IFPRI Key Facts Series: Poverty1 May 2022 Highlights • The proportion of people living below the poverty line declined by one percentage point between 2004 and 2019. In the same period, the incidence of extreme poverty declined by 2 percentage points. • The depth of poverty declined between 2010 to 2019 at national, urban, and rural levels, implying that the average consumption expenditure of the poor is moving closer to the poverty line (the poor are becoming less poor). • In contrast with the Northern and Southern regions, where the incidence of poverty declined over the survey years, the proportion of poor people in the Central region increased. • With an incidence of poverty under 20%, Malawi’s 4 cities (Mzuzu, Lilongwe, Blantyre and Zomba) are considerably less poor than the rest of the country. Twelve districts have a poverty incidence of over 60%, with Mchinji district having the highest rate (68%). • Based on the international poverty line, the incidence of poverty in Malawi was 68.5% as of 2018, making it the 6th poorest country in Africa. Background to the Integrated Household Surveys (IHS) This analysis uses data from the second, third, fourth and fifth Integrated Household Surveys (IHS2, IHS3, IHS4 and IHS5), conducted by the Government of Malawi’s National Statistical Office (NSO). IHS2 was conducted between March 2004 and March 2005 with a sample of 11,280 households, IHS3 was conducted between March 2010 and March 2011 covering a total of 12,271 households, IHS4 was conducted between April 2016 and April 2017, covering 12,447 households while IHS5 was conducted between April 2019 and April 2020, covering 12,288 households. Once appropriately weighted, the IHS surveys are representative of national, district, and urban/rural levels. The analysis uses the survey sampling weights provided by the NSO, hence all values presented in this Key Facts series are representative of the population of Malawi. All prices have been adjusted for inflation using NSO’s Consumer Price Index and are reported in April 2019 values. What is poverty? Whilst poverty is a multidimensional concept, this paper uses the consumption definition of poverty as it gives a more accurate measure of living standards as compared to income. Thus, poverty is defined as the condition whereby the value of a household’s total consumption (regardless of it being purchased, received for free or self-produced) falls below the level needed to maintain a basic living standard in terms of food, shelter, housing, healthcare, and education. Using the cost of basic needs approach, the Government of Malawi established the national poverty lines at MK 107,028, MK 131,380, MK 188,613, and MK 165,879 per person annually in 2004, 2010, 2016 and 2019 respectively in April 2019 values.2 Individuals living in households whose consumption falls below these poverty lines are classified as poor. Extreme poverty is a more severe form of poverty in which a household has insufficient consumption to meet its members’ nutritional requirements. The national extreme poverty lines in 2004, 2010, 2016 and 2019 were MK 66,402, MK 81,510, MK 117,016, and MK 101,293 per person per year respectively. The poverty estimates presented here do not adjust for differences in the age and sex of household members nor for household economies of scale. How much poverty is there? The incidence of poverty at the national level is represented by the national poverty headcount ratio, which shows the proportion of the population whose consumption is below the national poverty line. Figure 1 presents the poverty headcount ratios in 2004, 2010, 2016 and 2019. The incidence of national poverty changed marginally over the survey years, ranging between 51% and 52%. The incidence of urban poverty was highest in 2004, with 25% of the urban 1 Authors: Chimwemwe Banda and Jan Duchoslav 2 The poverty line decreased in real terms between 2016 and 2019 even though inflation reached 37 percent in the same period. This is likely because the cost of goods and services which are not necessary to satisfy basic needs increased faster than the cost of necessities. This is the fourth in a series of Key Facts sheets that IFPRI is producing based on the Integrated Household Surveys (IHS). The purpose of the series is to present data relevant to key policy issues on agriculture, food systems, and development topics in Malawi. Other Key Facts Sheets are available on our website at massp.ifpri.info. population living below the poverty line. This sharply declined to 17% in 2010 then increased to 19% in 2019. As expected, the incidence of poverty is higher in rural areas, where it remained between 56% and 59% during the observed period The extreme poverty headcount ratio, presented in Figure 2, is the share of the population that lives in households below the extreme poverty line. The share of people living in extreme poverty halved from 8% to 4% between 2004 and 2010 and remained more or less constant thereafter. In rural areas and nationally, the extreme poverty rate remained more or less stable at around 24% and 20% respectively, with small temporary spikes in 2010. How poor are the poor? The depth of poverty is shown in Figure 3. It is measured by the poverty gap index, which is the extent to which the poor fall below the poverty line. It is the additional annual consumption that it would take to bring an average poor household out of poverty expressed as a proportion of the poverty line. To make comparisons easier, the poverty gap reported in this paper has been calculated in reference to the 2019 poverty line. At the national level the poverty gap increased from MK 29,502 (17.8% of the 2019 poverty line) in 2004 to MK 31,326 (18.9%) in 2016, declined to MK 27,891 (16.8%) in 2016, then slightly increased to MK 28,131 (17.0%) in 2019. There is a declining trend in the poverty gap index in urban areas, indicating that the average consumption expenditure of the urban poor is moving closer to the poverty line. The additional income required for the urban poor to move out of poverty decreased from MK 11,732 (7.0%) in 2004 through MK 8,019 (4.8%) in 2010 and MK 7,497 (4.5%) in 2016 to MK 7,260 (4.4%) in 2019. In rural areas, the additional income needed for the poor to exit poverty was largest in 2010 at MK 35,502 (21.4%), declining to MK 31,989 (19.3%) in 2019. As of 2019, the poverty gap index in rural areas was almost five times higher than that of the urban area. Where are the poor? Table 1 presents the trends in the incidence of poverty at the regional level. Between 2004 and 2016, the Southern region had the highest proportion of people living below the poverty line. In 2019, the Central region recorded the highest level of poverty incidence after having the lowest incidence of poverty in the previous survey years. In contrast to the Northern and Southern regions, where the incidence of poverty declined by 21 and 9 percentage points respectively, the proportion of poor people in the Central region increased by 12 percentage points between 2004 and 2019. Figure 4 below illustrates the distribution of the incidence of poverty by district across the country and Table 2 presents the underlying numbers. Unsurprisingly, the proportion of poor people is lowest in the four cities which have an incidence of poverty between 11% and 16%. Mchinji district has the highest incidence of poverty (68%) followed by Kasungu (67%) and Dowa (65%). However, due to its size, Lilongwe rural has the highest absolute number of poor people (1,071,650) followed by Mangochi (760,402) and Kasungu (583,121). The rural districts with the lowest incidence of poverty are Nkhata Bay (22%), Likoma (26%) and Rumphi (26%). 22 8 2424 4 28 20 4 24 20 3 24 National Urban Rural Sh ar e o f p o p u la ti o n b el o w t h e ex tr em e p o ve rt y lin e (% ) 2004 2010 2016 2019 Poverty Incidence (%) Region 2004 2010 2016 2019 Northern 54.1 54.3 49.5 32.9 Central 44.2 44.5 47.5 55.8 Southern 59.7 55.5 56.0 51.0 52 25 56 51 17 57 52 18 59 51 19 57 National Urban Rural Sh ar e o f p o p u la ti o n b el o w t h e p o ve rt y lin e (% ) 2004 2010 2016 2019 Figure 1: Incidence of poverty 18 7 1919 5 21 17 5 20 17 4 19 National Urban Rural P er ce n ta ge s h o rt fa ll fr o m p o ve rt y lin e 2004 2010 Figure 2: Incidence of extreme poverty Figure 3: Depth of poverty Table 1: Incidence of Poverty by Region Figure 4: Incidence of poverty by district Table 2: Incidence of poverty by district Who are the poor? Figure 5 shows the proportion of people belonging to households living below the poverty line categorized by household size. Individuals living in large households (with 7 or more members) are twice as likely to be poor as those living in small households (with 4 or fewer members). There may be some economies of scale that large households can exploit allowing them, for the same consumption per capita, to reach higher welfare levels than a small household. Similarly, they are likely to consist of more small children who have, per capita, lower consumption needs. Taking such factors into consideration would attenuate the differences somewhat, but unlikely eliminate them altogether. Regardless of size, from 2004 to 2019 households have realized little movement in poverty rates. The share of poor people belonging to large households has gone up from 66% to 68%. District Poverty incidence (%) Population Poor population 1 Balaka 63 454,779 285,311 2 Blantyre 44 466,075 204,644 3 Blantyre City 15 819,955 121,921 4 Chikwawa 61 581,329 355,967 5 Chiradzulu 38 365,879 140,357 6 Chitipa 39 240,260 92,738 7 Dedza 62 856,147 527,800 8 Dowa 65 799,727 520,655 9 Karonga 41 374,881 153,954 10 Kasungu 67 870,639 583,121 11 Likoma 26 14,888 3,856 12 Lilongwe 63 1,688,116 1,071,650 13 Lilongwe City 16 1,031,520 161,255 14 Machinga 62 768,642 478,556 15 Mangochi 64 1,196,694 760,402 16 Mchinji 68 620,783 424,988 17 Mulanje 55 705,262 386,617 18 Mwanza 47 136,209 64,085 19 Mzimba 39 959,875 370,343 20 Mzuzu City 11 232,763 26,703 21 Neno 40 142,226 56,969 22 Nkhatabay 22 290,965 63,969 23 Nkhota kota 43 404,747 173,932 24 Nsanje 63 306,731 192,612 25 Ntcheu 57 683,816 388,319 26 Ntchisi 55 329,353 181,790 27 Phalombe 64 444,735 283,413 28 Rumphi 26 235,253 62,027 29 Salima 62 496,502 310,047 30 Thyolo 49 738,431 364,484 31 Zomba 49 768,818 374,829 32 Zomba City 13 108,102 14,556 National 51 18,134,103 9,201,870 34 57 66 36 54 62 38 56 66 34 56 68 Small (<5) Medium (5-6) Large (>6) In ci d en ce o f P o ve rt y (% ) 2004 2010 2016 2019 Figure 5: Poverty by household size Table 3 presents the incidence of poverty by characteristics of household head. Generally, poverty incidence was higher among people living in households with older heads than among those living in households with younger heads. However, this difference became less wide over time as poverty incidence increased by 6 percentage points among people living in households with heads under 30 years of age between 2004 and 2019, while decreasing in the rest of the population. This decline was most pronounced among people living in households with older heads (over 59), especially between 2004 and 2010. This decline coincides with the introduction in 2004 of the Social Cash Transfer Program which mainly targets the elderly. People living in households with unmarried and female heads had a higher poverty incidence than those living in households with married and male heads respectively. Prevalence of poverty decreases with the education of the household head: In 2019, 71% of people living in households headed by someone who never attended school were poor, compared 44% of those living in households with a head who completed primary education, and 14% of people living in households headed by an MSCE holder. These statistics validate the importance of education in alleviating poverty in the country. International comparison While most countries set their own poverty lines, the World Bank defines an international poverty line equivalent to US$1.90 per person per day at purchasing power parity (PPP) in 2011 prices, which is based on the average of the national poverty lines of 15 of the poorest countries. The purchasing power parity calculation establishes an exchange rate between currencies based on the value of a basket of goods and services that the currency can buy in different countries rather than the official exchange rate. Based on this international poverty line, the incidence of poverty in Malawi is at 68.5% as of 2018. Figure 6 presents an international comparison of poverty headcount ratios at US$1.90 at PPP for African countries. The latest available World Bank data was used for each of the countries. Malawi recorded the sixth highest poverty headcount ratio on the continent. The Northern Africa countries of Tunisia, Algeria and Morocco had the lowest incidence of poverty of 0.22%, 0.32% and 0.66% respectively. This Key Facts sheet represents a small fraction of the analyses that can be conducted using the IHS5 data. Please visit the IFPRI Malawi website to stay up to date on Key Facts sheets and other outputs: massp.ifpri.info Poverty incidence (%) Household head's age 2004 2010 2016 2019 13 - 29 38.4 41.3 44.5 44.3 30 - 44 53.1 52.7 53.6 51.6 45 - 59 58.4 53.3 53.3 53.5 ≥ 60 58.6 52.4 50.4 50.6 Household head's marital status Married 52.2 50.0 50.6 50.0 Unmarried 53.1 53.6 54.8 53.5 Household head's sex Female 58.5 57.2 58.7 56.8 Male 51.0 49.1 49.1 48.4 Household head's education Never attended school 67.2 71.7 70.8 71.2 Incomplete primary 55.2 54.5 59.1 56.5 Completed primary 41.9 37.0 42.8 43.5 Completed JCE 28.3 28.7 31.0 30.7 Completed MSCE 10.9 9.8 11.5 13.8 Note: The Junior Certificate of Education (JCE) is awarded after passing form 2 examinations of secondary education. The Malawi School Certificate of Education (MSCE) is obtained after passing the final (form 4) examination of secondary education. For further information contact us at: ifpri-lilongwe@cgiar.org Visit us online at: http://massp.ifpri.info Table 3: Poverty by characteristics of household head Figure 6: Incidence of poverty in Africa https://massp.ifpri.info/ mailto:ifpri-lilongwe@cgiar.org http://massp.ifpri.info/