Assets-based social policy vital

Sirojudin Abbas, Jakarta

According to the National Development Planning Board (Bappenas), President Susilo Bambang Yudhoyono will issue in June a presidential decree on poverty reduction.

It is hoped the decree will enhance the effectiveness of poverty-alleviation policies and programs, and provide a stronger basis for more assets-based pro-poor social policy initiatives.

Such policies would accommodate different approaches in poverty alleviation. "Assets building" is among the viable poverty alleviation approaches to be included in future Indonesian social policy. Assets building is substantially different from, but would complement, the current predominant poverty alleviation approaches, which put a lot of emphasis on "income" and "consumption".

The "income" and "consumption" approaches identify poverty merely as a problem of lack of income, which decreases the ability of a person to fulfill their basic consumption needs. One way of alleviating poverty is to employ the poor in paid jobs.

Yet, assets-building promoters argue that insufficient income and lack of consumption are not the only causes of poverty, citing lack of assets as a contributing factor.

Over-emphasis on the income and consumption approaches could be blamed for the poor performance of some poverty alleviation programs, such as the "micro-cooperative" program developed by the Ministry of Social Services.

Under this program, 10 to 15 people who are involved in similar economic activities -- based on farming production, micro-industry and so on -- become the beneficiaries of a rolling fund and have access to loans.

Another government initiative has been to pour resources into small and medium enterprises as they are considered the most promising vehicles to strengthen the economy and create jobs.

Unfortunately, the prevailing policies and programs have paid limited attention to saving and assets accumulation. These types of programs focus on income generation and income maintenance. Rather than breaking the cycle of poverty, such programs only serve to make the poor dependent on external assistance.

The assets-building approach aims to break the cycle of poverty and the dependency of the poor.

However, assets building can only be achieved alongside sustainable income-generating activities.

It is important to acknowledge that government programs to alleviate poverty already have a saving mechanism.

However, they place saving on the periphery, merely as a contingency plan to support cooperative members who are sick, or die, and to cover debt reinstallments -- just in case they cannot pay the debt on time. Conversely, the assets-building approach makes saving and assets accumulation its main objectives.

In some countries, such as the USA, Canada, England, Taiwan and Singapore, assets building has already become part of social policy. The USA, for instance, has developed Individual Development Accounts (IDAs) as a way of breaking the cycle of poverty. The policy assists the poor in accumulating assets, business capital, savings for further education, and purchasing vehicles through providing incentives through a grant that matches every dollar the poor save.

The Center for Social Development (CSD) at the Washington University in St. Louis, USA, has consistently developed the model and researched the welfare impacts of assets building. The IDAs demonstration project run by the center has proved that appropriate incentives and support can help the poor to save. Michael Sherraden, the primary promoter of assets building and founder and director of CSD, claims that assets accumulation generates greater welfare impacts and produces prospective improvement for social protection and economic development.

Sherraden summarizes, at least, nine welfare impacts of assets building. They are improving household stability; creating orientation toward future; stimulating the enhancement of assets; enabling focus and specialization; providing a foundation for risk taking; increasing personal efficacy; increasing social connectedness and influence; increasing civic participation and enhancing the well-being of offspring.

The current social and economic policies are not sufficiently pro-poor. While social policy seems to be half-hearted, the national economic policies give too many opportunities and incentives -- such as in the form of tax breaks and long-term loans -- to rich people. The coming presidential decree will hopefully provide a strong basis for an inclusive assets-based social policy innovation directed toward poverty alleviation.

The policy should break social, political and economic barriers for the poor to accumulate assets. It is time for the government to provide greater opportunities, incentives and support for the poor to save and accumulate assets so that they will be able to break the cycle of poverty.

The writer is a lecturer at the State Islamic University's School of Social Welfare, Jakarta. He can be reached at sirojudina@yahoo.com.