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Rural institutions and rural poverty

Members of the local water users’ group, called Mamelonanivo or “feed thousands”, working on a field in Madagascar

Water users’ groups, agricultural producer and rural workers associations, rural credit unions, women and youth associations and other self- help groups are all examples of institutions. They have been traditionally defined as organizational entities with procedures and regulatory frameworks. Institutions can be referred to as the ‘rules of the game’, that include: (a) mandate; constitutional and environmental factors; boundaries within which actors and organizations operate; (b) the relationships between actors and organizations within a number of fields of interaction; and (c) the motivations, incentives and rewards for actors and organizations to engage and participate in a given activity. Institutions are also the formal and informal constraints on political, economic and social interactions.

Smallholder women’s group meeting near Changli, Nepal

Given that the majority of the poor live in rural areas, the institutional context of rural institutions is pivotal to reducing poverty and fostering development. This is particularly true for countries where diverse institutions and organizations mediate the access of the poor to assets, technologies and markets. They also usually regulate customary practices and administrative processes that determine whether the poor benefit from such access or would be affected by it. Additionally, there is overall agreement on the fact that the chance the poor have to influence rules and to help control organizations depends on their power and informed participation.

Why do institutions matter that much? Both formal and informal rules of the game and organizational entities can exclude or include different members of society from any given right, service, assistance and, ultimately, benefit. Institutions also promote social cohesion and stability, reducing civil conflict and muting the adverse consequences of economic dislocation and change.

	Employees and their clients stand and chat in front of the Credit Union in Castle Bruce, Dominica

For the rural poor, good institutions and organizational entities are twice as important, as isolation and weak performing institutions impact considerably on their well-being. Additionally, the rural poor suffer from extremely limited provision of public goods, which further acts against actions aimed at reducing their poverty.

Finding ways to change existing institutional situations and behaviour is not obvious; finding sustainable solutions will probably require fostering higher political development and awareness to overcome political and institutional incentives that lead to inefficiencies and exclusion.

Source: IFAD (Round Table Discussions 2006)