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Are we less poor now?

Publication Date : 05-08-2012


Bangladesh prime minister, in a recent interview to BBC TV, asserted that in three and half years in power her government has reduced poverty in the country by 10 per cent. On the face of it, by any standards, this is a leap forward. One wonders at the pace she said she is going, by 2015 we should be able to meet one of the main UN Millennium Development Goals, that is to reduce poverty by half. Only 20 per cent of our population would remain poor.

Analysts and economists must be busy calculating the real rate of decline of poverty in the country during her watch. Are there any independent studies to back up this statement?

There is no doubt that Bangladesh economy has grown 5-6 per cent each year since 1996. Yet the country remains poor, overpopulated and inefficiently governed, with more than 45 per cent of the people still employed in the agriculture sector. Saying that 10 per cent of our 150 million people have come out of poverty means 15 million people have benefited from her economic policies.

But how do you define poverty in Bangladesh or, for that matter, anywhere in the world?

According to an estimate of Chronic Poverty Research Centre, a person may be below the poverty line if he/she has to survive with US$1.25 per day. Therefore, the number of people who came out of poverty in the past three and half years is quite large.

So what are the drivers behind this poverty reduction and do we have any indicators?

Past economic surveys have shown that geography has a significant and sizeable effect on poverty in the country. In a study by the World Bank, when households in Bangladesh locate close to big cities like Dhaka, there have been positive effects on income and household consumption. This is apparent when compared to those households which are located outside these geographic regions.

It has also been seen that there is a correlation between poverty and quality of housing. Those who live in houses with straw roofs are typically poor. Housing conditions seems to have dramatically improved with most houses now having roofs and walls of corrugated iron sheets.

Access to hygienic sanitation facilities is another indicator of reduced poverty. Till 2004, 39 per cent of the population had access to improved sanitation. This is now reported to be 53 per cent, close to the 2015 target of 60 per cent. Access to safe drinking water till 2004 was enjoyed by 74 per cent of the population. However, due to arsenic contamination, about 20 million people still remain exposed to levels of arsenic exceeding drinking water standards. So only 80 per cent of the population use safe drinking water sources.

Significant also is the increase of households with electricity connections and use of mobile phones. This percentage has increased to 49 per cent of the population for electricity connections and 62 per cent of the population for mobile phones.

In the rural areas, an important household asset is livestock. There has been a significant leap here, as existing owners have increased their livestock holdings and more households are owning livestock for the first time. Household demographics are again closely associated with poverty. It has been noticed that in the past, average number of children in a poor household was higher than in a non-poor household. This led to higher average dependency ratio for poor households. But this has changed markedly, with more poor households having less number of children than before.

An important aspect of poverty reduction in Bangladesh is education. More and more household heads in Bangladesh have education (at least up to Secondary level). Children, especially girls, are now going to schools and colleges and there are little or no impediments to their education. The literacy rate has increased to 53.5 per cent of the population. Foreign remittance is another major driver in poverty reduction. But there are regions where households receive more remittance, like in Chittagong and Sylhet, than households in Rajshahi, Khulna and Barisal. The disparity is clearly reflected in the geographic distribution of poverty in Bangladesh.

Access to microfinance is sometimes credited for reduction of poverty. Here the prime minister asserts that Grameen Bank has not been a critical player in poverty reduction. She claims that by charging 30-40 per cent interest on micro-loans, it has in one way been a negative influence on poverty reduction. This assertion is highly debatable. First, the interest rate quoted is not applied by Grameen across the board. A microcredit institution like Grameen has different rates of interest for micro-loans given for different purposes. Interest on a micro-loan for education would be different from the interest charged for house building or purchase of motor cycles. It would be quite unfair to lump different types of loans together and then quote the highest rate.

Again, it is not always the interest rate charged that is of critical importance. It is more to do with access to microcredit by the poor that acts as the change agent. In majority cases the poor have to depend on local moneylenders who impose excruciating interest rates and other conditions before such small loans are given. This must be understood and appreciated. Grameen Bank has made access to micro-loans easy. The government, through its umbrella microfinance agency, the PKSF, is replicating the system of Grameen elsewhere and giving millions of poor the same chance that Grameen did or is still doing. Today, under the watch of the prime minister, commercial banks are also coming forward to extend loans to the poor. A laudable step in this direction has been the possibility of the poor opening a bank account with just 10 taka ($0.1225).

However, extreme poverty in Bangladesh is still due to seasonal factors, land erosion due to scouring of river banks by our meandering rivers, as well as natural disasters. If we draw a poverty map of Bangladesh, we will see poverty still persisting along our rivers and in those areas affected annually by devastating floods or cyclones.

The prime minister may have added that much of the poverty in Bangladesh also stems from slow or inadequate application of some of her economic policies. Poor management at many levels, including corruption at the grass root level, has also kept thousands if not millions suffering from the ignominy of poverty.

So, while appreciating her bold assertion, we must remind the government that it still has a long way to go towards poverty alleviation. Pulling 10 per cent of our people out of the $1.25 poverty line in three and half years is commendable, but our struggle with poverty has just got serious and all encompassing.

As Nobel Laureate Professor Yunus had once said, we must end poverty and put it away in our museums for future generations to look at it only with awe. Let us therefore not be complacent at this early stage of this epoch making struggle. Our journey here must pick up pace.

The writer is a former ambassador and a commentator on contemporary issues.


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