Poverty Reduction in Bangladesh: Recent Progress

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Poverty Reduction in Bangladesh: Recent Progress

Summary: The Constitution of Bangladesh provides clear directives for formulating pro-people development strategies and goals. Bangladesh’s Constitutional guidelines are rooted in a framework aimed at raising the quality of life through a balanced and equitable growth. To fulfil the fundamental commitment, in recent times, Bangladesh is undertaking a number of planned strategies to eradicate poverty and extreme poverty from the country. For lifting poor section of the society up, Bangladesh is now enlarging the social protection strategies which could impact on poverty reduction through a series of direct and indirect channels. Bangladesh has laid reasonable foundations for building a comprehensive social protection strategy and has set a vision to eradicate extreme poverty from the country by 2021.

Bangladesh, home to a huge population of 14.23 crore (BBS, 2010), cannot escape the fact of severity of poverty. Poverty alleviation has, therefore, been high on its development agenda as is evidenced in all plan documents. Poverty is the single most important socio-economic policy challenge for Bangladesh. Bangladesh has been struggling for a long time to reduce the incidence of poverty and to improve the living standards of its millions of impoverished citizens. In recent years, Bangladesh has made significant progress in reducing poverty. This decline of poverty in Bangladesh is by and large attributable to the relentless engagement in poverty reduction interventions. The Government has laid special emphasis on poverty alleviation and has pledged to eradicate poverty through planned economic development. The present Government aims at reducing poverty rate at 22 and 15 by 2015 and 2021 respectively. Besides this, the Government is determined to build sustainable social safety net for the hard core poor.

Poverty Reduction: Recent Achievement

For poverty and extreme poverty reduction, in recent years, Bangladesh is being tagged globally as ‘the land of impossible attainments’ . The country has already achieved the targets meant for a hunger and poverty-free society under the Millennium Development Goals (MDGs). The success in poverty reduction has been well-acclaimed by the international community. When the grand alliance Government took office in 2009, around 5 crore (50 million) people of the country were poor, of which 2 crore 88 lakh (28.8 million) were in the clutch of extreme poverty. During the previous term of present government, though population growth rate was 1.16 percent on an average, the number of poor and extreme poor came down to around 3 crore 85 lakh (38.05 million) and 1 crore 57 lakh (15.07 million) respectively (Source: Ministry of Finance). Many of the extreme poor have crossed poverty line over the last 22 years. It is also worth mentioning that 45 percent of those extreme poor were pulled out of poverty within the last 5 years.

Figure1: Headcount Poverty Trends in Bangladesh, Source: HIESs of Bangladesh Bureau of Statistics

Target Assumptions Regarding Poverty Alleviation

The Government has set the target to bring down poverty to 13.5 percent by 2021. In the time of proposing budget for the current fiscal year (FY 2014-2015), scrutinizing the progress rate, they have drawn an assumption that poverty will be reduced to 10.2 percent by 2021. They further believe that, extreme poverty will be totally eliminated from this country by 2018. To attain the target the budget proposal contains various programmes worth Tk. 1,500 crore to eradicate extreme poverty.

Social Safety Net Programmes and Poverty Reduction Recent years have seen a perceptible increase in interest in social safety nets within developing countries including Bangladesh. Historically, public safety net efforts in Bangladesh have clustered around the twin themes of food rations and post-disaster relief. The third cluster has been informal safety nets at family and community levels to address issues of demographic and social shocks. There has also been pension scheme for state employees. In recent years, however, safety nets have transcended these historical moorings and have graduated to a mainstream social and developmental concern.

The Household Income and Expenditure Survey (HIES) 2010 reveals that 24.57 percent families of the country have been brought under the coverage of social safety net programme. In this coverage, the share of beneficiary families in the rural area is 30.12 percent.

In order to reduce poverty the areas of spending have been grouped into two services i.e. direct services, and indirect services. It is designed in such a way to generate a better focus in terms of priority on programs/spending which would benefit the poor best (See Annex 1 to know further about direct and indirect services).

Poverty Reduction Policy and Strategy Bangladesh has laid special emphasis to make safety net programmes more target oriented with a view to accelerating the poverty eradication process. The country is now on verge of finalizing the ‘National Social Protection Strategy’ (NSPS). At the same time, steps have been taken to prepare a list of hard-core poor and a ‘National Population Register’ for proper identification of beneficiaries of social safety net programmes. Currently the Government of Bangladesh following four broad principles to formulate various social safety net programmes:
• Enhancing capacity of the ultra-poor to face poverty by providing them with special allowances
• Creating employment and self –employment opportunities for the hardcore poor through micro-credit operations
• Ensuring food security for the hardcore poor by providing food assistance free of cost or at a nominal cost
• Creating capacity of the hardcore poor to deal with poverty by providing them with education, training and healthcare services.

Combating Poverty and Vulnerability in Bangladesh through Social protection
The diverse underlying causes of poverty in Bangladesh include vulnerability, social exclusion, and lack of assets and income opportunity. Risks and vulnerability are mainstream problems in the lives of the average Bangladeshi and are recognized as such by governments, individuals and communities.

Table 1: Budgetary expenditure on poverty reduction, source: website of the Ministry of Finance

Social Safety Net Programmes (SSNPs) in Bangladesh address basic needs of the people namely food, shelter, education and health. The prime programs covered under SSNPs are: Food for Works (FFW), Vulnerable Group Development (VGD), Vulnerable Group Feeding (VGF), old-age allowances, allowances for retarded people, allowances for widow and distressed women, grants for orphanages. There are also micro-credit programmes, allowances for freedom fighters and so on. Distressed people particularly women, children and disabled persons have been given priority under Social Safety Net. The SSNPs have been broadly categorized into two: Social Protection and Social Empowerment. They are implemented through both non-development budget and development budget. Social protection encompasses: cash transfer allowances; cash transfer (special), food security, new funds for programs. Social empowerment includes: stipends, housing and rehabilitation, micro-credit, miscellaneous funds, development programs.

In addition to that, for better combating poverty, the budgetary allocations for the SSNPs have shown an increasing trend, the percentage shares of SSNPs in the national budget and GDP have been declining since 2010-11(See: Table 1 and Figure 1).

The Government of Bangladesh maintains a variety of social safety net programmes designed to address mainly transient food insecurity stemming from shocks. Some of the most prominent Government of Bangladesh safety net programmes include Vulnerable Group Feeding (VGF), Open Market Sales (OMS), Cash for Work (CFW), Food for Work (FFW) Vulnerable Group Development (VGD), Gratuitous Relief (GR) and recently the 100 days employment guarantee scheme. World Food Programme (WFP) works with UNICEF and FAO to implement the nutrition intervention activities through a coordinated UN approach.

Figure2: Allocation for SSNPs as % of total national budget and GDP, Source: Budget in Brief, Finance Division, Ministry of Finance, Government of Bangladesh

Income Distribution and Inequality
There is considerable concern in Bangladesh about the growing income inequality. Results show that the distribution of income is much more unequal than the distribution of consumption.
The growing income inequality is of major concern to the Government. Though not so much, there is a inclination towards addressing the income inequality problem through a range of measures including creating better access to high productivity, income generating jobs; improving farm productivity and incomes; sharpening the focus on equity aspects of public spending on education, health, family planning; nutrition and water supply; reducing the regional disparity of growth; and improving the access of the poor to means of production (fertilizer, seeds, water, electricity and rural roads); and by improving the access of the poor to institutional finance.

Improving voice and access to information
The poor are often excluded from markets in remote areas, undermining their economic activities. Increasing information and voice can address exclusion at household, community and national level. Realizing the fact the Government of Bangladesh along with its development partners are undertaking programmes to remove the information access barriers. Establishing UISC (Union Information and Service Center), DESCs (District e-Service Centers), developing market enterprise programmes to improve access for the products of individuals and collectives to local and national markets are some noteworthy undertakings.

Table 2: The Major Type of Safety Net Programs in Bangladesh, Source: Raihan, 2013

Social protection and poverty reduction
Recent years have seen a perceptible increase in interest in social safety nets within developing countries including Bangladesh. Historically, public safety net efforts in Bangladesh have clustered around the twin themes of food rations and post-disaster relief. The third cluster has been informal safety nets at family and community levels to address issues of demographic and social shocks. There has also been pension scheme for state employees. In recent years, however, safety nets have transcended these historical moorings and have graduated to a mainstream social and developmental concern.

Limitation and Challenges
Though SSNPs have played a role in mitigating poverty, their coverage remains limited given the magnitude of extreme poverty that exists in the country. Furthermore, SNPs cover mainly the rural poor, whereas the nature of urban poverty is more severe than rural poverty in certain respects.
Current social safety-nets also lack coverage of specific socially excluded and marginalised groups. Some outcast groups in Bangladesh like cobblers, sweepers and fishermen are living in extreme poverty for years together. Tea plantation workers are another group found to live for years in extreme poverty. In Bangladesh, farmers, particularly the small farmers, are exposed to large-scale vulnerability due to various natural uncertainties, price fluctuation and low price of output. This may be exacerbated by the globalization process. If prices suddenly fall due to large-scale imports, there are no means to protect these farmers. There is also a lack of understanding of the poverty implications arising from globalization-induced shocks and their gender dimensions for the garment sector.
Despite the successes of SSNP in Bangladesh, there have been causes of concern on several counts. There have been various administrative problems obstructing the smooth running of the programmes. Targeting has been off the mark in some of the programmes. In some cases, leakages have been more of a problem than targeting. Also in-kind transfers such as food may have depressed prices somewhat, and this could be a disincentive to small producers.
The nature of extreme poverty varies with variations in geography and agro-ecology. Separate safety net programmes are needed to alleviate poverty arising from area specific problems like river erosion, salinity and arsenic pollution. Geographic targeting taking these characteristics into account is still lacking.

Need of Soft Assets
Johannes Zutt, World Bank Country Director for Bangladesh said that “…against [all] the odds, Bangladesh lifted 16 million people out of poverty in the last 10 years and also reduced inequality; that is a rare and remarkable achievement. He also added, “Bangladesh now needs to help a growing population of young adults to obtain the skills and education to find productive work and to participate fully in Bangladesh’s social and political life.” He has rightly identified the need for soft assets like skill, knowledge and information to lift up extreme poor sections from their generational ghetto.

Annex 1: Direct Services and Indirect services
Direct Services (addressing income poverty):
According to the policy of Ministry of Finance of Bangladeshi Government, direct (targeted) services addressing income-poverty would include the social safety net programs, income and employment generating programs/projects targeted directly at the poor, i.e. the services that benefit the poor for the most part. Direct services are designed and targeted at the poor and, hence easy to identify and prioritize.

• Old-Age Allowance Scheme (OAAP)
• Allowance Scheme for Widowed and Distressed women
• Rural Maintenance Program (RMP)
• Rural Infrastructure Development Program (RIDP)
• Food/cash for works, Test Relief (TR), Gratuitous Relief (GR), Vulnerable Group
• Feeding (VGF), Vulnerable Group Development (VGD) programs for the hard core poor
• Food Security Enhancement Initiative (FSEI)
• Rural Social Service (RSS): micro-credit and training program
• Urban Social Service: small credit and training program
• Rural Mother Centre (RMC): micro credit and training program
• Programs for Acid Burnt Women and the Physically Handicapped
• Funds to assist victims of natural disasters
• Honorarium scheme for insolvent freedom fighters
• Funds for retraining/reemployment of voluntarily retired or retrenched workers
• Funds for programs to generate employment for people in extreme poverty
• Salaries and benefits paid out to Grade IV employees
• All micro-credit programs
• Spending on programs to generate employment for unemployed youths
• All programs/activities providing cash assistance, housing for the homeless, etc.
• All programs/activities targeted at poor women and children

Direct Services (addressing human poverty)
• Primary Education Stipend Program (PESP)
• Female Secondary Stipend: i) Female School Stipend Project (FSSP); ii) Female
• Secondary School Assistance Project (FSSAP); iii) Secondary School Development Project (SSDP); and iv) Female Secondary School Education Stipend Project (FSSESP)
• Targeted Social Investment Spending
• Programs promoting primary and mass formal/informal education
• Programs promoting vocational/technical training/education
• Spending for sanitation and safe water supply including arsenic mitigation

Indirect Services (growth–oriented)
Services will include spending on overall infrastructure development including roads/highways, electrification, modern agriculture etc. These services are not directly pro-poor in appearance but, rather pro-growth in nature.
• Building on roads/highways/bridges/structures for public use, including link roads
• Allocation to local governments for development programs
• Construction/expansion of building facilities for schools
• Developing/building/maintenance of rural infrastructure
• Spending on rail roads/bridges/culverts
• Flood rehabilitation programs
• Development of rural/cottage industries
• All agricultural development expenditures including in agro-forestry, flood protection, high-yield varieties of food grain, char development and horticulture expansion programs, etc.
• Allocations as development assistance to Upazilas, and Zila-Parishads
• Construction/repair/rehabilitation of river ports/terminals/ferry ghats
• Development of ICT infrastructure
• Construction/expansion of building facilities for schools
• Construction and repair of water and sanitation facilities, etc.

Indirect Services (addressing human poverty)
• Spending on construction, repair/renovation of primary/secondary schools
• Flood rehabilitation programs
• Programs to combat not-communicable diseases
• Programs to enhance administrative/institutional efficiency and capacity
• Allocations as development assistance to Upazilas, and Zila Parishads
• Spending on disease control activities

Resources Used
– Budget Speech of Finance Minister, 2014-15
– Official Website of Ministry of Finance
– Holmes et.al, 2008, Extreme poverty in Bangladesh, Project briefing DFID
– Rahman & Choudhury, 2012, Social Safety Nets in Bangladesh, PPRC-UNDP
– Raihan Selim, 2013, Social Protection for Inclusive Growth: The Case of Bangladesh
– The Chronic Poverty Report 2014-2015, CPAN

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