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16th IsDB Global Forum on Islamic Finance Multidimensional Poverty Index: An Application to the Egyptian Economy

02 Jun, 2022

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The poverty situation in member countries of the Islamic Development Bank (IsDB) has been exacerbated by the COVID-19 pandemic and the East European crisis. As a result, one in three member countries, of which about 90 percent of their population, is afflicted by severe multidimensional poverty.

In this context, the IsDB Institute (IsDBI) organized the 16th IsDB Global Forum on Islamic Finance, with the theme ‘Social Entrepreneurship for Shared Prosperity,’ on 2 June 2022 during the IsDB Group Annual Meetings in Sharm El Sheikh, Egypt. Two interrelated panel sessions were held during the forum; the first of which was entitled ‘Multidimensional Poverty Index: An application to the Egyptian Economy.’

The panel promoted the IsDBI-OPHI Briefs, jointly developed by IsDBI and the Oxford Poverty and Human Development Initiative (OPHI), particularly the publication that analysed multidimensional poverty in Egypt using the Global Multidimensional Poverty Index (MPI). Aside from using Egypt as the primary platform to discuss the concept of multidimensional poverty, the panel also aimed to highlight the novel and innovative approaches to address multidimensional poverty in IsDB member countries.

At the start of the forum, Dr. Sami Al-Suwailem, Acting Director-General of IsDBI and Chief Economist, had welcomed the panelists and participants of the forum. IsDB President, H.E. Dr. Muhammad Al Jasser, delivered the opening speech afterward. H.E. The President noted that the task of fighting poverty and fostering shared prosperity across our communities now requires novel approaches, given the new problems that our world faces.

 

Panel Discussion: Multidimensional Poverty Index

Dr. Areef Suleman, Director, Economic Research and Statistics at IsDBI, moderated the panel discussion. The panelists were Dr. Ahmed Kamali, Deputy Minister of Planning and Economic Development, Egypt; Dr. Sabina Alkire, Director of OPHI; Dr. Sami Al-Suwailem, Acting Director-General of the IsDBI and Chief Economist; and Mr. Mohamed Ashmawy, Vice-Chairman and Managing Director of Nasser Social Bank, Egypt.

In his introductory remarks, Dr. Areef Suleman highlighted that the IsDBI and the OPHI have been collaborating to provide an evidence-based analysis of multidimensional poverty. The objective is to support effective and efficient decision-making to help the IsDB better target its interventions in selected member countries, including Egypt.

Dr. Suleman noted that the combined effects of COVID-19 pandemic and the East European crisis have worsened the poverty situation in member countries. Hence, this makes the panel discussion even more relevant to understanding the problems that afflict IsDB member countries today and in the foreseeable future.

The IsDBI convened this panel of experts to discuss poverty from both monetary and multidimensional perspectives. The discussions focused on addressing multidimensional poverty in IsDB member countries, related policy implications, and corresponding lessons learned, with Egypt as a primary example.

 

Dr. Sabina Alkire, Director, OPHI

Dr. Sabina Alkire set the stage for discussion on the MPI initiative by highlighting how and why a Global MPI was developed, and how it is different from other measures, such as the National MPI measure in Egypt and monetary poverty measures. The MPI initiative analyzes the integrated nature of poverty with deprivations in health, education, housing, and nutrition. The MPI allows comparisons of multidimensional poverty experienced by urban vs rural poor, female- vs male-headed households, women, and children among other population groups.

The Global MPI is used as a crucial measure to identify appropriate policies and interventions, and assess the efficient mobilization of resources that would have the most significant impact on the lives of poor people. The National MPI can be used in a similar way, except that it is adjusted to the specific context of the country. Therefore, the National MPI may not be the best statistic for intercountry comparisons of multidimensional poverty, but it nonetheless takes a vital role in country-level policymaking.

Dr. Alkire emphasized that the MPI provides another perspective to understand the different deprivations that afflict the poor, giving policymakers a lens to understand the lived experiences of poor people.

The IsDBI and the OPHI have been engaged in collaborative work on assessing multidimensional poverty across selected IsDB member countries, one of which is Egypt. Dr. Alkire expressed her recognition of the deep commitment of the IsDBI in their partnership, as well as the leading role of the Ministry of Planning and Economic Development of Egypt in developing its National MPI.

In Egypt, Dr. Alkire shared that MPI is less than 5 percent in 2014. Moreover, multidimensional poverty was cut in half in the poorest governorates between 2008 and 2014. Observably, poverty reduction in Egypt is significant in most of the indicators of multidimensional poverty. This is associated with positive changes in policies, safety programs, and targeting of the poorest.

The impact of the COVID-19 pandemic as well as the East European crisis on multidimensional poverty is currently of great policy interest. While data to quantify the impact of these crises on the MPI is yet to be available, Dr. Alkire shared that observations on-the-ground indicate that, indeed, the crises left a dent on multidimensional poverty, given how they disrupted education, jobs, health and nutrition, and food security.

 

Mr. Mohamed Ashmawy, Managing Director of Nasser Social Bank

In his contribution, Mr. Mohamed Ashmawy gave a detailed account of Nasser Social Bank’s interventions by referencing the use of the MPI to achieve its financial inclusion objectives.

Nasser Social Bank adopts the MPI to appropriately target the needs of the disabled, women, orphans, single citizens over 60, and other vulnerable groups. It has reached over half a million people, including women and other marginalized communities, supporting their financial needs. Mr. Ashmawy also shared that they are aligning with the government’s strategy as well as with other social organizations.

Moreover, Nasser Social Bank is a Shari’ah-compliant bank, consciously merging social and financial aspects of poverty reduction. They target arid zones and poor areas by offering micro-social savings and working with government and other stakeholders. These financial and social services address various dimensions of multidimensional poverty.

 

Dr. Sami Al-Suwailem, Acting Director-General of IsDBI and the Chief Economist

Dr. Sami Al-Suwailem initiated his discourse by emphasizing that “good economics is Islamic economics, and good finance is Islamic finance.” Fighting poverty is one of the core values of Islamic finance, implying that Islamic finance is also social in nature.

According to Dr. Al-Suwailem, the Islamic finance movement initially focused on addressing riba and usury and “Islamized” banks in that direction. However, as Islamic finance grows, it must shift back to its core values, which is social in nature. Islamic finance must begin to set up social institutions that tackle zakah and awqaf, for instance, and to build social cohesion and empathy among the members of societies. This will pave for a social foundation to commercial and profit financing initiatives for economic growth.

To create awareness of this lack of balance, IsDB is leading several initiatives like the MPI partnership with the OPHI and governments. For example, zakah is multidimensional from the Islamic point of view, such as zakah on money, zakah on animal production, and zakah on agriculture production, to name a few.

Dr. Al-Suwailem reiterated Dr. Alkire’s point on the multidimensionality of poverty, and noted that an MPI measure is a welcome addition to monetary poverty measures, given that not everything can be quantified in monetary terms. An MPI is able to tackle other dimensions, highlighting social factors, educational attainment, access to technology, and others.

 

Dr. Ahmed Kamali, Deputy Minister of Planning and Economic Development

In responding to how Egypt is progressing in tackling multidimensional poverty, Dr. Ahmed Kamali emphasized that the first course of action is to realize and recognize that poverty is a problem, and to be transparent about it. This will allow the government to tease out the root cause of the problem, and then strategically target the interventions accordingly.

Underlying effective government interventions is reliable data. The Egyptian government paid close attention to multidimensional poverty by developing its own National MPI, and assessing deprivations beyond monetary poverty. Dr. Kamali reiterated the importance of transparency and that solutions must be shared with all stakeholders, including development partners and the targeted population.

Dr. Kamali explained that Egypt is focusing on providing access and right to services such as education, jobs, health, and many other privileges and opportunities. The government primarily targeted the poorest sections of society, which is why the more vulnerable groups have witnessed more significant improvements in MPI. Overall, the structure and design of the interventions aimed to break the cycle of poverty.

As Dr. Kamali concluded, he emphasized four things that are necessary for effective policy. First, policies must be based on facts and evidence-based decisions. Second, policymakers must acknowledge the problems transparently. Third, government must admit that there is an integrated problem and that multiple solutions might be necessary. Fourth, bold enough response should be backed by proper diagnosis.

 

Conclusion

While coming from different perspectives, the panel discussion concluded with three unifying themes: innovation, empathy, and solidarity to address multidimensional poverty in IsDB member countries. The panelists shared the challenges in Egypt and other parts of the world, and their corresponding thoughts and experiences in tackling multidimensional poverty.

The panelists further suggested the importance of meaningful partnerships (SDG17 – Partnerships for the Goals), South-South Cooperation, knowledge exchanges, and experience sharing. To end, the panel recommended consolidating data and evidence for more impactful and targeted interventions in breaking the multidimensional poverty trap.

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