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Talking poverty with Wahiduddin Mahmud

  • Published at 06:40 pm November 5th, 2013
Talking poverty with Wahiduddin Mahmud

When I met Wahid chacha last week, we chatted about social protection for the poorest. It’s not your usual topic of conversation during the noontime of a working day. Most of us would rather discuss which restaurant to visit for lunch than worry about the 25 million extremely poor people who may not eat lunch at all. But not Wahid chacha.

As one of the leading economists in our nation, it’s not surprising he can talk about social protection (and I suppose any other topic you throw before him) with clarity, precision and wisdom.  I admire that sort of collection of knowledge and tidiness of thought. Here I summarise some of his words for you.

He says: “It is the government’s responsibility to deal with the extreme poor.” Microcredit, he explains, was never meant to provide funds to cover the immediate needs of the extreme poor. The extreme poor exist in perpetual crisis conditions.

They are hardly able to plan for longer term livelihood strategies.  Microcredit is not meant to be used to meet the immediate subsistence needs but as capital to establish an income generating enterprise. 

Microcredit can do much more for the 60 million poor in Bangladesh than for the 25 million extreme poor.  “It is important to distinguish between the role of public safety nets in protecting the extremely poor and vulnerable households and the role of microcredit in helping those poor households who can put funds to productive use. We should recognise that these two groups have different needs that require different solutions.”

He says: “Furthermore, in the majority of cases, microfinance can provide only supplementary family income through small-scale self-employment activities. Only a small proportion of borrowers are found to be able to scale up their activities substantially beyond subsistence. Not all poor people can be entrepreneurs. People need to find work in paid employment. Social business can be a good framework. But, what is our government doing to create jobs? The key is to combine job-creating economic policies with household-level interventions to match economic opportunities with household capabilities.”   

He mentions that he knows about extreme poverty eradication programs Shiree and CLP, partnerships between GOB and UKAid, that are included in the government’s count of 81 safety net programs. These are the only two on the list that are promotive or transformative in nature rather than protective. 

He says, “Protective safety nets are necessary, for those incapable of earning even when given stimulus packages: the elderly and disabled; but these nets fall grossly short of meeting the need as they are not only insufficient but also tragically misappropriated.”

In fact, it is the inadequate coverage of public safety nets that create confusion about the appropriate roles and effectiveness of other poverty interventions like shiree.

Incidentally, from the May 2013 survey of 1 million extreme poor shiree beneficiaries across the country, 88% of them said they are aware of their entitlement to safety nets, yet only 10-12% are receiving some form of safety net facilities. 

I ask Wahid chacha if he thinks we can eradicate extreme poverty by 2021 (as the honourable prime minister has committed to do).

He says: “Yes. It is possible, at least arithmetically. To eliminate the poverty gap so that the extreme poor cross the threshold of the lower poverty line and become moderately poor would require less than 3% of our GDP. This would be enough to enable the poorest to climb out of extreme poverty.”

Unfortunately, it is difficult to redistribute out of existing income.  One can only hope to give the poor a better share out of the increase in income generated by economic growth. 

I think: Alright, let’s just skim the cream off the top? To break the intergenerational transfer of poverty, we don’t need too much money, just a good strategy and passionate execution along all levels of government. Nothing short of a miracle.  Do miracles happen, I ask him?

“Yes.  It happened in Korea and Malaysia,” he says.

For those who cannot earn a living, the elderly, disabled, chronically ill, a different strategy is needed: one of pure welfare, protection in the form of reasonable monthly safety nets and possibly rent-out-able assets if the person has a family structure to depend on. 

What sort of Bangladesh do we want? 

2021 is only 8 years away. If we are to achieve this goal and establish ourselves as global leaders in poverty reduction, we must start implement strong policies and practices this year. We look to our nation’s experts and leaders to make this a number one priority and we pray for a great Bangladesh, one that is fully inclusive and extreme-poverty-free by 2021.

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