Stethoscope: Tackling urban poverty in Malaysia

This article first appeared in Forum, The Edge Malaysia Weekly, on October 18, 2021 - October 24, 2021.
Financial assistance can be provided in short-term ways that encourage and incentivise the poor to ‘graduate’ to progressively lower levels of financial assistance. (Photo by Bloomberg)

Financial assistance can be provided in short-term ways that encourage and incentivise the poor to ‘graduate’ to progressively lower levels of financial assistance. (Photo by Bloomberg)

-A +A

The ability to eradicate poverty is the single biggest predictor of good health. In other words, eradicating poverty is more important for improving the health of Malaysians than building more hospitals or training more doctors. The converse is also true, that the single best predictor of poorer health is poverty.

A Unicef survey in December 2020 called “Families on The Edge” shows that urban poverty worsened in the first year of the pandemic. Although official urban poverty statistics are not available for this year, it is likely that urban poverty has worsened further.

Both urban and rural poverty exist and we should focus equally on both. Urban and rural poverty have different causes and therefore different solutions, but several factors remain the same. One, poverty is a relative concept and cannot be measured using monthly income levels alone. Two, poverty should be measured using a multidimensional poverty index that incorporates health, education and living standards. And three, eradicating poverty requires the active building of capacity, confidence and non-financial capital among the poor, rather than their just passively relying on cash transfers, handouts or economic assistance.

We write this article to elaborate on three overarching strategies to resolve urban poverty in Malaysia. We believe that it can be tackled with the right set of tools, the right coalition of actors and the right regulatory and bureaucratic framework.

Build the right set of tools

Firstly, tackling urban poverty in Malaysia requires the right set of tools, as there is no single magic solution to resolve urban poverty. This set of tools can be divided into three components: shelter, financial assistance and employment. Each component requires short-term solutions and long-term investment to reorganise and repurpose our existing infrastructure and society.

For example, there can be multiple shelter solutions to cater for different categories of people. The Ministry of Women, Family and Community Development or Kementerian Pembangunan Wanita, Keluarga Dan Masyarakat (KPWKM) can provide annual grants for non-governmental organisations (NGOs) to operate fully-free shelters for those with mental health issues. Low-cost hotels affected by the pandemic can be converted into low-cost hostels for those who cannot afford to rent a place of their own. And underutilised buildings like shopping complexes can be used for urban intervention programmes.

Financial assistance can be provided in short-term ways that encourage and incentivise the poor to “graduate” to progressively lower levels of financial assistance. This will reduce the risk of welfarism or prolonged dependence on the government. There is a spectrum of financial support that can be provided, ranging from direct cash transfers to a means-tested financial support package. Where possible, we believe that electronic cash transfers via e-wallets are the best approach, as they reduce administrative cost and ensure that the recipients are receiving the assistance directly.

Durable employment solutions must accompany shelter and financial assistance. However, solutions for durable employment are beyond the scope of this article, as it requires changing the fundamentals of Malaysia’s persistently low-wage jobs, low productivity, the impact of the gig or platform economy, and Industrial Revolution 4.0.

Nonetheless, there are some low-hanging fruit that we can easily harvest to promote durable and dignified employment solutions for the urban poor in Malaysia. These low-hanging fruit are based on simple principles: utilise their existing skills while providing longer-term upskilling so they can “graduate” to needing lower levels of government support.

One example is providing a clean, centralised kitchen (a “cloud kitchen”) so that women can, on a shared basis, prepare food to sell to individuals or restaurants. Another example is to convert abandoned buildings, multi-storey carparks or rooftops into urban or community gardens that produce food (as is being done in California, Singapore and Spain). A third example is to guarantee employment to the urban poor by imposing a minimum wage in the construction sector as well as gardening, maintenance or hygiene services. There are many more creative ways to provide the urban poor with a regular and routine salary, while including them in the formal economy.

Assemble the right coalition

Secondly, implementing these solutions requires the right coalition of actors. Traditionally, the government has been the most important actor in eradicating poverty in Malaysia. Since 1957, Malaysia has received negligible amounts of foreign direct aid or loans from the World Bank or International Monetary Fund, and most of the poverty eradication efforts have been domestically funded.

However, the landscape of actors and funders has fundamentally changed. The role and size of statutory boards like the Employees Provident Fund and Social Security Organisation have increased over time, with a gradually larger and more active Community Welfare Department (Jabatan Kebajikan Masyarakat), which is part of KPWKM. There are also many social enterprises, civil society groups, NGOs or even groups of well-meaning individuals, as evidenced by the organic RakyatJagaRakyat movement during the pandemic.

The private sector has also entered the landscape, beginning with their standalone corporate social responsibility (CSR) activities. As investment criteria begin to incorporate environmental, social and governance (ESG) elements, large corporations may soon include metrics like urban poverty into their business model. The government’s role is to avoid duplication of services — which leads to wastage and abuse of privilege — by registering those organisations that offer regular services.

Three underrated actors in poverty eradication efforts are educational institutions, licensing authorities and banks. Technical and vocational education and training (TVET) will be crucial to the upskilling of the urban poor and providing them with employment opportunities. They can be hairdressers, make-up artists, carpenters or cobblers. TVET should be lifelong and offer progressively more sophisticated content. The urban poor may not need traditional degrees, but will benefit from short modules or certificate courses. Most importantly, the urban poor need to be guided out of poverty. We must show them how to use their skills to earn a living sustainably, such as at centres offering intervention programmes.

The second underrated actor is the licensing authority. The government must re-examine the licensing regime for various jobs, and reduce the licensing requirements as much as possible. For example, someone who wants to open a rooftop community garden or start a small business selling biscuits and cakes should not have to go through multiple layers of bureaucracy. We must remember that the urban poor do not just lack money, they also lack the familiarity, confidence and courage in navigating an unfriendly or intimidating bureaucracy. Besides, there are also many who will never be able to satisfy all the requirements to obtain a licence.

The third underrated actor in poverty eradication efforts is the financial institutions. In a vicious chicken-or-egg situation, the urban poor are poor because they cannot access capital to lift their standard of living. We propose that for-profit banks consider building a micro-finance architecture for the urban poor in Malaysia. A hugely-successful example is the Grameen Bank, a profitable micro-finance organisation in Bangladesh with 20,000 employees, 2,500 branches, US$2.8 billion in total assets, US$204 million in revenue, and one Nobel Peace Prize its founder received in 2006. We have a selection of development banks in Malaysia, the global Alliance for Financial Inclusion is based in Malaysia and new financial entities like GrabPay provide us with an excellent opportunity to extend capital to the poor.

We should welcome a larger landscape of actors in our poverty-eradication efforts. The government should accept that these actors are all pulling in the same direction of eradicating poverty, and are not competing with each other. The success of each actor reflects positively on the government.

Enable smart regulations

And that is why we argue, thirdly, for the right regulatory and bureaucratic framework for poverty eradication. The current framework is arguably too rigid and prioritises the central role of the government in direct efforts to eradicate poverty. That could work in Malaysia’s adolescence and early adulthood, but is impractical and undesirable six decades after independence.

The right regulatory framework for poverty eradication will be non-paternalistic, and will treat all actors as equal partners. That framework will allow non-government and private sector actors to experiment with new ways to eradicate poverty in multidimensional ways, because financial assistance alone is inadequate. All non-government entities working in poverty eradication or community development should be regulated through smart regulations that allow adequate oversight without imposing unnecessary bureaucracy on them. In other words, the government becomes an active partner, coordinator and enabler, rather than the final approver.

Malaysia’s efforts to eradicate poverty have been relatively successful so far, but we need new strategies, frameworks and solutions as our understanding of poverty increases. Winning the war against Covid-19 also requires that we repair our social safety nets and provide multidimensional solutions to the multidimensional problem of urban poverty.

Datuk Munirah Abdul Hamid, president of the 54-year-old Pertubuhan Tindakan Wanita Islam (Pertiwi), started the Pertiwi Soup Kitchen in 2010, which now feeds up to 1,200 people daily. Dr Khor Swee Kheng specialises in health policies and global health.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.