The Financial Express

Smart ways to fight poverty and provide economic opportunity

| Updated: October 21, 2017 19:34:57

Smart ways to fight poverty and provide economic opportunity

Bangladesh has made spectacular progress over the recent years. The country has halved poverty and the economy has grown by about 6.0 per cent a year. But many challenges continue to frustrate its development efforts. According to the World Bank, one-third of children under age five are underweight, and two out of every five adults cannot read. A quarter of the population still lives in poverty. And other obstacles, from failing road infrastructure to limited electricity access, still plague many citizens.
Stakeholders from the government to international donors to everyday citizens want to make progress toward a better tomorrow. To do that, we must focus today on the solutions that will help the people of Bangladesh prosper most, and at the least cost.
The Bangladesh Priorities project aims to discover the most effective solutions for overcoming the development challenges still facing the nation. The project, a partnership between the Copenhagen Consensus Center and BRAC, has commissioned dozens of top economists from the country, region, and world to study which solutions can produce the greatest social, environmental, health, and economic benefits for each taka spent on development efforts.
POVERTY-FIGHTING GRADUATION PROGRAMMES: When it comes to fighting poverty and promoting economic opportunities, new research illuminates possibilities through three strategies. Stakeholders could look toward so-called "graduation" programmes to alleviate extreme poverty, provide stipends for farmers to temporarily migrate to cities for work during the lean season, or focus on streamlining opportunities to migrate overseas. The strategies differ not only in their respective approaches, but also in their potential payoffs.
Twenty million Bangladeshis still live in conditions considered to be ultra poor, even though the rate of extreme poverty has been cut from 34 per cent to just 13 per cent over the past 15 years. Just-published research from economists Munshi Sulaiman of BRAC International and Farzana Misha of Erasmus University Rotterdam examines ways to tackle the extreme poverty that remains in the country.
The most promising strategy is "graduation." Participants in these programmes first receive a small gift of cash or food, which eases the stress of daily survival and allows them to start saving. After that, they receive an asset, perhaps a cow or a goat, along with basic financial education. Many programmes also provide healthcare support so that beneficiaries will not be forced to sell assets in the event of an emergency. Finally, participants get a confidence boost through social training-an important but often overlooked factor for fighting poverty.
The analysis shows that the cost of such a programme would be approximately Tk 23,400 per household. But the benefits would be quite large: Graduation programmes would increase recipients' incomes by at least one-third. Much of the gains come from beneficiaries shifting occupations, progressing out of casual day labour and into self-employment. And the researchers found evidence that the positive effects are long lasting and can help participants pull themselves out of poverty for good. The economists estimate that when you aggregate all these benefits, they equal roughly Tk 51,000, meaning that each taka spent on graduation programmes produces about two takas of benefits.
The analysis also looks at other projects, including cash transfers and livelihood programmes, but these actually provide a taka or less in benefits for each taka spent. That is why graduations programmes are probably the best poverty alleviation programmes for Bangladesh: each taka of cost could do two takas of social good, allowing participants to save for the future and, ultimately, escape extreme poverty.
SEASONAL MIGRATION PROGRAMMES: But, of course, there are many demands for help and money, and only limited resources. That is why we need to look where each taka can do the most good. Mushfiq Mobarak, a Yale University economist, and Agha Ali Akram, a postdoctoral fellow with Evidence Action, researched one good way to help that would focus on the troubles of many rural people, particularly in the north, during the autumn lean season. This is the most difficult time of year, especially in Rangpur, where close to half of the 15.8 million residents live below the poverty line, many of them working as day labourers on neighbouring farms. But in September, while waiting for crops to mature in the fields, there is very little farm work to be done. Wages fall, and the price of rice also increases as food becomes scarce.
The low wages and high food prices particularly hurt pregnant women and young children. Many households are forced to miss meals and also decrease the quality of their diets, which can lead to poor physical and cognitive development for these vulnerable groups.
The researchers examine how helping people from rural areas migrate to work seasonally in urban centres can help families overcome the lean season. Urban centres do not have the seasonal downturns that farming villages do, so cities offer low-skilled employment during the lean season. This includes things like working on a construction site or pulling a rickshaw. But seasonal migration is costly and risky. Migrants don't only need to pay for the travel, they also have to take the risk that they fail to find a job and waste their money altogether.
The economists studied six years of research that randomly assigned various strategies across more than 100 communities. In the first set of villages, participant households received a stipend of about Tk 1,000 to pay for a round-trip bus ticket and a few meals to allow people to migrate. In other villages, households received information about seasonal work opportunities but no money. And still other villages were randomly chosen to be controls-they received no information or money.
Very few people migrated if they received information only. But the benefits that came from a simple stipend to purchase a bus ticket and a few meals for one family member to migrate during lean season were significant. The economists found that spending about Tk 2,700 per household in the project-which pays for the temporary migration and also covers other programme costs-gave each household significant benefits.
In the households who received the stipend and sent a family member to work in a city, daily caloric consumption increased 600 calories for every person. This is a crucial finding, because it's the difference between eating two or three meals a day. These families also spent more money on healthier food, like protein sources such as fish and lentils. For certain households, seasonal migration increased income by up to 86 per cent. The stipend programme also increased the likelihood that a household member would migrate-by 22 to 42 percentage points, depending on project details. If you add up the total positive effects, they equal Tk 10,900 in economic, health, and social benefits.
So summing up all the costs and all the benefits, the economists estimate that spending on seasonal migration programmes can provide social benefits of four takas for each taka spent.


IMPROVING OVERSEAS MIGRATION PROCESS: But researchers identified yet another way to help economic development, focusing on migrants of a different type: the roughly half a million people who leave Bangladesh each year to work overseas. Bangladesh Bank estimates that these migrants send the equivalent of 7.4 per cent of GDP (gross domestic product) back to family and friends. This amount totaled Tk 9.6 trillion (Tk 960,000 crore) from 2001-2015. But because the migration process is overly expensive and burdensome, Bangladesh actually receives fewer benefits than it could. The cost to migrate can equal three years of income for many people.


A big reason costs are so high is that many middlemen force lower-skilled migrant workers to pay exorbitant fees for visas and other expenses.


New research by Wasel Bin Shadat, lecturer of econometrics at the University of Manchester, and Kazi Mahmudur Rahman, assistant professor of development studies at the University of Liberal Arts Bangladesh, finds that formalising the migration process with existing union digital centres, or UDCs, holds great potential.
In 2013, after the Bangladesh government signed an agreement with Malaysia to formalise the migration process, nearly 1.4 million people registered online through UDCs. More than 4,500 UDCs already operate across the country, providing public and private services to millions of people. Adding migration services across all of them would be inexpensive and straightforward. Aspiring overseas migrants would get many services at a UDC migration desk, ranging from basic forms and visa processing to job information and to printing services.


The experts estimate that it would cost a total of Tk 785 million (Tk 7,850 lakh) to establish a migration desk at all Bangladesh's UDCs, plus an added Tk 203 million (Tk 2,030 lakh) per year in operating costs. But the benefits would be quite large. Services offered by UDCs would allow a conservative estimate of 50,000 people to migrate to Malaysia in the first year of operations, with up to 10,000 additional workers in subsequent years.


As a result, the cost for one person to migrate would fall to Tk 36,500- a savings of up to 83 per cent.


Each of these strategies-poverty-fighting graduation programmes, stipends for seasonal migration, and improvement of the overseas migration process-aim to unlock opportunities for Bangladesh in different ways.

Dr. Bjorn Lomborg is president of the Copenhagen Consensus Center, ranking the smartest solutions to the world's biggest problems by cost-benefit. He was ranked one of the world's 100 most influential people by Time Magazine.

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