What Works for the Extreme Poor in Bangladesh?

Roland Hodson and Azim Manji outline a way out for the poor

Who are the extreme poor?
Many terms have been used in Bangladesh and the rest of the world to draw distinctions between varying degrees of poverty. Terms like "absolute poor," "poorest of the poor" and "ultra poor" are frequently bandied around, but often without clear definitions. Comparisons between countries can be difficult but attempts are made by using purchasing price conversion ratios to try to establish a common basis. Simply put, in the context of Bangladesh, the extreme poor are defined to be that segment of the population which comprise the bottom 10 percent of the economic ladder.

In rural areas, the extreme poor live on less than Tk. 22 per person per day. This is difficult to measure or understand at the field level, which is why so many organisations use other means of identification. Most of the measures used to determine who is (and who is not) extremely poor rely on qualitative indicators such as households with limited or no assets (land, livestock and shelter), having no secure employment opportunities, with low social or political capital, without the ability to withstand or recover from setbacks and with little or no access to health-care, education and other public services.

The distinction between the non-poor, moderate poor and extreme poor has recently been mainstreamed to categorise the most vulnerable group, by the British Government Aid Programme through the Department for International Development (DFID). As used by DFID, the term extreme poor is defined as those who are at the bottom 10 percent in terms of household incomes. This definition ensures that while the actual Taka amounts for household income may change, the focus should be on the poorest 10 percent of households in the country.

While extreme poor households are present in all areas of the country, it is generally agreed that larger concentrations of extreme poverty exist in particular areas such as the hill tracts, north-western districts, coastal areas and haors. Within Bangladesh, the term 'monga prone' refers to areas where seasonal hunger and unemployment persist due to fluctuations in the demand for agricultural daily wage labour. The low lying, flood prone areas of the country, where risks to livelihoods from natural disasters are often highest, are understandably the types of areas where larger concentrations of extreme poor households exist. The Government of Bangladesh, DFID and other donors have begun to focus particular attention on these areas.

One of the key findings from mainstream poverty research is the existence of a substantial proportion of households who seem to remain poor over time. Not only do these households fail to move out of poverty permanently, but they also fail to get into the dominant group of households who fluctuate and move in and out of poverty. These are the poor whose experience of poverty can be considered extreme. We can think of three main characteristics of extreme poverty :

First of all, extreme poverty denotes the persistence of a state of poverty over extended periods of time in their lives. The Chronic Poverty Research Group (CPRG 2004) suggests that chronic poverty can be identified over a five year time frame but this is quite an arbitrary estimation. Work on chronic poverty in Bangladesh suggests thirteen years (Sen and Hulme 2004) as this represents "at least a generation," One needs to be cautious with these estimates. Neither, for example, captures the significance of the role of intergenerational influences on keeping people imprisoned in a state of extreme poverty.

Second, extreme poverty conveys a sense of depth and intensity. People may move in and out of poverty because of fluctuations (for example in income) that occur over short periods of time. In cases of extreme poverty however, people are more likely to experience profound deprivation in several aspects of their lives simultaneously. Minor changes in discrete areas or dimensions of their lives are unlikely to help them get out of poverty. This reinforces the need, already accepted in a lot of conventional poverty research, to move beyond income and consumption measures and take on a multi-dimensional view of poverty. In the context of Bangladesh, Sen (2003) argues that the ability to escape from poverty depends not only in creating different exit routes in addressing specific dimensions or capabilities but in also combining the exit routes.

Jashim Salam/Driknews

Third, those experiencing extreme poverty are more likely to be excluded from, or adversely incorporated (Wood 2003) into, the wider socio-political processes, structures and relationships that give rise to and reproduce the conditions of poverty (Green 2006). This highlights the problematic link that exists between individual and household capabilities or resources and wider society. In pursuit of livelihoods, everyone needs to negotiate a complex institutional landscape. For those in extreme poverty, the ability to drive those negotiations (capacity for social action) is far more restricted while the option of exiting is not feasible.

One example of a program focused on a particularly vulnerable geographic area is the Chars Livelihood Programme (CLP). The CLP, which is funded by DFID, endeavoured to focus on the extreme poor living on an island and attached chars in selected districts of the Jamuna region. Because of difficulties in reliably determining household income, the CLP chose to define the extreme poor as households who are landless and assetless.

Building on work done previously by BRAC, The CLP approach is distinctive in that it adopts a time-limited stipend approach in which productive assets are given to the household as a grant, rather than as a loan which has to be repaid. This program has been rated by DFID as highly successful and is on track to enable over 50,000 extreme poor households to exit the extreme poor bracket, at least in terms of household income.

The BRAC "Challenging the Frontiers of Poverty Reduction (CFPR)" program was the first in the country to systematically seek out the extreme poor through an extensive and sophisticated targeting process. The CFPR program also uses an asset transfer approach, giving grants and stipends to beneficiaries but at a lower level than the CLP, relying more on supplementary support to these households from other BRAC programs and from the richer elements in the communities where they live. This program, which is also supported by DFID and other donors such as CIDA and the Government of Bangladesh, has also been found to be successful and is being rolled out in further districts.

The Economic Empowerment of the Poorest (EEP) Challenge Fund, which is commonly known as the shiree Programme and is also funded by DFID, is working for poverty reduction among the extreme poor by empowering NGOs across the country to create their own vision and program design. Shiree as an organisation has recruited its own experience and expertise base to research and select proposals to be funded and to support, advise and supervise organisations receiving funds to ensure good accountability and transparency in the use of money. Shiree is also paying particular attention in collecting evidence and documenting impacts as part of its larger advocacy and lesson learning strategy.

Shiree has emphasised a number of highly cost-effective initiatives such as the use of de-worming tablets in children which, coupled with complementary efforts to prevent re-infection, is expected to reduce levels of malnutrition, especially in children. Most importantly, shiree is investing in a scientifically reliable way of monitoring impact through measures that can be replicated and scaled up by both the Government of Bangladesh and international donors in the long run. It may be that what the poor need most of all is reliable evidence that properly targeted and monitored assistance can actually reach and help extreme poor households.

The task of organisations such as the Chars Livelihoods Programme, the BRAC Challenging the Frontiers of Poverty Reduction initiative, UNDP's Urban Partnerships for Poverty Reduction or the shiree initiative is to respond to the needs of these groups of extreme poor. There is an acknowledgement that whilst significant gains have been made by Bangladesh to decrease the overall number of people living in poverty, the gulf between the non-poor and the poorest has actually increased. Vulnerabilities due to climate change, income inequalities and food insecurities have actually made the poorest of the poor much worse off, despite overall levels of economic growth.

All of the organisations noted above work in partnership with the government as part of the national commitment to eradicate extreme poverty and hunger (MDG 1) and indirectly help to improve maternal health (MDG 5) and ensure environmental sustainability (MDG 7). At the national macro level, these extreme-poor initiatives support the Bangladeshi Government's Poverty Reduction Strategy Papers(PRSP) which provides a comprehensive plan for initiating policy changes to reduce poverty across Bangladesh. With the formalisation of the five-year planning process, these principles will also be embedded within clear and specific targets to be achieved within each planning horizon.

In the face of such rising inequalities, where the bottom 10 percent are actually worse off than they were a decade ago, what can be done to address the growing disparity between the extreme poor, the moderate poor and the non-poor?

First of all, it is important to note that there is a difference between the extreme poor and the moderate poor. Whereas many moderate poor still suffer from income poverty, decreased social status and the inability to translate their rights into responses from statutory service providers, for the extreme poor these issues threaten their lives, not just their livelihoods. Without immediate and direct support, the extreme poor of Bangladesh cannot survive. The stark truth is that up to 10 million people will die if not provided with direct assistance.

Growth for some but not all
The history of efforts to reduce poverty in Bangladesh is a long one, dating back to the pre-independence era. There have been major successes that have changed the lives of countless people for the better. Although there have been various measures and definitions of "poverty" used over the last 50 years, no one disputes that the numbers of Bangladeshis living in poverty by any measure, has been significantly reduced.

The recent death of Norman Borlaug, the father of the agricultural research and extension work known as the "green revolution," has reminded many of what can be achieved when there is a clear vision and sustained hard work, backed by wise donors and governments.

From being a region expected to suffer regular famines, South Asia has transformed itself to be generally self-sufficient when it comes to food and, in good years, a net exporter of grain. All of this has been achieved through scientific seed development and accompanying irrigation improvements leading to significant increases in agricultural yields. And this was achieved during a period when the population of Bangladesh roughly doubled. Sadly, despite attempts to diversify diets, millions of children in South Asia still continue to be blighted by chronic malnutrition and the resulting mental and physical stunting that keeps people imprisoned in poverty. The causes and implications for this have been hotly debated and discussed, but there is general agreement that levels of malnutrition are no longer due to chronic national grain shortages, but a host of other factors, many of which are being addressed by initiatives such as the DFID/GoB sponsored shiree program.

Migration: Not the only solution
When the famous Canadian economist John Kenneth Galbraith wrote that international migration was one of the solutions to mass poverty, he was ridiculed by some development experts but, luckily, Galbraith lived long enough to see his prediction fulfilled.

But it isn't only international migration that is helping to mitigate poverty. Due to improved transportation links and major infrastructure projects like the Jamuna Bridge and the growth of jobs in urban areas and in richer districts, there has been an increase in short and long term geographic and economic migration of poor households. Some of this migration is a permanent movement from rural to urban areas -- a massive trend all over the world -- but much of it is short term movement for seasonal jobs in construction, agriculture or services (e.g. the numerous rickshaw pullers plying the streets of Dhaka). Although these jobs are not well paying, often take place under harsh working conditions and sometimes lead to family break-ups, they have been of benefit to many previously very poor people.

Bangladesh on the world stage
But it wasn't only people who migrated to find work in richer countries. Many jobs in richer countries migrated to poorer countries in search of lower wages. Major reforms in international trading regulations brought about by the establishment of the World Trade Organisation and some other previous reforms saw the migration of millions of jobs, principally to Asia. The textile and garment industries which brought relative prosperity to the poorer South American states and pockets within Europe earlier in the 20th century migrated to Asia in little more than a decade, creating millions of jobs in the region and starting a march towards economic growth. This growth has been most dramatic in places like Singapore and South Korea, which were very poor countries within living memory. Both these countries embarked on the road to industrialisation and growth with jobs in the garment industry. Today, both are rich countries with sophisticated and technology-driven economies and the garment industry has long since moved on to countries like Vietnam and Bangladesh, both of which are at the earlier stage of growth and development.

Basic education and health care: Precursors to long-term development
But while there has been tremendous progress in these sectors in many "emerging economies," some significant problems still remain. Although there have been reform efforts by both the Government of Bangladesh and donors, the quality and distribution of health and education services by the government remain one of the major impediments to further growth and development. Various political governments' efforts and large amounts of donor assistance over the years have made some progress (particularly in increasing the number of teachers and health workers) but have been largely unable to ensure that good quality basic services reach hundreds of thousands of (particularly rural) households.

The policies of the government and the responses by many donors have ensured that the bulk of the public expenditure on health and education has remained under government control. The existing bureaucratic systems have not been able to deliver good quality service, and there have been insufficient incentives to restructure the existing outdated and ineffective systems. The results have been tragic: poorer households, particularly those in traditionally excluded settlements because of their remote locations, have developed parallel systems often delivered by well intentioned NGOs instead of being served on a statutory basis by government mandated provision. Most households throughout the country spend some of their own money buying health and education services that, by rights, ought to be provided by government. Even the most affluent households in Dhaka rarely rely exclusively on government provision for health and education, which is a testament to the need for improvements in these essential sectors if Bangladesh is to follow in the footsteps of Singapore or Korea. Costs for self-managed health and education are all the more unbearable for the extreme poor households. For households who are unable to afford more than 2 meals per day on a regular basis, having to pay for health and education means that parents must chose between either educating or feeding their children. No parent should be compelled to make such a decision.

Shafiqul Islam Kajol/driknews

As noted, NGOs have helped to fill, at least partially, the void left by government in health and education. Despite the commendable work of organisations such as BRAC, GSK, Proshika, TMSS and others, there is no doubt that, if Bangladesh is to attain the status of Singapore and Korea in the future, it must reform its health and education sectors. This means that the government must guarantee (and, if necessary, subsidise) quality and affordable education and health-care to all its citizens Many NGOs have proven to communities throughout Bangladesh that it is possible to educate children and provide health care cost-effectively in even the most remote villages when the leadership and management structures that promote accountability are present. Many have been able to do this not through external financing, but through securing user fees, cross-subsidisation plans and approaches to cost recovery founded on the principle that the sick or ill who cannot afford to pay will not be turned away. Bangladesh is far from achieving universality in health-care and education, but these debates have not even gained traction here, partly because there is no acceptance that these basic services are state responsibilities. Clearly, if the state is to take up the responsibility of these two fundamental sectors, expectations from the citizenry must reinforce such provisions as a right rather than as a privilege.

To offset some of the costs associated with delivery of essential health, education and other necessary services (such as water, sanitation or housing), NGOs have had to seek new opportunities for funding. BRAC, because of its size, prestige and the clear vision of its leadership, has been able to remain an autonomous organisation carrying out its own policies and programs but lesser known NGOs are not as fortunate. Many smaller NGOs throughout the country have had to compromise their initial vision of what needs to be done and have been forced to transform themselves into project and program contractors and sub-contractors, subject to trends and whims of larger international NGOs or donors. These hundreds of NGOs have little choice but to work in whatever type of intervention happens to be in fashion at the time, whether it be gender, voice, governance, market development, HIV prevention or periodic work in flood and disaster relief. Many NGOs have also turned to being micro-credit providers as funding for such programs is available and the profits from the credit business can build the capital assets of the NGOs in terms of land, buildings and cash reserves. The grassroots transformation of Bangladesh, whereby citizen movements spearheaded by indigenous NGOs helped to shape the political landscape and heightened social consciousness from the 1970s onwards, has broadly failed to materialise, partially because of the reality of having to pay for salary, generator and flexiload costs.

In fact, micro-credit, to which many NGOs initially subscribed because they believed it would help their poorest members, has now become a reasonably worthwhile way for some organisations to ensure their existence. Bangladesh is famous throughout the world for pioneering the provision of credit to poor households. The group lending approach, pioneered and innovated by the Grameen Bank and copied by hundreds of other organisations, is now commonplace throughout most parts of the country. For many urban Bangladeshis, the provision of credit is synonymous with poverty alleviation. However, For many households in Bangladesh as well as in the UK and USA (as seen in the sub-prime crisis in the housing market), this has not proved to be the case. In fact many moderate poor (and even a staggering number of extreme-poor) households have multiple loans from several different micro-credit organisations and continue to borrow year after year without much change in their economic status.

Some of the loans are used to invest in productive enterprises, but much of the credit is used to meet consumption needs much as western households in richer countries use credit cards. Although the cost of these loans is relatively high due to the operational overheads (particularly for the huge number of NGO staff) necessary to manage the schemes, this financial service and the discipline of regular weekly savings or repayments is of benefit to households. These loans remain in demand although there may be some indication that a saturation point in the provision of these services may be in sight. What isn't certain is how much impact on long-term household income and poverty these loans provide. What is clear, even from the statements of leading credit providers themselves, is that they are not lending money to the very poorest households (the bottom 10%) as they know that these households are not creditworthy or "bankable." Even an NGO aiming, in principle, at achieving social improvement can understand that there is no sense in lending to a borrower unless there is a high probability of getting repaid. Therefore the extreme poor, who are often unable to repay even small loans, rarely benefit from micro-credit initiatives and are hence bypassed by NGOs working in their area.

It is a tragedy to realise that some of the very same NGOs who nearly a decade ago were looking to improve the lives and conditions of the most marginalised and vulnerable are now (after having identified them) overlooking these very same people because of pressures on ensuring their organisations remain financially solvent.

Government's role as a development catalyst
While there is much disagreement among development experts and observers about many aspects of poverty reduction, it is universally agreed that the leadership role of government in setting priorities and mobilising resources is vital. Encouraged by donors in recent years, particularly the World Bank, governments around the world have endeavoured to summarise their policies and plans into Poverty Reduction Strategy Papers (PRSPs). The overriding purpose of the process of creating these Poverty Reduction Strategy Papers was to ensure that the government of the day would have "ownership" of the policies. Whether the PRSP process has in fact lead to greater ownership and whether a greater sense of ownership will lead to better resource allocation, execution and service delivery isn't yet clear. But it remains the case that for most donors and observers, improvements in governance remains the central focus of efforts to achieve poverty reduction.

The challenges of the coming decade
Much progress has been made in bringing the extreme poor into focus and thereby making these invisible households more visible not only to government, but also to donors and the broader development community. But the coming decade will challenge the momentum and commitment of poverty reduction strategies. The recent worldwide financial crisis brought international growth to a temporary halt and with it a big reduction in the volume of international trade. Unless this is reversed, fewer jobs in Bangladesh and a reduction in remittances from Bangladeshis abroad will lower net levels of growth in Bangladesh, decrease formal sector employment and cause potential stagnation of the domestic economy. It may also result in a reduction in the growth of international migration opportunities and could lead to a real reduction in the availability of overseas jobs.

Salim Mahfuz/driknews

While Bangladesh is no longer as dependant on foreign aid remittances as in previous decades, such aid has still funded some of the most innovative poverty reduction work in South Asia. And while the government has been a valued partner in many of these initiatives, it has largely been slow to formally mainstream a number of valuable lessons gained from some of the most interesting and cost-effective poverty reduction schemes it has been instrumental in assisting. As many bilateral donors are under financial constraints at home, it may be that financial commitments for developing countries will come under pressure in the coming decade and this may mean a lessening of focus on the poor and the extreme poor. Through commitments made via the Paris Declaration, G20 countries are expected to offer more budget support to central government over direct technical assistance. But if Bangladesh is to responsibly use these resources, a first step will be to recognise that there is a quantum difference between the needs of the poor and the extreme poor and this difference merits an equally different approach: conventional poverty alleviation programmes with a focus on livelihoods, water or sanitation alone is unlikely to deliver longer-term measurable benefits to the lives of the extreme poor.

Climate change, erratic rainfall patterns and the frequency and severity of floods and storms is another major challenge that will need to be faced in the coming decade. Climate change will disproportionately affect the extreme poor households and they will need to be given special attention in any adaptation efforts. Not only because of their existence in environmentally vulnerable areas, but because they are least able to afford or implement adaptation responses and have lower levels of resilience, their needs must be considered as separate and distinct from others.

Another major threat to the poorest households is the acceleration of the mechanisation of agriculture in Bangladesh. Already, the widely available and generally affordable motorised tiller has largely replaced ploughing with oxen. This has led to a major reduction in the amount of labour needed to cultivate a unit of paddy. As the poorest households still rely primarily on unskilled agricultural labour work, this is seriously bad news for landless households. Admittedly, mechanisation of agriculture is necessary and has always proven to be a net benefit to a country; mitigating measures on how to better respond to this inevitability are needed. Without such a response, many extreme poor face the very real threat of a slow and undignified demise brought about by starvation and illness.

At the end of the tunnel
There is a recognition that development actors (NGOs, donors, academics, practitioners and the government) need to take a broad and varied approach to address extreme poverty (particularly at the household level) and put in place mechanisms to buffer the shocks that cause a return to poverty. There is a need to enact a range of initiatives which address the factors which cause extreme poverty to persist in the first place, namely policies and programs which:
-Allow households to control and manage changes in inequality and buffer their negative impacts (recognising that inequality inevitably rises during socio-economic transition);
-Direct livelihoods and humanitarian-based assistance to poor (and extreme-poor) and vulnerable people for greater livelihood security, especially during times of environmental (i.e. monsoon) or seasonal (i.e. monga) hardships;
-Offer support for very poor and marginalised individuals through better targeting and improved access to GoB safety net provisions, promoting social and economic reestablishment and reintegration into mainstream (formal and informal) systems;
-Protect and strengthen social capital in order to produce desirable developmental outcomes and greater social inclusion and participation, including demanding of rights;
-Strengthen policy reforms by actually budgeting for the needs and interests of the extreme poor and vulnerable groups at all levels of government;
-Promote and protect the human rights of women, children, cultural minorities and vulnerable groups, such as the elderly or those with disabilities;
-Strengthen the productive capacity of the extreme poor through applied understanding, education, and training and work towards improving productive capacities and diversifying the skills/talent base;
-Integrate social development and economic policies so as to complement each other and move simultaneously, not (as has been recently seen) at varying paces;
-Better focused social and welfare policies on increasing earning capacities and improving the asset base of the poor first, and address other non-income forms of poverty second .

Raj Anikat/driknews

In implementing and delivering the above, there are two broad approaches. On the one hand there are programmes that work individually with households and communities, trying to get people out of poverty household by household. The donors call this kind of approach transactional. The alternative approach is to work closely with the GoB to try to get better sets of policies adopted that will lead to widespread poverty reduction and promote more effective implementation of those policies. This approach is transforma-tional. When working on a household-by-household approach, donors and government can know exactly where their money went and what impact it has had; but that impact is generally limited to those specific households. In the wider transformational approach, major changes in the economy of the whole country are achieved, as witnessed with the Green Revolution. Eradicating extreme poverty will necessarily consist of a two-pronged approach that combines both the transactional and the transformational.

The views expressed are those of the author and in no way reflect the views of their employers.

Roland Hodson is the former Chief Executive of ActionAid International and has worked for UNDP, the World Bank and was also Team Leader of the Chars Livelihoods Programme.

Azim Manji has worked throughout the world in the development sector for over 20 years. His time in Bangladesh has been spent working with the World Bank, Asian Development Bank and others. He is currently the C.E.O. of the Ecomomic Empowerment of the Poorest Challenge Fund.