Poverty Explained In Simpler Terms

Poverty affects millions of people globally. In fact, when you think about someone who is living in poverty, you will probably have an image of someone skinny and scrawny, someone who lives in a shack or rundown house, someone who doesn’t have enough money to buy nutritional or good food and necessities. While you may not be wrong, it is all too easy to stereotype the poor. 

There is more than meets the eye. Poverty is not just about the lack of money or basic material possessions, but it also includes issues of access to basic rights and services such as education and healthcare. Poverty is about the absence of or the lack of equality and respect for all people. 

By now, you can probably guess that poverty is not a simple term to define. In fact, there is no singular definition of what poverty is. It is a complex issue with many causes and solutions. But, we can all agree that a world without poverty would be a better place. 

That’s why we have put together a quick explainer on poverty – what it is, how is Malaysia fairing, why it matters, and what you can do to alleviate it. 

• What is the definition of poverty?
• What is the Poverty Line Index (PLI)?
• What is the difference between absolute poverty and relative poverty?
• Is poverty only about money?
• What are the different types of poor?
• What is Malaysia’s poverty rate and how was it before?
• What does B40 actually mean?
• What do M40 and T20 mean?
• Where does Malaysia rank in comparison with other countries?
• Who is most affected by poverty in Malaysia?
• Where are the poor in Malaysia?
• Which places in Malaysia are the most affected by poverty?
• What can I do to help alleviate poverty?

What is the definition of poverty?

The World Bank defines poverty as the ‘inability to attain a minimal standard of living^[1]. Globally, those living on less than $3.10 a day are considered poor^[2]. According to Investopedia poverty is a state in which a person or community lacks the financial resources and essentials for a minimum standard of living^[3]. Whilst many correlate poverty with income, it goes beyond one’s salary. Poor people lack the means to meet necessities, are deprived of proper housing, sanitation, food, education and much more^[3]. Poverty is multidimensional. 

What is the Poverty Line Index (PLI)?

Malaysia’s poverty line, called Poverty Line Index (PLI), is a measurement of absolute poverty. The PLI is based on the gross monthly household income required to meet basic needs, including food and non-food items(clothing, rent, transportation, etc). A household with a gross income below PLI is defined as absolute poor and a household with a gross income less than half of PLI is defined as hardcore poor^[4]. 

Previously, Malaysia’s national PLI was RM980 a month. This PLI implied that an urban family of four would have to survive on RM8 per person, per day. It was later revised to RM2,208 in 2019^[4]. It’s also important to note that Malaysia’s PLI differs in East and West Malaysia as the cost of living in both regions are different. 

What is the difference between absolute poverty and relative poverty?

Absolute poverty is when a household falls below the national poverty line and is severely deprived of basic human necessities. It is assumed that everyone living below the PLI is deprived of basic human needs over an extended period of time, long enough to endanger or harm their livelihoods. This can include the deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information^[1]. 

Relative poverty is when a household earns less than the poverty line in the specific region they live in. Relative poverty varies depending on the location, as different regions have different costs of living. Those who fall under relative poverty are struggling to maintain an ‘average’ standard of living. For example, even though a family can afford to buy food and have shelter, they are still considered poor if they are unable to send their children to school because of the lack of access or other factors that limit them^[1].

Is poverty only about money? 

Poverty is definitely not just about how much money you make or have. The United Nations Development Programme analyses poverty through the Multidimensional Poverty Index. This index measures poverty across three dimensions which are further broken down into ten indicators of poverty. These include health (child mortality, nutrition), education (years of schooling, enrollment), and living standards (water, sanitation, electricity, cooking fuel, floor, assets)^[6].

Malaysia’s Multidimensional Poverty Index is slightly different. In Malaysia, there are eleven indicators divided between four dimensions^[4]. These include Education (schooling years, school attendance), Health (healthcare access, clean water access), Standard of Living (living place condition, room crowdedness, toilet, garbage collection facility, transportation, basic communication tools), and Income (Mean monthly household income). 

What are the different types of poor? 

We explained the difference between Absolute and Relative poverty earlier – but in fact, there are various types of poverty that give more explanation on how people arrive at the state of poverty and the area they are living in. 

• Absolute poverty: It’s when a household falls below the national poverty line and is severely deprived of basic human necessities^[1]. 
• Relative poverty: Refers to those who are earning less than the poverty line in their specific region and also struggle to afford the same standard of living as others from the same community^[1]. 
• Situational poverty: This is caused by a sudden crisis or loss. Anything from a natural disaster, to a divorce, loss of a job, or severe health conditions can cause situational poverty. This form of poverty is often temporary and hard to predict^[9]. 
• Generational poverty: Resulted from a person coming from a family who has experienced poverty for two or more generations. Because of the circumstances, they were born into, generationally poor people are faced with more difficulties in breaking the poverty cycle. People caught in the cycle of generational poverty are focused solely on surviving^[1]. 
• Rural poverty: This is where the local population have difficulty accessing basic services and amenities such as schools and hospitals. They are also faced with a lack of opportunity making it difficult to break poverty cycles^[1]. 
• Urban poverty: This happens to people living in urban areas where there is a higher chance of overcrowding and high costs of living. While urban areas are generally well connected and accessibility is not a major issue, those who are living in poverty in urban areas may face problems such as proper sanitation, poor housing, lack of job opportunities, high debt levels and high-risk blue-collar work as a result of the lack of qualifications^[1]. 

What is Malaysia’s poverty rate and how was it before? 

In 1977, Malaysia’s poverty rate was 46%^[5]. The 2014 Poverty Line Index (PLI) was RM930 for Peninsular Malaysia, RM990 for Sarawak and RM1,170 for Sabah^[4]. It wasn’t long before this was increased to RM980 in 2016. At this point, Malaysia’s absolute poverty rate was 0.4% meaning only 24,700 households nationwide were categorised as poor in 2016^[4]. 

When the PLI was revised again in 2019, the nation’s poverty rate increased to 5.7%, equivalent to 405,441 households in the poor category^[5].

What does B40 actually mean? 

B40 or Bottom 40 refers to the bottom 40% of Malaysia’s income group. Any household earning RM4,849 or less falls into the B40 category. The B40 income bracket is further broken down into B1 (below RM2,500), B2 (RM2,501 – RM3,169), B3 (RM3,170 – RM3969) and B4 (RM3970 – RM4849)^[7]. 

What do M40 and T20 mean? 

M40 or Middle 40 refers to Malaysia’s middle class. Similar to the B40, this income group makes up 40% of the country’s population. The M40 income bracket is any household earning between RM4,850 – RM10,959. M40 is broken down into M1 (RM4,850 – RM5979), M2 (RM5,880 – RM7099), M3 (RM7110 – RM8,699), and M4 (RM8,700 – RM10,959). While the term middle class represents a level of ‘comfort’ this group faces a high cost of living but are unable to apply for government aid^[7]. 

T20 or Top 20, refers to the top 20% of Malaysia’s income group. Broken into T1 (RM10,961- RM15,039) and T2 (More than RM15,040), this group represents Malaysia’s upper class^[7]. 

Where does Malaysia rank in comparison with other countries? 

To lower its national poverty rate, its people have to have access to education, proper healthcare, access to clean water, and job opportunities to aid their financial situation. The Organization of Economic Co-operation and Development (OECD) defines the poverty rate as ‘the number of people in a given age group, whose income falls below the poverty line’^[8]. 

Currently, Malaysia has a poverty rate of 5.6%. This level ranks it higher than its neighbours Vietnam (6.7%), Indonesia (9.8%), and Thailand (9.9%)^[8]. 

Who is most affected by poverty in Malaysia? 

There are many vulnerable communities in Malaysia. Struggling households can be found throughout the country. Poverty can be found in children, adults and even the elderly. While the scope of poverty is focused on the B40s, Malaysia’s poor are also highly concentrated among marginalised communities such as refugees, the Stateless, homeless, Orang Asli’s and even native Malaysians (Orang Asal). 

Where are the poor in Malaysia? 

According to a Household Income survey of each district, the vast majority of Malaysian districts fall under the B40 category. As of 2020, Sabah has the highest poverty rate in the country at 19.5%. Kelantan is second with a poverty rate of 12.4% and Sarawak takes third at 9%^[10]. 

Visit Wiki Impact’s Poverty Map for visualised data income brackets specific to states and districts in Malaysia.

Which places in Malaysia are most affected by poverty?

There are a total of five B1 districts in Malaysia. This includes Petaling (RM1,999 median income), Tongod, Sabah (RM2,197),  Kota Marudu, Sabah (RM2,425 median income), Port Dickson (RM2,449 median income) and Julau, Sarawak (RM2,731 median income). These are the districts with the lowest median income^[10]. 

Five districts in Sabah recorded the highest poverty rates in Malaysia. Tongod had the highest poverty rate (56.6%), followed by Pitas (53.6%), Kota Marudu (46.1%), Beluran (45%), and Telupid (40.7%)^[10]. 

What can I do to help alleviate poverty? 

Since poverty is so diverse, there are many ways to help address the problem. Yes, you can donate to those in need, but always ensure you are taking the necessary steps to make sure that your money is going to the right place. 

There are limitless organizations that would welcome you with open arms for those interested in donating their time. In the education sector, there is Teach for Malaysia and Borneo Komrad have stepped up to guide the next generation.  In terms of food and nutrition, countless food banks can be found throughout the nation.

Some want to help give long term support to those in need. These companies work towards upskilling the vulnerable community and providing them with job opportunities and skills that will aid them to generate income independently. 

You can also think creatively about how you can use your talent and network to create change. Wiki Impact listed seven awesome ways to make a difference. In case you are wondering “Where are the poor in Malaysia?” and “Who Are The Changemakers In My Area?” – figure out no more. Head over to our comprehensive maps and begin that journey of giving back. 

Explore Our Sources: 

1. Papertyari. (2018). What is Poverty, Types of Poverty, Poverty Line Explained. Link. 
2. World Vision. (2021). What is Poverty? It’s Not As Simple As You Think. Link. 
3. J. Chen. (2020).  Poverty. Investopedia. Link. 
4. I. Lim. (2019). How Malaysia Is Measuring Poverty Levels and How It Can Do Better. Malay Mail. Link.
5. Fly Malaysia. (2020). A Comprehensive Breakdown of Malaysia’s Poverty Measurement. Link. 
6. SDNS. (n.d). Indicators and Monitoring Framework. 3. Multidimensional Poverty Index. Link.
7. PropSocial Editor. (2021). What is the B40, M40, and T20 income Classification in Malaysia? Malaysia Income Classification. Link.
8. World Population Review. (2021). Poverty Rate by Country 2021. Link.
9. Wiki Impact. (2020). Poverty Map Version 1. Link. 
10. A. Geraldine. (2020). Sabah Ranks As Malaysia’s Poorest State, Again. New Straits Times. Link.