“Moving Out of Low Poverty Trap: Investing at the Bottom of the Pyramid”

A. Q. M. Golam MawlaGeneral Manager, PKSF

Dhaka, Bangladesh29 October 2014

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Extreme Poverty (EP) in Bangladesh

Poverty line 26%

Very poor program (12.4%)

Mainstream microfinance (540)

Near poor

15 % above PL

26 % below PL

Bottom 12.4%Bottom 12.4%

Schematic representation of different population segments for inclusive financing

food-energy intake: food-energy intake: <1,805 Kcal <1,805 Kcal per dayper day

per capita income: < TK. 1103 per month

Around 17.5 million extreme poor

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EP communities (in million)

• Dalit, & socially excluded communities (5.5)

• Tribal/ethnic communities (1.2)• Tea garden labourers (0.1- 0.3)• Beggars (0.7)• Domestic help (0.42)• Physically handicapped

population (10.6%, WHO)• Street children (tokai)• Economically insolvent elderly

people (appx 7% of total population)

• Extreme poor living in ‘haors’ (5.5)

• Extreme poor living in climate change vulnerable areas/Chars

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Insufficient economic opportunities

Poor access to public services & transfer

Vulnerable to external shocks Face health and nutrition

vulnerability Gender inequity and

marginalised group specific risks & vulnerabilities are also prominent

Extreme poverty is often chronic – it passes down from one generation to the next.

Occupational Distribution of extreme poor

Salient characteristicsSalient characteristics Not homogeneous Vulnerable, limited access to basic needs Mostly unskilled Highly dependent on day labor/wages (low-paid wage labor) Often excluded from the society

Occupational Distribution of 1 million

participants of PKSF’s UPP programme

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Need to Address the Multidimensional Aspects of Poverty

““A condition characterized by A condition characterized by severe deprivation of basic severe deprivation of basic human needshuman needs, , including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services.” – UN, 1995

Multidimensional Poverty Multidimensional Poverty Index (MPI) Index (MPI) of UNDPof UNDP measures not only income, but also basic needs and living standard

In Bangladesh, In Bangladesh, 58% 58% population are MPI poorpopulation are MPI poor

DimensionsDimensions + Indicators+ Indicators

Income Income + Food poverty line+ Food poverty line

Health Health + Daily protein intake+ Daily protein intake

+ Source of water for + Source of water for drinking, cooking, and daily work, etc.) drinking, cooking, and daily work, etc.)

Education Education + Years of schooling + Years of schooling

+ School attendance+ School attendance

Living Standard + Type of toilet Living Standard + Type of toilet + Living space + Living space

+ Electricity, etc.+ Electricity, etc.

Access to safety net Access to safety net

+ Cash/food for work+ Cash/food for work

+ Elderly benefits/ allowances, etc+ Elderly benefits/ allowances, etc

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Income poverty improved but Income poverty improved but nutritional status still remain nutritional status still remain

alarming!alarming!

• 41% of children under age 41% of children under age 5 are stunted, 5 are stunted,

• 16% are wasted, and 16% are wasted, and

• 36% are underweight36% are underweight

• 24% of w24% of women have BMI omen have BMI

<18.5<18.5

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Key drivers for EP eradication in BangladeshKey drivers for EP eradication in Bangladesh

• Remittance inflow Remittance inflow – Nearly 8 million migrant workers – Nearly 8 million migrant workers contributing $12.5 billion/yearcontributing $12.5 billion/year

• Microfinance Microfinance – As of 2011 , 34.36 million HHs availing US$ – As of 2011 , 34.36 million HHs availing US$ 5.83 billion as microcredit5.83 billion as microcredit

• Ready Made Garments (RMG) Ready Made Garments (RMG) – Employ over 4.5 million worker – Employ over 4.5 million worker mostly women and contribute 10.5% of GDPmostly women and contribute 10.5% of GDP

• Many fold increase in Many fold increase in Agricultural production Agricultural production – Employ nearly – Employ nearly 23 million people (nearly 48% of the employment)23 million people (nearly 48% of the employment)

• Expansion of Expansion of Social Safety Net Programme Social Safety Net Programme – Covering 9.04 – Covering 9.04 million man month at a cost US$ 3.25 billion million man month at a cost US$ 3.25 billion

• Human capacity development Human capacity development – Education, Vocational & Skill – Education, Vocational & Skill Training, Woman empowermentTraining, Woman empowerment

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Related Issues MDGs Achievements Reducing poverty Child mortality reduction (own UN award) Attaining gender equality Maternal Health improvement Universal primary education Post-2015 Sustainable Development Goals (SDGs)

Bangladesh resets its goal of ending extreme poverty by 2022

Targets to be middle income country (MIC) – reaching threshold per capita income of $1,130 – by 2021

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Productivity

Productivity is an average measure of the efficiency of production - i.e. output per unit of input. The production performance can be measured as an average or an absolute income.

Productivity is a crucial factor in production performance of firms/ economic activities. Increased productivity helps raising living standards because more real income improves people's ability to purchase (i.e. higher purchasing power). Productivity growth also helps businesses to be more profitable.

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Low Productivity TrapLow Productivity Trap

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Strategies for Removing the Trap

Expanding Opportunities (i.e. promoting sustainable livelihoods)

Facilitating Empowerment (enhancing access to services)

Ensuring Protection (both covariant and idiosyncratic - need to be addressed)

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A livelihood is sustainable when it can cope with and recover from stresses and shocks, maintain or enhance its capabilities or assets, while not undermining the natural resource base

Livelihood strategiesReduced reliance on day-labourCreating ‘livelihood ladders’Enhanced regular income from market-based IGAs

Livelihood outcomeo More income & increased well-beingo Reduced vulnerability & improved food securityo More sustainable use of NR base

Key questions: What will be transforming structures and process?What will be role of government/private sector/MFIs?

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Promoting Sustainable Livelihoods

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Technical know-how and demand-driven technical services Appropriate financial services Market linkage - quality assurance, knowledge on market

demand Potential areas of investmento Farming (Livestock)• Goat (Black Bengal, Boer, Jamnapari) or sheep

(Chotanagpur, Dmarah, Suffolk) farming : Buck center, Small breeding unit,

• Dairying (Fresian cross - at least 8 litter average milk)• Beef (Crossbred bull calves, Pabna/shahiwal) o Land leased based farming specially in char areao High value commercial vegetable gardeningo Off-farming- Small business, vocational trades, tailoring

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Removing constraints of the bottom poor – Demand Side Issues

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Homestead Gardening

Traditional vegetable garden

Traditional gardens are scattered, seasonal

Developed gardens produce vegetables throughout the year, produce more varieties of vegetables and are on fixed plot of land (bed system-Robi, Kharif-1, Kharif-2).

Developed vegetable garden

Investment

Total investment BDT 60-80/- per decimal/year.)

Net profit

BDT 530-650/- decimal year.Provide vegetable 42.89 gm/person/day.

Investment

Total investment BDT 180-200/- per decimal/year.)

Net profit

BDT 2,350-2,600/-/dec/year.Provide vegetable 364.56 gm/person/day.

Small Scale nursery

Investment/1decimal

Total investment (seed, tree/fruit sapling, fertilizer etc.) BDT 25,400/- per decimal/year.)

Income

Income BDT 53,600/- per decimal land/year.

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Native Shing/Magur, Tengra, Koi fish culture

Magure/Shing culture/2decimal pond

Investment

Total investment BDT 13,800/- per decimal pond/year (2 crops/year.)

Net profit

BDT 18,200./- per decimal/year (2 harvest/year)

Thai koi culture/2 decimal pond

Investment

Total investment BDT 5,500/- per decimal pond/year (2 crops/year.)

Net profit

BDT 8,500/- per decimal/year (2 crops/year)

Fish Culture (Crab fattening)

Traditional method crab fattening- encircle earthen area (Pond/Gher)-

Scientific method crab fattening -bamboo made floating case-

Investment

Total investment BDT 45,800/- per decimal pond (20 crops/year.)

Net profit

BDT 11,000/- per decimal pond (20 crops/year)

Investment

Total investment BDT 2,64,770/- from 30 cage (40m2 area) within 12 crops (12 days/crop)

Net profit

BDT 91,630/- from 30 cage (40m2 area) within 12 crops (12 days/crop)

Black Bengal Goat (BBG) rearingLIFT Intervention at WAVE a) Total HH (BBG rearer): 6382

b) Total goat: 44895

Traditionala) Non descriptive housingb) flock size: 1-2 doec) No attention to healthd) Small litter size (less than 2)e) High mortality

Investment (yearly)

Goat & treatment: 8000/--10000/-Income: Kid: 3500/-5500/-

Net profit: 2500/-3500/-(2 cycle)

Asset: Doe-5000/--6000/-

Improveda) Maccha rearingb) flock size: 4 doec) Regular vaccination & dewormingd) Good litter size (2 or more than 2)e) Low mortality

Investment (yearly)

Housing, Goat, feed & treatment: 25000/--30000/-

Income: Kid & doe- 42,000/--45000/-

Net profit: 15000/--18000/- (2 cycle/year)

Asset: Doe & house-17000/-19000/-

Buck Service Centre

Feature: a) Maccha housingb) flock size: 4 buckc) Regular vaccination & dewormingd) Natural Insemination once dailye) Ensure trabisf) Natural Insemination (NI)charge-100/-

Investment (yearly):Housing, Buck, feed & treatment:

50000/--55000/-

Income:

NI charge- 1,00,000/--1,10,000/-

Net profit:

45000/--50000/- (3500/--4000/- monthly)

Asset:

Buck & house-28,000/-30,000/-

Vermicompost Production (semi-commercial)

Feature:

a) Produced by the worm (cow dung, kitchen waste)

b) Improves soil organic matter (5%) content

c) Improves germination rate, crop’s growth & yield

Toward new technology

Investment (yearly):

1. Rings (10 no’s): 2500/-

2. Vermin (20000 no’s): 20000/-

3. Cow dung (12000kg): (self)

4. Sac, sieve, net: 1700/-

Total: 24,200/-

Income:

Vermicompost (4800kg) &

Vermin (80000 no’s): 1,37,600/-

Net profit:

113400/- (8 batch/year) i.e. or 9450/- monthly

PRIME Intervention

No. of farm established: 18045

(Small & semi-commercial)

Total investment: 42.8 million

Total Production: 14454 ton/year

Income: 173 million (except vermin)

Quail (layer) ProductionFeature:

a) Need Low Investment

b) Starts laying at six to seven weeks of age

c) Laying 280 to 295 eggs/year.

Investment: Cage, Quail, feed & other: 48,000/-

Income: Egg, Quail & other: 67,000/-

Net profit: 16,000/--18,000/- (one year)

Asset: cage & equipment- 5,000/-

Feature:a) Short gestation period (30-32 days)b) Give birth 6-8 time per yearc) Addressing the tribe

Investment: Cage, rabbit, feed & other: 23,000/-

Income: Rabbit: 31,500/-

Net return: 7000/--8000/- (7 kitting/year)

Asset: Rabbit, cage & equipment- 8,000/-

Basket makingMat making

Investment

Total investment 20,400.00 BDT (training, equipments, cloth etc.)

Income

Income 2,600.00-3,200.00 BDT/month

Investment

Total investment 5,400.00 BDT (training, materials etc.)

Income

Monthly income 3,500.00-5,500.00 BDT/month

Investment

Total investment 3,000.00 BDT (Training, cloth, thread etc)

Income

Monthly income 2,000.00-2,500.00 BDT (4 cap/month)

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Tailoring Stitching

Investment

Total investment 25,000.00 BDT (training-6months, machine, cloth, etc.)

Income

Monthly income 2,500.00-3,500.00 BDT

Investment

Total investment 8,000.00 BDT (training)

Income

Monthly income 2,500.00-3,000.00 BDT

Mobile Servicing Hosiery

Investment

Total investment 8,140.00 BDT (training)

Income

Monthly income 6,000.00-10,000.00 BDT

Investment

Total investment 70,600.00 BDT (training, machine, equipments, computer etc.)

Income

Monthly income 10,000.00-15,000.00 BDT

Electrical Mechanic

Investment

Total investment 30,500/-BDT (training, equipments etc.)

Income

Monthly income 6,000.00-8000.00 BDT

Investment

Total investment 22,600.00 BDT (training)

income

Monthly income 6,000.00-10,000.00 BDT

Education ProgramENRICH

• Total Centres- 3239

• Total Students- 86,745

• Each SK has on the average 26 students per centre.

• 53% of students are girls.

• Low cost: Cost/Centre/Year-Tk. 26,250/-• Ultra-poor and poor students are achieved good results in their school exam.•% of dropped-out: 7%• High appreciation from the society

Living remains no more a daily struggle Attaining qualitative economic security. It’s a result of many

small qualitative changes in livelihoods New livelihood strategies have to contribute in increasing the

purchasing power of the households Considering heterogeneity, need further stratification within the

extreme poor Expanding economic opportunities to create ‘livelihood ladders’ Promoting high earning livelihood strategy Identifying and exploiting new income generating activities and

making markets work for the extreme poor Growth of homestead economy as a source of cash income Acquiring new skill to enhance the scale of operation

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Moving Forward

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• Mind-set of development agencies yet to be re-oriented toward addressing the bottom poor. Besides, they are not technically and financially equipped to address the bottom poor issues. Furthermore, they do not have sufficient trained staff to handle the issues of bottom poor.

• Absence of targeted, long-term, flexible programme for the bottom-poor

• Both government and non-government agencies are shying away from the poor of vulnerable disaster prone areas.

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Removing constraints of the bottom poor – Supply Side Issues

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Conclusion PKSF attempts to expand growth-oriented market-

based activities for the poorest

Multidimensional aspect of poverty must be addressed

Making sufficient investment for enhancing human and social capital

A more focused and programmatic approach has to be undertaken

Expanding employment opportunities in both formal and informal sector is crucial

Identify and expand market linkages for the poor

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ThanksThanks

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