This entrepreneur owns a telecentre in Tanzania and is among the small business owners in the unique position to create change for Africa's poor. Photo: IICD (flickr)

They own apartments instead of huts. They exploit technology to organize revolutions. They are Africa’s new middle class — and they are still living on less than $20 a day.

One in three Africans are earning between $2 and $20 a day and considered middle class. According to the Guardian, it is exactly this growing, educated population that is becoming the catalyst for change throughout the developing world.

According to a World Bank study cited by the Guardian, "countries with lower poverty will have a large middle class and see higher subsequent rates of both growth and poverty reduction." The reasons for this are both social and economic, but the growth of Africa's middle class seems to bode well for the continent.

Because the developing world's middle class still lives on less than $20 a day, it shares many of the grievances of those living below the poverty line, explains the Guardian. However, members of this income bracket pay more in taxes and thus are more likely to seek transparency and accountability from those in power. Since members of this narrowly defined middle class are generally business owners rather than government employees, they are unlikely to reap benefits from a corrupt system. Given these circumstances, they are often the ones most effective in lobbying for improved living conditions.

In developing countries, this mid-level income group is also particularly important in the small business sector. They have higher disposable income to invest in domestic economies and in education to produce a skilled workforce. As small business owners and entrepreneurs, they may also have the hiring power to employ new workers in difficult economic times.

Freeing Africa from poverty and corruption will take all these changes and more. But with one in three Africans qualifying as middle class, the continent may be on the right track.

Cash transfers let people choose what they want to spend money on, like these buffalo. Other purchases could be anything from farm machinery to food. Photo: andrew chang (flickr)

When people donate to charity, they don’t usually expect their money to go straight into the pocket of a needy person half a world away. But giving money directly to the poor is becoming a global trend. It's called a cash transfer and it's much more than a handout.

In principle, a cash transfer is a handout. There are usually limitations on what a recipient can spend it on — no alcohol or drugs, for instance — but the idea is that poor people know what they need more accurately than aid agencies, according to an article in The Guardian. Recipients are free to spend the money on what’s best for their families, which could include food, livestock or farm supplies.

The recipients also gain a bit of purchasing power, which they may never have had before. Being in charge of their own spending can teach people fiscal responsibility says Duncan Green, Head of Research for Oxfam Great Britain. It can also improve their self-esteem. On his blog, he writes that “cash transfers can be a good way to support and empower people.”

But can the system work? In 2006, Oxfam handed out about three months worth of wages to a group of Vietnamese farmers. They studied the results periodically over three years and their figures show that the poverty rate in that area fell from about 65 percent to about 40 percent. Among other things, Green says that the Oxfam team saw “improved community infrastructure, new opportunities for the youth and unemployed, increased community/social activities, [and] increased female participation” in community activities.

Though there are concerns that cash could do more harm than good, The Guardian notes that 45 countries have some sort of cash transfer system in place. And The Boston Globe points out that Brazil and Mexico have been using cash transfer programs since the late 90s. As more and more countries follow suit, this growing acceptance could mean that the world is ready to revamp its aid strategy.

Photo: James Pradhan/Mercy Corps

If you want to understand how to fight poverty, ask poor people what it means to be poor.

That philosophy underlies the new World Bank book Moving Out of Poverty in India: Empowerment and Democracy. The authors of the book collected the life stories of thousands of Indian villagers who have experienced poverty.

Among other findings, the authors found that aid agencies should stop looking at the total number of the poor as a diagnostic and start looking at the numbers of those entering and those leaving poverty.

The report’s core finding, as identified by the authors, is that aid agencies should not track the total number of poor as a measure for success. Instead, aid workers should focus on the number of people escaping poverty and the number of people descending into poverty. These separate processes drive the overall poverty level and their causes are different.

The study found that villagers frequently descend into poverty because events force them to sell off their assets. Villagers told tales of people falling sick, family members dying, education bills coming due, weddings — all of which required the selling off of precious land. With the loss of land, or other assets, the villagers were less well off, and less prepared for the next catastrophe.

Villagers often escape poverty because their family members are able to help them. Family support is essential because few report access to credit from the private or non-profit sector. Extending credit opportunities through building new microfinance programs, extending financial institutions into the rural sector, providing public sector jobs, or other means, can help those who lack wealthier family members.

The study found that focusing on the overall poverty level can lead aid workers to address the wrong problems. Using the overall rate as a measure for success in poverty reduction can also be misleading. A static overall rate can, for example, hide great changes in those becoming better off and those becoming worse off, which combined would cancel each other out and leave the net poverty level unchanged.