Tackling forms of corruption that affect
the poor most
1. Which areas or forms of corruption are perceived to hurt the
poor most?
2. Are there any examples of successes in combating
those particular forms of corruption?
Purpose
To inform a seminar on corruption from the perspectives of poor
people.
Content
Part I outlines the negative consequences
of corruption for the poor
Part II provides examples of tackling corruption
in areas affecting the poor
Annex includes a list of additional papers
and web resources
U4 helpdesk reply
The impact of corruption on the poor and on poverty reduction processes
has now been reasonably widely discussed. The effect of corruption on
the poor can be gauged through both its direct impact (through,
for example, increasing the cost of public services, lowering their quality
and often all together restricting poor people's access to such essential
services as water, health and education) and the indirect impact (through,
for example, diverting public resources away from social sectors and the
poor, and through limiting development, growth and poverty reduction).
While corruption impacts negatively on most of the segments of the society,
it is suggested that the poor are more vulnerable both in terms
of being easy targets for being subjected to extortion, bribery, double-standards
and intimidation as well as in terms of being hit by the negative and
harsh consequences of corruption on country's overall development processes.
So, in addition to the 'default' negative impact of corruption, there
is also an element of disproportionality and inequality when corruption
is viewed in the context of poverty.
Part I of this query demonstrates that corruption disproportionally
hits the poor and lists a number of ways in which it can affect poor's
basic rights, livelihoods as well as hinder development and poverty
reduction processes. Part II of the query provides guidance
as to how corruption and its negative impact on the poor can be addressed.
Additional papers and web resources of relevance to the topic are
annexed.
Presented below is a combination of survey evidence and qualitative research
demonstrating that corruption, both in the form of petty bribery as well
as grand corruption and diversion of public funds, can have numerous negative
consequences on the poor.
1. Survey evidence establishes the link between corruption
and poverty
Corruption is a core poverty issue as viewed by the poor themselves
Corruption emerges as a core poverty issue as a result of the participatory
poverty assessments carried out within the framework of World Bank's Voices
of the Poor initiative that brings together experiences of over 60,000
poor men and women around the world. Poor people engaged in the study
reported hundreds of incidents of corruption as they attempt to seek health
care, educate their children, claim social assistance, get paid, attempt
to access justice or police protection, and seek to enter the marketplace.
Source: World Bank, Voices
of the Poor Programme
Survey evidence indicates the lives of the poor to be most affected
by corruption Attitudes towards corruption and its impact vary substantially. Based
on the results of the 2003
Global Corruption Barometer, corruption hits the poor hardest. Two
out of five respondents on a low income believe that corruption has a
very significant effect on their personal and family life. The same answer
came from only one in four respondents on a high income. So, 41% of respondents
on low income felt their lives were "very significantly" affected
by corruption, as opposed to 27.5% of those on medium income and 25.4%
of those on high income. Source:
Global Corruption Barometer 2003
Survey evidence indicates direct correlation between income levels
and incidences of bribery encountered
The Kenya
Urban Bribery Index results indicate that those with low-income
are more vulnerable to corruption than those with higher income levels.
Those on the lowest income reported a 74.4% incidence of bribery encountered
and those on the highest income reported a 61.9% incidence. Similar comparisons
exist for other social-economic categories, such as, for example, education
and employment. The findings indicate that those likely to be poor (i.e.
unemployed, those with low education, etc.) are more vulnerable to corruption
than the better off socio-economic groups. Respondents with primary education
and below encounter bribery in 75% of their interactions with public organisations,
as compared to 67% for those with secondary school education and 63% for
those with tertiary education. The unemployed encounter bribery the most
(in 71% of their interactions), self- or family employees 68% of the time,
the business and non-profit sector 61% of the time, and the public sector
employees report encountering bribery in just over half (52%) of their
interactions, significantly lower than all the other groups.
Source: Kenya
Urban Bribery Index
Corruption affects income inequality and poverty
As well as affecting economic efficiency corruption can also have distributional
consequences. This affects income inequality and poverty by reducing
economic growth, the progressivity of the tax system, the level and effectiveness
of social programs, and by perpetuating an unequal distribution of asset
ownership and unequal access to education. These findings, based on various
empirical analysis, hold for countries with varying growth experiences,
at different stages of development, and using various indices of corruption
(used to compare the correlation of corruption with real per capita GDP,
Gini coefficient and quintile income shares, etc).
In a cross-section of 37 countries, a significant impact of corruption
on inequality was found, while taking into account various other exogenous
variables. When controlling for GDP per head, this impact remains significant
at a 10 % level. It was concluded that a deterioration in a country's
corruption index of 2.5 points on a scale of 0 to 10 is associated with
the same increase in the Gini coefficient as a reduction in average secondary
schooling of 2.3 years. Researchers have also tested various instrumental
variables to ascertain whether the relationship between corruption and
inequality is not a case of reverse causality.
Source: Does
Corruption Affect Income Inequality and Poverty? Sanjeev Gupta, Hamid
Davoodi and Rosa Alonso-Terme, IMF working paper, 1998
2. Examples of the negative consequences of corruption
on the poor
Corruption affects the poor by diverting resources and holding back
development
A report by the African Union, presented before a meeting in Addis Ababa
in September 2002, estimated that corruption costs African economies
in excess of 148bn dollars a year. This figure, which includes both
direct and indirect costs of corruption, i.e. resources diverted by corrupt
acts and resources withheld or deterred due to the existence of corruption,
is thought to represent 25% of Africa's GDP and to increase the
cost of goods by as much as 20% - deterring investment and holding back
development. Most of the cost, the report says, falls on the poor.
Source:
BBC report, 18/09/2002 (origin: African Union report)
Corruption impacts the poor through public service delivery "Corruption is a crime against the poor above all", declared
Claire Short in the UK Parliament's Select Committee on International
Development Report. DFID conducted participatory poverty assessments in
23 developing countries. These consistently showed that corruption reduced
the access of the poor to basic services. They provided evidence that
unofficial payments were often needed for health, education and other
services and that some people went without services as a result. They
also demonstrated diversion of resources as essential medicines and supplies
went missing. In many countries where the justice system was affected
by bribery, the poor were unable to obtain the protection of the law and
in some cases were threatened by those who should protect them.
Source: UK Parliament web resources, International Development Committee
Publications,
2001 Report
Corruption affects poor's basic livelihoods
In Rajasthan, minimum wages, which were part of a drought relief programme
organised by the state, were hardly ever paid due to mismanagement, corruption
and the deliberate obstruction of access to information held by local
officials responsible for the programme's administration. As a result,
workers demanding payment of their minimum wages were repeatedly told
that no evidence of their work existed, and that as a consequence they
would not be eligible for payment. The money went instead into the pockets
of bureaucrats who had been copying names from electoral rolls, including
those of dead people, or receiving payment for material never supplied.
Source: The
Right to Information: Facilitating People's Participation and State Accountability,
Aruna Roy, Nikhil Dey, 10th IACC paper, 2001
Corruption can affect poor's political choices and participation
The custom of providing a service or favour in return for political loyalty
is known as clientelismo in Mexico. This trade of services for votes
is often the major way that the poor acquire land, housing, and local
infrastructure - demonstrates a Mexican example. The communities of the
poor are run by local leaders who act as brokers between the people and
the major political parties. Some 80 percent of the respondents in the
area of Mexico City stated that they engaged in clientelismo politico
to get their houses and urban services (water, electricity, street paving,
etc.). Yet, despite widespread participation in this system, it is
generally resented. One man interviewed in Mexico City said, "I
don't like politics, nor the ties that come with it... I think no one
is interested; they do it to get something, to give something, the house
to the children, such as myself. But they have to participate because
in so doing they are able to obtain things."
It is this clientelismo, and the deep distrust and disrespect for government
which go with it, coupled with excessively low salaries, little opportunity
for remunerative employment, and poor quality public services (health
and education), that explain much of the cause of poverty in Mexico, as
voiced by the poor of that country.
Source: State
Institutions in Voices of the Poor: Can Anyone Hear Us? Deepa Narajan,
Raj Patel et al, World Bank / Oxford University Press, 2000
Corruption affects poor's access to health services
An independent survey of the quality of maternity health services for
the urban
poor conducted by the NGO Public Affairs Centre found considerable damaging
evidence of corruption in all the maternity hospitals run by the Bangalore
City
Corporation. These maternity hospitals represent the city's only decentralised
set
of health facilities that are accessed by relatively low-income women.
The survey
revealed that the poor pay huge amounts of extortionary money in their
interactions
with the public maternity hospitals. The average patient in a maternity
ward run by
the city corporation pays Rs 1,089 (approximately US $22) in bribes to
receive adequate medical care. A further 61 per cent of the respondents
were forced
to pay for medicines, though public policy clearly mandates that they
be given free of
charge.
Source: Maternity
Health Care for the Urban Poor in Bangalore: A Report Card, Sita Sekhar,
Public Affairs Centre, June 2000
Corruption affects poor's access to support services
Profound frustration with corruption and maltreatment is compounded by
a sense of being voiceless and powerless to complain, since complaining
may result in losing services altogether. In Pakistan, for example, a
widow said, "If anybody complains or protests against this corruption,
they are struck off the lists of all support services because it is the
same Local Zakat Committee that recommends names for the assistance programs
run by different Government departments". (Pakistan 1993).
Source: State
Institutions in Voices of the Poor: Can Anyone Hear Us? Deepa Narajan,
Raj Patel et al, World Bank / Oxford University Press, 2000
Corruption affects poor's access to education
Despite the pledge by the world's governments to make access to primary
education universal and free, corruption and misuse of public resources
remains one of the biggest barriers in achieving this fundamental human
right. CIET International has done social audits that highlighted petty
corruption in primary education in Costa Rica, Nepal, Nicaragua, Pakistan
and Uganda. According to the results, in Nicaragua, 86% reported they
had to pay extra "contributions" to the teachers. One in ten
children had to pay extra charges to teachers in exchange for an education
in Uganda. Of the 47% of girls who managed to get into primary school
in the Sindh provincein Pakistan,nearly all reported
unofficial demands for money ("for invisible things", as
one girl said in a community discussion group around the social audit
results in the province).
The CIET social audits collected detailed information on school costs
to households, which provided the basis for estimating levels of corruption
and the specific target groups for those extra charges. As is often the
case with petty corruption, it is not only those who can afford it who
are asked to pay, but those who are thought to have no other options.
The price tag put on the right to an education by petty corruption filters
out those who need to access it most.
Source: CIET
International, 1999
Survey evidence indicates corruption is a heavy burden on households
Series of surveys conducted in Bangladesh, India, Nepal, Pakistan and
Sri Lanka among urban and rural households, sought to measure the incidence
of corruption in public services deemed to be of particular importance
to the poor: healthcare, education, power, land administration, taxation,
police and the judiciary. The survey found that petty corruption was endemic
in all sectors in all countries, with bribes imposing a heavy financial
burden on South Asian households because of both the high frequency and
the amounts paid. For example, in Pakistan, 92% of households using public
education services reported the payment of bribes averaging 4,811 rupees
(US$ 86) - compared to a gross national per capita income of only US$
410 per annum.
Source: Transparency International, South
Asia survey, 2002
Part II: Examples of tackling corruption in areas affecting the poor
1. Holistic anti-corruption reform
As demonstrated through some of the examples above, corruption in its
various forms and manifestations can have negative impact on the poor.
It is thus difficult to single out a particular form or area of corruption
in this respect. Therefore, to effectively control the negative impact
of corruption on the poor, corruption as a whole needs to be addressed.
Holistic anti-corruption reform is a multi-pronged and multi-faceted
process. It would be out of the scope of this query to get into in,
but there are a number of useful comprehensive resources available to
consult, including:
2. Improved tracking of public funds and expenditure
Ensuring that resources allocated for aid or public and social services
reach the intended beneficiaries is an essential part of addressing
corruption in the context of poverty. This is an area where both the
donors, the governments and the public can play a role. There is a
significant body of information available on public financial management
in the context of donors and recipient governments. These range from
fiduciary risk assessments and public expenditure reviews to public
expenditure tracking surveys (pioneered in Uganda and at present used
in a number of countries). To avoid duplication, we would like to
refer you to some resources on corruption and financial management,
such as the U4
Focus Area on Public Financial Management.
In the meantime, in this section we would like to draw your attention
to approaches that can be used at the level of civil society and local
communities to monitor public expenditure and improve its benefits for
the intended beneficiaries and the poor.
Participatory budgeting is an innovative financial practice
that involves citizens in priority-setting and resource allocation.
It has become increasingly popular in the context of decentralisation
and creates opportunities for greater citizen and local legislature
involvement. Participatory budgeting helps improve transparency in
the financial administration of local authorities and contributes
to a more equitable distribution of resources. It breaks with the
tradition that the budget process should occur exclusively within
the executive, with the input only of budget technicians and a few
politicians. Participatory budgeting tools have been widely applied
in Latin America and Europe. It is estimated that currently at least
300 cities apply participatory budgeting methodology.
An effective way to monitor expenses is to involve beneficiaries
in budget execution. Recipients of aid can become involved both
in the administration of funds and in the review and approval of key
decisions, including allocation of central government transfers and
contributions in cash and kind from the community.
Another tool that generates public awareness and citizen engagement
in budget processes are public hearings. Public budget hearings
at local level raise citizens' awareness of the goods and services
they should receive. Presenting expenditure records in simple
language to the public and confronting local politicians with discrepancies
between policy statements and actual delivery can trigger civic action
against corruption in the public sector, thus contributing to improved
accountability. There are many examples of such initiatives, such
as that conducted by Mazdoor Kisan Shakthi Sangathan (MKSS), or the
Workers and Peasants Power Association, a grassroots organisation
based in India.
NGOs involved in relief projects must be accountable vis-à-vis
their donors and the wider public. They should publish information on
their own resources and how funds are being allocated. In this regard,
they should be well resourced to properly manage such income.
In addition, civil society organisations can play an important role
in the monitoring of revenues and expenditures. An increasing number
of NGOs carry out independent research and training with the aim of
building public awareness on budget issues.There are also various
glossaries that explain the often difficult technical language used
in budget processes: IBP, IMF and the South African Institute for
Democracy (IDASA) have developed glossaries of key budget terms.Many
NGOs around the world are involved in budget analysis, providing comprehensive
information to the public and to the media and often enabling them
to comment on budget proposals and monitor expenditures.
PROOF (Public Record of Operations and Finance) is a tool
developed by four Indian NGOs aimed at promoting transparency and
reducing opportunities for maladministration and financial misappropriation
in the Bangalore Municipal Corporation. Since August 2002, PROOF has
been obtaining quarterly statements from the municipality and sharing
them with the public through regular public meetings and a weekly
radio talk show. In parallel, PROOF has developed performance indicators
to assess municipal undertakings, including for a variety of public
schools. Regular training sessions for citizens aim at raising the
level of awareness about the technicalities of the municipal budget,
its process and the financial statements. This training builds citizens'
capacity to evaluate local government and school performance through
analysing the budget and financial statements. The prerequisites for
PROOF's success are the city's state-of-the-art Fund Based Accounting
System (FBAS) and the political will to share public finances with
the public. For more
information on PROOF see www.indiatogether.org.
The
South African Public Service Accountability Monitor (PSAM)
is an independent research and monitoring institute that monitors
the management of public resources and cases of misconduct and corruption
by the government. PSAM provides a database of information on budget
allocations and resources available to various government departments,
as well as their plans for the use of these resources, any problems
they may experience during the course of their implementation and
recommendations made by oversight bodies. Scorecards for the
department and records of public officials' promises and commitments
to service delivery are also provided. This information is extracted
from a wide range of official documents, from budget documents to
the minutes of parliamentary committee meetings.
Report cards on public services are another powerful tool
to mobilise the public if public funds go missing. A report card is
a survey that assesses the performance of, for example, schools and
school administration. It measures both quantitative and qualitative
indicators of service delivery through direct citizen feedback. If
results of the report card surveys are fed back to schools and administration,
they provide an incentive for increased accountability. If they are
widely disseminated amongst the public, together with budget information,
they provide an opportunity for citizens to get involved in the budget
allocation process and to ensure that the budget addresses their needs.Then
the budget cycle starts again. Some NGOs also carry out surveys to
compare budget transparency across countries, thus putting pressure
on governments to improve budget systems.
State
Institutions, in: Voices of the Poor: Can Anyone Hear Us?
(Deepa Narajan, Raj Patel et al, World Bank/Oxford University Press,
2000)
This chapter discusses the effect of dysfunctional state institutions
on the poor people through humiliation, exclusion and corruption.
It includes case studies on, among others, access to health care
and education, which contain real 'voices' of the poor on the
effects of corruption on their lives.
Africa:
Regional Overview of the Impact of Failures of Accountability on Poor
People (Ahmed Mohiddin, Background Paper for the UN Human Development
Report 2002)
It is argued that good governance is an integral element in the creation
of the enabling environment of peace, security, the rule of law, legitimacy
and stability, in which sustainable human development can be promoted.
This paper presents a regional overview of the impact of the
failures of accountability of institutions of governance on poor people
and disadvantaged groups.
Poverty
and Corruption in South Africa: Government Corruption in Poverty Alleviation
Programmes (Lala Camerer, in Costly Crimes: Commercial Crime and
Corruption in South Africa, Monograph No 15, September 1997)
This monograph focuses mainly on the impact on the poor of corruption
in the social security sector. That particular area was chosen
because: social security programmes, particularly pensions and other
grants, are largely regarded as the state's primary attempt to alleviate
poverty. In addition, it is acknowledged that they are seriously hampered
by fraud and corruption.
CIET, 1999: Corruption
and System Leakage. Accountability Theme Sheets prepared for the
9th IACC, Durban.
These Accountability Sheets, which refer to the results of social
audits conducted by CIET in a number of countries, cover examples
of corruption and its effects on the poor in the police service, customs,
health service, primary education, and the justice services.
Corruption,
Poverty and Inequality (Stefanie Teggemann, World Bank topic page,
last updated 2002)
The page contains brief narrative analysis accompanied by recommended
resources and readings on each sub-topic.
International
Budget Project and
IDASA offer a variety of courses and have produced various materials
on the importance of fiscal transparency and participation of legislatures
and civil society in government decision-making.
IBP also publishes a Guide
to Budget Work for NGOs which explains the activities and approaches
NGOs can undertake in this regard and provides examples of resources
and best practices.
The Indian NGO Public Affairs Centre (PAC) has pioneered the report
card methodology.
In Latin America, a group of NGOs and academic institutions under
the guidance of International Budget Project developed a common survey
methodology including a unique budget transparency perceptions index
in 2001. The survey measures in a comparable form the degree of accessibility
and usefulness of the information provided by national governments
with respect to finances, revenue and expenditures. See Juan Pablo
Guerrero and Helena Hofbauer: 'Budget transparency in Latin America',
Transparency
International's Global Corruption Report 2003.
