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Dhaka Tribune

The fight for freedom from extreme poverty

Update : 12 Nov 2014, 07:41 PM

It seems strange that so much time and intellectual effort is spent debating the nature of poverty. Surely poverty is very simple and stark, it simply means people who lack the basic necessities for life.  If this is the case then the solution is as simple, to fill this economic deficit either through earned income as a result of employment or self employment or, where people have insufficient earning capacity, through some form of direct income support. 

In essence this is indeed the approach taken by both the government and non-government poverty reduction schemes. Hence there are many projects that help poor households to establish micro enterprises to initiate or increase the recipients’ own income earning potential. These projects typically involve asset or cash transfers providing the minimal capital needed to set up a productive enterprise. For example, the shiree programme encompasses a diverse range of over 250 such income generating activities (IGA), from rickshaw pulling to crab fattening.

This “hard” transfer of cash or assets is often combined with “soft” interventions such as training, counselling and the mobilisation of mutual support groups, all intended to increase the likelihood of a successful and sustainable micro business venture. Other projects aim at helping members of poor families transition into formal employment through, for example, vocational training, provision of tools and linking with private sector employers. Variations include cash for work where transfers are associated with, usually limited duration, public employment schemes. 

Direct income enhancing transfers take various forms and have been given several names including social protection, safety nets, social security and humanitarian relief. All essentially involve a transfer from one section of the population (usually taxpayers) to another (the recipients).  Long term social protection benefits such as old age pensions or disability benefits are usually state financed and this will increasingly be the case for Bangladesh as economic development generates expanding tax revenue and further reduces dependency on donor funding.

Transfers may be one-off (eg flood relief) or recurring (eg widow’s allowance).  Whether a cash transfer is used for consumption purposes or to invest in a productive enterprise is the choice of the recipient.  In any case it is not always easy to distinguish consumption from investment, for example spending on improving basic diet, rebuilding a shelter or meeting health related outlays, while perhaps defined as consumption, may also be essential to the future productive capacity of the household.

Social protection transfers are not intended exclusively for the extreme poor, but it is difficult to deny that if anyone is receiving these benefits, it should first and foremost be the poorest and most needy members of society. Hence targeting of such benefits should start with the poorest and the greatest and most direct impact can be their contribution to extreme poverty reduction.

The experience of shiree is that a mixed mode of intervention may provide the best option for a sustained route out of extreme poverty at the household level.  Hence a mix of micro enterprise establishment through asset transfer, along with accessing social protection transfers where eligible and ideally eventual transition into formal employment for at least one household member is a winning combination. The good news is that this combination is eminently feasible for most extreme poor households.

The amount of resources needed to solve the problem is a moot point. There are several brilliant and experienced economists and policy planners in Bangladesh, some of whom have already endorsed the Manifesto for the Extreme Poor, who are capable of doing the necessary sums and providing robust cost estimates.

This article does not try to provide a detailed cost analysis. An estimate of $3bn is based on establishing six million micro productive enterprises at household level at $500 per household (including project implementation costs). This does not however include the cost of ensuring that all the extreme poor have access to public services, such as, education and health, or that of additional (in coverage and value) social protection transfers.  However, I doubt if any economist, donor or policy maker can make the case that, assuming continuing rapid economic growth, expanding tax revenues and ongoing donor commitment to poverty reduction, a policy objective of rapidly eradicating extreme poverty is ruled out on cost grounds alone. 

In other words, while total cost estimates may vary considerably depending on what is included in the equation and the underlying assumptions made, the range of possible outcomes are all eminently affordable through a combination of government, donor and private sector funding.

Given a strong policy commitment backed up by the application of sufficient resources and a planning and implementation regime that draws on and scales up already successful approaches, it will be possible to achieve the rapid eradication of extreme poverty from Bangladesh. Despite the severity of the multiple challenges facing the extreme poor described in part one, the outlook is essentially optimistic. 

However, even if the policy commitment is genuine and the means to achieve the objective are known, available and affordable, the optimistic scenario is by no means inevitable. 

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