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The Reduction Of Poverty In Bangladesh Economics Essay

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Published: Mon, 5 Dec 2016

For the purpose of this essay, I will be using Bangladesh as my chosen developing country and explain how it has implemented economic objectives and other programs to reduce poverty. As a Less Economically Developed Country (LEDC), Bangladesh is not very financially stable and lacks competitiveness in international trade. This is combined with a very dense population and unpredictable weather forecasts which could include prolonged heat or even torrential rain leading to detrimental floods.

However, this has not prevented the countries leaders and philanthropists aspiring to tackle this challenge and reduce poverty which has been present there undoubtedly during its entire existence. From government support to anti-poverty programme innovators, Bangladesh has fought many years to remove such a universal problem and give its citizens a better standard of living.

Poverty is defined as those people who live below the critical threshold of income, consumption or access to goods under which they are declared poor. This level, usually declared by the World Bank is currently at $1.25 a day according to data from 2005 [1] and includes just over 20% of the world’s population, approximately 1.4 billion people. According to the Bangladesh Bureau of Statistics 2005, Bangladesh’s poverty level was at 40% which is approximately 57 million people. This figure however has fallen dramatically over the decades in which it was as high as 82.9% in 1973, just before they got their independence from then West Pakistan.

Statistical evidence is shown on a working paper by the ASARC who conduct economic researches in South Asia [2] . The figures begin in 1983 where national poverty is at 52.3%, in 1988 it is at 47.8%, in 1991 it is 49.7% and in 1995 it is up to 53.1%, 49.8% in 2000 and finally 40% in 2005. As you can see from this trend, the fall is not consistent year by year; in fact poverty had increased between 1991 and 1995. However the correlation of the regression is a negative one as the percentage of those poor has fallen in an ever-growing population. The impact of this has come from Bangladesh’s success at supporting the needy and innovating programmes to help the extremely poor alleviate from their current state. My essay will continue looking at the fundamental issues that helped Bangladesh progress aswell as a few more data to show how effective the plans have been.

I would firstly like to look at some of the reasons why Bangladesh suffers from a high poverty rate. Bangladesh is one of the biggest victims of natural disasters; one of the only few reasons you may see this country on the news. Throughout its history, it has endured many catastrophes which include major floods in 1999 and 2007, a destructive tornado in 1989 flooding three quarters of the country and tropical cyclones in 1970, 1991 and most recently 2007. In fact there are many pages on Wikipedia and other sites, dedicated to the list and details of its numerous unfortunate tragedies. Having to deal with its aftermath constantly, Bangladesh has failed to revitalise its infrastructure and the communities around it continuously leaving more and more families homeless.

A more insignificant reason is due to the Poverty Trap, which underlines the conflict of being unable to escape poverty because trying to increase your income would deter you from receiving state benefits in which case you are still not better off. The insignificance of this matter is due to the fact that as Bangladesh has an enormous number of unemployed and those below the poverty line, they would all qualify for benefits and the state would not have enough funds to sustain it. Trying to meet the requirements of the millions of needy hands would cripple the economy further. Without the sufficient funds, people are left to make their own living or find other means such as beg on the streets. However, minimal support is available; such as grants for health and educational facilities whereas subsidies are available in the agricultural sector. Although the needs of many individuals cannot be met, the government has strived to support those communities in bigger numbers by funding parts of it, thus efficiently distributing the funds it does have available; programmes which include ‘Food for Education’ which I will later talk about.

One of the most influential and successful ways poverty has been tackled in Bangladesh is through the introduction of Microfinance programs. Mohammed Yunus, a graduate of Chittagong University was one of the first to pioneer a scheme which would later win him the Nobel Prize. Microfinance entails a system of financial services offering loans, savings and other credit facilities to assist the poor who lack collateral to borrow against and would otherwise be turned away by the traditional mainstream banks. In 1976, he set about providing miniscule sums of money to large numbers of women who had it in their hearts that they could become small-time businesswomen and pay back the loans, but were being held back by hungry loan sharks. By funding their unfulfilled potential, Yunus continued to endeavour the needs of millions by creating the Grameen Bank and giving small loans.

His project was initially funded by himself, then started using client savings, then government funds and now has many donors. His scheme was clever in that he gave the loan to individuals in a group, so that money would be available to the next borrower based on the repayment of the current borrower. This helped develop community cohesion and more importantly trust amongst communities. On a broader scale however, Yunus’s work inspired and empowered millions of women in a country where men are always perceived as the dominant income earner of the household. His project clientele consists of approximately 97% females and he proclaims because of this, his repayment rate is above 95% and so everyone benefits.

Another way Bangladesh has aimed to reduce poverty is through its innovative NGO (Non Governmental Organisation) programs. BRAC (Bangladesh Rural Advancement Committee) is the world’s biggest NGO established in Bangladesh by Sir Fazle Hasan Abed, who aim to tackle poverty ‘from a holistic viewpoint, transitioning individuals from being aid recipients to becoming empowered citizens in control of their own destinies.’ Their holistic approach to fixing the countries poverty issues comes in the way of recognising and tackling the core issues that lie in health, education, human rights, legal services and more.

Similar to the Grameen Bank, it also adopted the Microfinance model in the 1970’s which now has a client portfolio of over 7 million people; hence established before Grameen aswell as bigger than them as a Microfinance Institution (MFI). BRAC funds 80% of its operations through their own commercial enterprises which trade as ‘Aarong’ selling handicraft goods and through other projects in the dairy and food sector. The overall work that they do involves employing teaches for their educational facilities, doctors for their health facilities, microfinance officers and many more, most of which are available to the doorsteps of the needy making them very accessible.

The impact of the Grameen Bank and BRAC has been life-changing for many. Due its presence, it has reached out to millions of hungry hands helping get shelter over their heads, food on their table and a gradual income. As the two hold a very distinguished role in the country amongst the many other microfinance projects, we can firmly believe that the fall in poverty on the national data has been effected by them. As specific data cannot be reached for the two programmes, their efforts have had a substantial impact on the country’s poverty decline.

We must also analyse whether funding education and health will reduce poverty. The Bangladesh government introduced a ‘Food for Education’ programme in 1993 on to the anti-poverty interventions list. This entitles poor household families that send their children to primary school to receive a free monthly ration of food grains which can be used to lower their food budget or even sold on to give them an income thus gradually increasing human capital and giving financial support. The intention of the programme significantly aims to ‘potentially empower future generations by educating today’s children… thereby expanding their future income-earning opportunities’.

Government support has also been available to assist health issues along with support from NGOs such as that from BRAC, one of which is the Shapla Health Programme funded by the UK’s Department for International Development. This 5-year reform programme consisted of pooled finance and technical assistance to many poor and vulnerable people with support also being given to the Bangladesh government rather than just work from an outside party. The assistance was given generally in hospitals to a senior level consisting mainly of Bangladeshis so that the skills gained would remain within the country increasing human capital and reaching their goals of strengthening hospital management aswell as human resource management; a few amongst many.

The reduction of poverty has brought many benefits to Bangladesh’s economy. Although debatable that poverty reduction has had a direct impact, the progress can be reflected on many economic indicators. Based on the ‘Bangladesh at a Glance’ report by the World Bank, there is a constant rise in annual GDP growth and likewise GDP per Capita. From 1986 to 1996 GDP growth is on average 4.2% and consistently keeps growing until 2006. The average annual growth from 2006 to 2010 is on average 6.3% slightly lower than previous years but nevertheless positive. A similar trend is present with the GDP per capita showing a slight fall in the average growth between 2006 and 2010. In effect, the overall national progress on Economic growth has allowed poverty statistics to fall. Many foreign firms look to invest in the cheap unskilled labour in a dense population with lower living standards. Although parts of the country have been much criticised for allowing child labour to occur, many families have benefitted from the income and are safely moving away from the extreme poverty division. This has proved a positive impact on Unemployment showing this number to decline. Another positive outcome from the poverty alleviation has meant infant mortality to fall. The CIA world fact book shows a fall in the number of child deaths in Bangladesh over the years.

Bangladesh is the recipient of many charity donations. Having been the victim of many natural disasters over the past 30 years, it has received large sums of charity from many countries and organisations. The impacts has made many worse off, sidetracking the aim of reducing poverty nationally however the assistance has to some extent helped as not everyone could always be reached. The aid only helps in the very short-term as they can recover for this period, however with the loss of possessions and property they remain stranded as worthless victims. Therefore over the long-term, the effects of the programs are somewhat washed away and can affect those that have been previously lifted from poverty back to how they were or perhaps in an even worse state.

Looking at the country from a holistic approach, it has made much more progress in terms of reducing poverty than most countries in the world, be that from international aid or its own self-progress. A lot of support has come from donations and aid due to its natural disasters as it is insufficient to support itself and a lot has come from innovative programmes. The trend of those in poverty however lies mainly in rural areas. From the ASARC paper, there is always a difference in urban to rural poverty with rural always being much higher. The obvious reasons are that jobs are more available here and living standards would be better, but the report shows other reasons to regional differences which include a higher likeliness of flooding, river erosion and harvesting disadvantages. As many of the programmes are based in rural areas, the poverty statistics do give a fair view on the impacts it has had on average in the country.

The future for Bangladesh seems a brighter one. As a part of the Millennium Development Goals (MDG) partnership which commits its members to promote the world’s main development challenges, Bangladesh has targeted to support poverty reduction, education, gender equality and many other issues by the year 2015. Current statistics from the 2005 MDG report shows that Bangladesh is well on track to meet its target of halving poverty to approximately 29% in 2015. At its base year in 1990, it was 56.6% and the report shows it’s currently at 40% and so swiftly on route.

Other prospects ahead for Bangladesh include the possibilities of more innovative projects. As practitioners are continuously making efforts to create new ways of overcoming poverty, Bangladesh can look forward to a wide range of solutions. With the success of current MFIs in terms of profitability and progress, there is the possibility many more will enter and continue to help even more. The work Bangladesh has done to continue supporting its citizens started early and is very widespread. The Comilla Model is a rural development project founded by Akther Hameed Khan, a cooperative pioneer who urged farmers in his village of Comilla to rapidly expand their production and sales. He applied a methodology which was based on the principle of ‘grassroots cooperative participation by the people’ so they could continue to produce whilst the land they used was regularly maintained and managed. This system allowed the villagers to construct a strategy to help their farming be done more efficiently and a long-term solution to their problems, benefitting many of the other villages who adopted it.

In conclusion I believe that although the distribution of poverty in Bangladesh is unequal, it still requires much progress as the poor remain poor and the income equality gap has yet to shorten. Bangladesh has become much more successful in terms of international trade due to its cheap labour allowing foreign firms to invest here. This has led to an overall rise in Economic growth raising the living standards for many and pulling families out from poverty. Bangladesh’s state of affairs has allowed it to be on the forefront of innovative solutions to eradicating poverty. Since the 1970’s, efficient programs on poverty eradication, health and educational facilities have been implemented many of which have been replicated around the world. There has been a constant decline in the number of poor over the last 25 years as statistical evidence has proven and I believe will continue doing so over many more years as Bangladesh is on the forefront of discovering solutions to one of the world’s biggest unresolved problems.

Word Count: 2,433


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