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The Financial Express

Covid-19 tiggers impact on poverty


Covid-19 tiggers impact on poverty

The poverty impact of Covid-19 brought unprecedented demand and supply-side shocks on the socio-economic lives of Bangladesh's people. The Covid pandemic has significantly eroded the country's past rapid success, and it is happening worldwide, regardless of developed or developing countries whatsoever. According to the UNU-WIDER study in April 2020, with a 5.0 per cent contribution to per capita incomes, the world could witness a potential increase in the number of poor people by nearly 85 million living on 1.9 dollars per day relative to the figure in 201-- rising from 759 to 844 million. Of these 85 million, South Asia's share will be 45 million. In Bangladesh, significant shocks are emerging from the labour market through large scale job losses. As more than 85 per cent of the labour force work in the informal market, the job losses are mostly hidden. They have necessary implications for aggravating poverty in Bangladesh, both now and in the future. The remittance-receiving poor households in the rural areas have also become more vulnerable due to a sudden fall in remittance incomes. The likely rise in poverty has several implications. No doubt, our long-achieved success in poverty reduction since 1990 is under threat at present. Furthermore, many of poor people who had graduated from extreme poverty in the past and used to live around the poverty line before the pandemic may fall back into poverty or extreme poverty again. Besides, a large part of these ultra-poor people may face long-term deprivation. The aggravated poverty situation may persist for some time in the future, likely to make it difficult for Bangladesh to achieve the sustainable development goals (SDGs) by 2030.
At the outbreak of the Covid-19pandemic in March 2020, the whole country went under lockdown with the minimum movement of people other than those who were in emergency services. The death toll went up. It stuck the life suddenly like other parts of the globe. People saw a dismal situation as all hospitals were lacking severe patient care and all sectors' economic activities almost closed. At that time, so far, the quick policy response of the government covered several areas. A large part of the stimulus package is credit-based through the banking system at a subsidized interest rate and was offered to the RMG sector, agriculture, microfinance, and other affected areas. The social protection coverage had been expanded through food distribution and cash transfer programmes. The critical challenge, however, was to make accurate targeting and effective implementation. Our Prime Minister took quick measures with her prudent knowledge, experience, and foresight. The prime minister continuously held meetings with the Deputy Commissioners of different districts, took updated field-level information about the livelihood of the poor people, and gave instructions to take government supports to the targeted jobless people. Everyone did not know how to handle the situation while consciously, the infected family, once detected, was kept in isolation, having no such experience ever before. At that time, the role of administration was praiseworthy. They cordially helped people with utmost patience and sincerity. So Covid did not impact much in the economy as many expected it to be. Keeping the tolerance level of Covid infection rate and death case in close observation, the government opened up the economy from the lockdown situation gradually to resume economic activities maintaining health and social safety measures.
In this context, the NGO-MFIs played a vital role in handling the crisis, which had far-reaching impacts, especially on the poor and vulnerable communities across the country. NGOs carried out relief and rehabilitation programmes among the poor in combating the Covid-19 crisis. Also, many volunteer groups came forward to do the same. They also provided the poor people with hand sanitizer, masks alongside handwashing, and other health safety concerns raising the program. As the government instructed, NGOs suspended the collection of loan instalments. Microfinance borrowers were not put under pressure and on the list of defaulters by lingering the loan maturity period until June 2020. But it was confirmed that many impoverished people who were affected by the Covid-19 could not be reached due to inaccessibility in some areas of NGOs intervention. Following June, NGOs have begun both collection and disbursement of loan operations again. As the infection rate and deaths were constantly skewed down and the situation eased, the microfinance started to get its average pace again. The borrowers of microfinance, however, tried to get resilience. They spontaneously responded to loan operations paying off their previous loans for the sake of reviving their ongoing economic activities. Consequently, the loan collection got a sharp rise and hit the recovery rate of NGO-MFIs shortly, which fell drastically in early April 2020 due to countrywide lockdown.
Surprisingly, the second wave of Covid-19 broke out just one year later, in early April 2021.In response, the government went for crackdown on people's movement and announced a countrywide lockdown in April 2021. This timely step undertaken by our government has been, in fact, practical to keep both infections and deaths at the tolerable level yet. In contrast, our neighbour India is badly experiencing a massive infection rate and death toll after the second wave of Covid-19 has hit the country. Amid the government restrictions, this time RMGs sector remains open, and shopping malls run following government instructions. No impact is there similar to last year on the rural grassroots level microfinance activities so far. At the onset of the second wave of Covid-19, the microfinance operations came to a halt for a shorter period. But in a few days, it got back to its normal functions keeping flexibility in loan repayment with no undue pressure on borrowers. This time, any significant impacts are yet to notice in the rural sector's economy, including microfinance. So, it is not the time to draw an inference about the rural economy. But this time, the new surge of Covid has seemingly impacted urban and semi-urban areas. Pandemic has pushed the low and middle income people down the poverty line. As a result, the new poor have been added mainly from the informal urban service sector comprising small entrepreneurs and unemployed daily wage workers. A recent study of the South Asian Network on Economic Modelling (SANEM) has conducted a survey countrywide and assumed an estimated 42 per cent of people staying under the poverty line, which was 21.6 per cent before the pandemic in 2018. It is assumed that almost 24.5 million people have become new poor by this time, and it may further rise if the pandemic continues with its recent surge.
Covid-19 is undoubtedly an eye-opener for Bangladesh since it shows how internal and external shocks could affect the country's hard-earned success in poverty reduction over the past decades. What is needed is to emphasize developing the resilience and inherent capacity of the people to cope with Covid-19crises in view of the demand of time.

Md. Ziauddin Iqbal is Senior General Manager of PKSF
Email: [email protected]

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