg) of wheat, turned it into flour, baked it and invited thirty men for dinner; they ate to complete satisfaction. Accordingly, he ordered for each individual, one garib monthly, knowing that this will meet his satisfaction need (AbouObayd, 1975; Salama, 1984).

This historical experience demonstrates how the precedence of monetary and in-kind resources to be distributed to their appropriate beneficiaries. This makes the sufficiency level closely related to the available resources, the number of needy and the general level of life in the society. It is different with changing places, times and resources. In case of lack of enough monetary and in-kind resources to cover the sufficiency level, the needy must be satisfied with the subsistence level until more available resources are collected (Mashhour, 2004).

To be continued…

————

This is part one of a research paper titled Poverty in Secular and Islamic Economics by the above authors taken with slight editorial modifications from Google Scholar website.