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A national
strategy for economic growth and poverty reduction
Muhammad Yunus
Globalisation can
help us overcome poverty quickly, if we can prepare our poor to participate in
the globalised market. Most important thing is the participation. We must bring
IT to the poor, to participate in and take advantage of globalisation. If we
leave our poor at the mercy of the global forces without preparing them to ride
on the tidal waves of globalisation, they'll get drowned by the globalisation...Actions
to be taken to reduce poverty by half by 2015 are well-known. Just pick the
strategic ones and go for them with full force.
I am disappointed,
more so, hurt, by the way the strategy document has been prepared. I am hurt
because we may miss great national opportunity to organise ourselves for the
most important task ahead of the nation. But on the positive side, I am glad
that we have a document around which we can hang our thoughts leading to the
preparation of the real strategy document. Reading the document I felt that it
is not a strategy document, it is an academic document. It could be better
titled as: "All You Wanted to Know About Poverty". An executive in charge of
national poverty reduction will have very little use of this document in taking
decisions. Every ministry of the government can continue to do whatever they
have been doing before this document was prepared, still no one can point
accusing fingers at them by
saying that they are out of step with the Poverty Reduction Strategy. A strategy
document must be very clear regarding do's and don'ts, must's and mustn'ts ---
so that anybody can see who is out of step, if anybody gets out of step.
What would I have
done if I had to draw up this strategy paper? I would have started out by
suggesting the creation of a strong poverty monitoring outfit for continuous
monitoring of poverty upazila by upazila.
I would have warned
the government that if something cannot be monitored continuously, it cannot be
achieved within a timeframe, just like a multi-million dollar construction work
---- you can finish it on time only because you monitor everything, every day.
I would have
recommended that the government publicise the progress of the poverty reduction
in each upazila, listing them in order of merit, every six months. By doing that
government will create occasions for upazilas to celebrate their achievements,
express their disappointments (even anger) for their failure, and prepare
themselves to catch up with others. Government can encourage various enterprises
to announce awards, prizes, honours, for achieving various achievements by
upazilas, within each half yearly segment of the total time span.
Government can also
encourage the business enterprises, social organisations to give awards and
honours to persons, organisations, institutions for their special contribution
in achieving specific results. They may even announce competitions.
I'd have also
identified the programmes, organisations, institutions, ministries, agencies,
policies, even persons, who made negative contribution to poverty reduction
during the past 15 years. I'll grade them according to their negative
contribution.
The reason why I'd
have done this, is a very simple one. On the basis of this information, I'd
recommend that in the coming 15 years government provide all the support to
assist the recognised "heroes" of the past so that they can contribute more,
that Government inspire others to follow their path, help generate more
innovative ideas. If the "heroes" of the past have more ideas the government
should go out of the way to provide them every support to try out their new
ideas. Obviously, at the same time government should do everything in its
capacity to restrain the "villains"
of the past, and help them transform into themselves into "heroes" of the
future.
Poverty eradication
is a simple task: In its basic form poverty eradication is a very simple task.
We should never allow ourselves to be duped by the smart people to think that it
is a complicated thing. It is not. First thing to remember is that poverty is
not created by the poor people. It is created by the institutions and the policy
environment created by the designers and managers of those institutions. There
is nothing wrong with poor people. They can get out of poverty by themselves.
All they need are opportunities. That's what State must provide. They need
opportunities for earning income. That's all.
Wage Employment:
How does the State do it? Enhance the scope of wage employment. That's why
agriculture becomes so important in Bangladesh. The more dynamic this sector
becomes, the more wage opportunities are created for the poor. Of course,
agriculture alone cannot provide all the employment that is needed. The more we
rely exclusively on agriculture the more chances will be that agricultural wage
will be reduced to mere pittance, because of
over-supply of employment-seekers. That income will not be good enough for
overcoming poverty. That's why we also need employment away from agriculture.
Rural and urban industrial employment is the next option.
We'll have to
create environment for more investment, and expansion of the existing industrial
base. We need strong local government to create local investment opportunities.
(Strong local government is needed for another important reason. The lower the
tier of the local government, and the stronger it is, the greater is the
opportunity for the poor to participate actively in it to get things done in
their favour.
Another option is
overseas employment. Injection of income from remittances has played a vital
role in giving a boost to rural economy and poverty reduction. While we are busy
bragging about how remittances are helping economy in improving the foreign
exchange reserve, we have paid very little attention to mobilising these
remittances for investments within the locality or within the country. Most of
it is wasted away in hiking up the real estate value or extravagant expenses on
social occasions. While we must put all our attention to ensure high growth in
wage employment we must not forget that it is slow process.
Self-employment
through microcredit: Luckily for us we have opened up another option which is
almost limitless in scope --- that is self-employment. Microcredit is the
vehicle which creates it. It has many attractive features. Over the last
twenty-five years it has been studied by researchers in its every single aspect.
They come up with very positive findings with regard to the impact of
microcredit. They find steady movement of the borrowers from poverty to
non-poverty, improvement in housing, sanitation, nutrition, education, child
mortality, women empowerment etc.
At least 7 million
poor families in Bangladesh have access to microcredit. Around Tk 5000 crore is
disbursed each year as microcredit. In a country where conventional banking is
stuck with Tk 20,000 crore in overdue loans, microcredit sector has created a
financial service with near 100% repayment
rate. Bangladesh has created a microcredit wholesale fund, PKSF, which has set
the business standard for the world. PKSF has played a very strategic role in
Bangladesh, in expanding the access to microcredit. All the credit goes to the
Government of Bangladesh for creating this strategic institution. Now many
countries are emulating it.
Best news about
microcredit is that they are sustainable; they can cover their cost from their
own income. They do not need budgetary allocation to keep them afloat. Grameen
Bank alone lends out nearly Tk 2000 crore each year. It has stopped accepting
donor money since 1995. It has stopped borrowing money locally too. It generates
enough deposits to carry out its credit programme and pay back all the past
loans without ever falling behind in repayment even by a day. Currently 82 per
cent of its outstanding loans is financed from its deposits and own resources.
By the year-end this percentage will exceed 100%. During the next year, Grameen
Bank will enter into a phase where it will have more money in deposits, mostly
from its own borrowers, than outstanding loans, unless it expands its business.
Grameen Bank is owned by the borrowers. The borrowers come under life insurance
coverage, without paying any premium, by being a shareholder of the bank.
Their loans are covered under a insurance programme where the entire outstanding
loan amount is paid off by the insurance fund if the borrower dies. Grameen Bank
gives housing loans at 8 per cent simple interest. More than half a million
rural houses have been built with Grameen Bank loans. GB offers scholarships to
3700 selected students from Grameen families, each year, and loans (at 5 per
cent simple interest) to all students from Grameen families, at higher levels of
education.
Credit As a Human Right: Credit is so important in the lives of all people that
I have been arguing that credit should be accepted as a human right. Bangladesh
can take pride at what she has achieved in ensuring access to credit by the
poor. If government is supportive in providing policy-support, micro-credit can
ensure access to credit for the remaining poor families of Bangladesh. Credit
goes to the Government of Bangladesh for creating this bank for the poor by a
special legislation passed by the parliament. Now 19 years after is was created,
it needs some policy support from the government to resolve some important
institutional issues to make the bank more consistent with its objectives
(please see Appendix). The faster these issues can be resolved, better policy
environment can be created for Grameen Bank.
I bring out the case of Grameen Bank for another reason. It is about ownership.
One key recommendation I'll make as a strategy for poverty eradication is to
create exclusive institutions for the poor, with the ownership of the poor. Job
creation is good. Ownership creation is much better. That's where Grameen Bank
example comes in. This is a bank for the poor, owned by the poor, and finally,
today, it operates with their own money, it makes profit, it provides insurance
support to them, it provides financial incentives for education of their
children. We can and must build many institutions with exclusive or part
ownership of the poor, particularly poor women, and help the poor to have equity
participation in business enterprises, specially strategic business enterprises,
through mutual funds of the poor.
Agricultural Credit: Lessons learnt from microcredit can be applied with equal
success in providing agriculture credit, and providing credit to the people who
do not have access to credit from conventional banks. Social entrepreneurs can
be encouraged to come forward with their plans to give it a try. Farmer-owned
agricultural Bank, similar to Grameen Bank, can also be created.
Social entrepreneurs in Bangladesh have offered interesting examples of
social-objective-driven enterprises, such as, schools for the poor, information
technology for the poor, mutual fund for the poor, health insurance for the
poor, and so on. Government machinery has not been designed for such creativity.
Once the policy-makers accept this reality much of the uneasiness in the
relationship between non-profit sector and the government will end. Faster we
can move away from ridiculing the successes of the non-profit sector and start
admiring their work, provide inspiration and hold out challenges to them to do
more and remove the bureaucratic hurdles along their way, faster we can bring an
end to poverty in Bangladesh.
Microcredit network of Bangladesh gives Bangladesh a better chance of success in
its endeavour to end poverty. It may not have done quite a miracle so far, but
its contribution is significant. When the economy will pick up speed in moving
forward, the poor people will have better opportunity to show the real power of
microcredit in changing their lives.
Emergency of information technology is a fantastic news. If Bangladesh can open
up all its doors and windows to bring in the flood of information technology, it
can create a completely different story altogether. Synergy
between microcredit and information technology can really work wonders. To
emphasize this I have been insisting in the past that if we remove all official
barriers to information technology (IT) and provide policy support to develop
the IT infra-structure, Bangladesh can reduce poverty by half and double its per
capita income within ten years.
What must be done are: Open up telecommunication completely, privatise T&T, open
up international telecommunication gateway, open up VOIP, open up submarine
cable, give permission to operate internet nationwide without any fee for the
next ten years, put the intellectual properly right law into effect.
Faster growth rate is essential for faster reduction in poverty. There is no
other trick to it. We have to create right climate for bigger an bigger
investments. There are three investments climates that we should keep our eyes
fixed on ---- domestic, international, and regional. Domestic investment climate
depends heavily on international climate. International climate which is going
through a lull, will soon start picking up. But when it does, will it come our
way? We must prepare ourselves quickly to answer this question positively. If
our law and order situation continues to deteriorate, as it is doing now, we can
forget about foreign investment.
Corruption and violence have become order of the day. Nothing can work in an
environment of limitless corruption and deteriorating law and order. Even the
poor borrower of microcredit is not sure if her investment is safe. Restoring
law and order and bringing down corruption level at a level consistent with
atleast the SAARC countries --- is the first action to be taken to move in the
direction of poverty reduction. That is the poverty reduction strategy number
one.
Chittagong Port: Chittagong port is the noose which is tightening around our
neck. It is going to kill us, if we cannot get ourselves out of it. To find a
way out, I'd recommend creation of a company, under primarily private ownership,
to expand Chittagong port capacity several times. We should invite international
investment and expertise to run it. Give the port a special legal status by
creating a special zone, such as, "Export-Import Facilitating Zone" with its own
administrative structure to deal quickly and effectively with the problems of
the users of the facilities and the people who work there.
Open Up Borders: We need to open up borders with our neighbours. Our best future
lies in opening up to our neighbours. We must convince our neighbours that it is
also to their advantage to have free market arrangement with us. Our port
facilities and road network should be built keeping in mind to serve our
neighbours --- Eastern India, Nepal and Myanmar. This will be good for the
entire region. We can bring prosperity to ourselves faster only if we are
willing to share it with our neighbours. Poor must be Ready to Ride
Globalisation: Globalisation can help us overcome poverty quickly, if we can
prepare our poor to participate in the globalised market. Most important thing
is the participation. We must bring IT to the poor, to participate in and take
advantage of globalisation. If we leave our poor at the mercy of the global
forces without preparing them to ride on the tidal waves of globalisation,
they'll get drowned by the globalisation.
Actions to be taken to reduce poverty by half by 2015 are well-known. Just pick
the strategic ones and go for them with full force. Monitor them continuously.
Publicise the results, applaud the upazilas which are moving ahead, nudge the
ones falling behind. Most importantly --- give the citizens peace, personal
safety and security, and clean governance. We'll get there.
Professor Muhammad
Yunus is the Managing Director of Grameen Bank.
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