Poverty remains a problem. There is an overall reduction in national poverty over the last 3 decades, but this masks the persistent spatial concentration of poverty and high inequality.
2. Poverty in Ghana
⢠Poverty reduction in Ghana has been underpinned by robust
economic growth in the last 2 decades
- Extreme poverty levels have fallen by almost 80% from 1998/1999 to
2016/2017 when 39.5% of households lived below the national extreme
poverty line.
- Latest figures from 2016/2017 show only 8.2% of households in extreme
poverty.
- GDP per capita increased by 88% in real terms over the same period
3. Poverty in Ghana
⢠Emerging challenges in the fight against extreme poverty.
- Extreme poverty barely change between 2012/2013 and 2016/2017.
- The national success story also masks regional variation. The rural savannah
area contains 75% of the countryâs extreme poor and exhibits levels of
extreme poverty as high as 36.1%
⢠We examine four well known policy instruments designed to boost
livelihoods and improve circumstances of the poor: poverty
graduation programs, cash transfers, microfinance and social housing.
5. The solution
⢠Combination of intensive, inter-
related and sequenced
interventions to boost
livelihoods and other skills such
that beneficiaries can eventually
âgraduateâ out of poverty.
Source: BRAC (2017)
6. Transfer would cost GHS 9,633 per beneficiary
}15%
}25%
}61%
Target population
⢠Selected rural communities in 3 Northern
regions based on their poverty levels.
Costs = GHS 9,633
⢠We assume 75% of the costs are incurred
in year 1 & 25% of the costs in year 2 of
the program.
- This cost benefit analysis draws from
the Ghana specific findings reported by
Banerjee et al (2015) on a similar
programme with several adjustments.
5839
2392
1402
0
2000
4000
6000
8000
10000
12000
GHS
Cost per beneficiary
Asset transfer
Other
Supervision and training costs
7. Intervention would result in consumption gains of GHS 17,574
per beneficiary
Benefits = GHS 17,574
⢠Benefits are consumption gains by recipients
⢠This is similar to West Bengal study with
assumptions:
⢠A constant growth rate in consumption between years
3 and years 7.
⢠Consumption continues for an additional 23 years for a
total of 30 years.
⢠The average beneficiary in the program is 30 years old
and continues working until 60.
⢠Between years 8 and 30, annual consumption gain
increases in line with projected real GDP per capita
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
2018
GHS
Years after asset transfer
8. Total costs, total benefits and cost-benefit ratio
Discount rate
5% 8% 14%
NPV (GHS) 26,544 17,574 9,157
Cost (GHS) 9,975 9,633 9,013
BCR 2.7 1.8 1.0
9. Increase cash transfers under Ghanaâs
Livelihood Empowerment Against Poverty
program (LEAP) to account for cost-of-living
differences
10. The solution
⢠Increasing cash grants of LEAP, first implemented 2008 to poor
households.
⢠An increase equivalent to 7% of household consumption for cost-of-
living based on GLSS 7.
- 7% of the poverty consumption level (GHS 2,289 per year) for a household
(accounting for adult and children equivalent) amounts to a cash transfer of
GHS 13.35 per month.
11. The costs
⢠The cash transfer GHS 13.35 per month or GHS 160 per year per
beneficiary across 81,600 beneficiaries amounts to a cost of GHS 13m
per year.
- We assume the distribution follows the national pattern of extreme poor.
Together these regions account for 54.4% of the extreme poor in Ghana, with
37.5% in Northern region alone (Ghana Statistical Service, 2017).
- Given approximately 150,000 beneficiary households under LEAP this implies a
target population of 81,600 households for increased transfers.
12. Benefits
⢠The benefit in terms of
consumption increase would
equal GHS 255 per
beneficiary or GHS 21m per
year.
⢠BCR = 1.6
- The benefits are computed as an
11% increase in poverty
consumption based on midline
and endline reports for a long
run evaluation of the LEAP
program from January 2010 to
July 2016 (Handa et al. 2013; -20
0
20
40
Start Midline Endline
%
boost
to
HH
consumption
as
%
of
starting
consumption
Monthly consumption relative to control
as % of starting consumption
Consumption increased by
11pp between midline and
end-line due to transfer boost
13. Total costs, total benefits and cost-benefit ratio
Discount rate
Costs per year
GHS million
Benefits per
year GHS
million
BCR
5%, 8% and 14% 13 21 1.6
15. The solution
⢠A micro-credit loan of GHS 3920, equivalent to the average loan size
obtained by household non-farm enterprises in the recent Household
Living Standards Survey (GLSS 7) to households in underserved areas
- Access to finance would serve as a leverage to propel or increase household
economic activities into higher and sustained levels thereby eventually
increasing their welfare levels.
16. The costs
⢠The total cost of providing a loan is
GHS 1077.
⢠The cost to the expanded
microfinance intervention is at three
levels:
- the operational cost,
- the financing cost and
- the default cost.
0%
5%
10%
15%
20%
Operational
cost of credit
Financing
cost of credit
Default
Percentage of loan amount
Percentage of loan amount
0%
20%
40%
60%
Operational
cost of credit
Financing
cost of credit
Default
Percentage of total cost of loan
Percentage of total cost of loan
17. The benefits
⢠The total benefit amounts to
GHS 1,679
⢠BCR = 1.56
- We focus only on the first order
benefits (welfare) to consumers and
MFIs of the intervention.
⢠The welfare value (consumer surplus) is
estimated by taking the difference between
the willingness-to-pay for microfinance and
the actual cost of attaining it.
⢠The MFI benefit is the average revenue from
a given loan
Benefits Amount (GHS)
Consumer Surplus 503
MFI benefit 1176
Total Welfare 1679
18. Total costs, total benefits and cost-benefit ratio
Interventions
Benefit (GHS) Cost (GHS) BCR
Higher default rate (10%) 1679 1274 1.3
Lower default rate (2%) 1679 961 1.7
Greater responsiveness of credit demand
to price (-2.9)
1379 1077 1.3
Lower responsiveness of credit to price (-
0.84)
1876 1077 1.7
20. The solution
⢠The intervention, consists of providing housing facilities in urban
areas.
⢠Two types of housing structures are considered.
1. The provision of a two-bedroom semi-detached house built from primarily
locally sourced and produced building materials.
2. Building of high rise apartments (one and two bedrooms) to replace
improper structures in poorly planned urban areas and slum dwellings.
21. The costs
⢠For all types of housing
structures the cost items are
similar and consist of the
following;
- the cost of land,
- the cost of providing infrastructure
(e.g. water and sewerage, electricity,
road etc.)
- the compliance cost,
- the development cost and
- the construction cost.
Unit Total cost (GHS)
2 bedroom house
semidetached house
229,265
2 bedroom apartment 212,185
1 bedroom apartment 162,189
22. The benefits
⢠Market value of the property (assuming that the market value of the
property is a function of the stream of future cash flows that can be
derived from the investment).
BENEFITS
Market value
BLC GHL 2 bedroom
(GHS)
2 Bedroom
apartment (GHS)
1 Bedroom
apartment (GHS)
Rent per month 913 685 465
Market value of property assuming 4% growth in housing prices
5% 1,095,600 821,700 547,800
8% 273,900 205,425 136,950
14% 109,560 82,170 54,780
23. Total costs, total benefits and benefit-cost ratio
Discount rate
2 Bedroom
semid house
2 bedroom apart
redev
1 bedroom
apart redev
5% 4.8 3.9 3.4
8% 1.2 1.0 0.8
14% 0.5 0.4 0.3