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BDS Current Issue Volume XL, September- December 2017, Number 3&4

Addressing the Structural Sources of Risk and Vulnerability for the Resource Poor


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Exposure to asymmetrical risk forces the poor into a precarious existence, leaving them permanently vulnerable to a variety of shocks which limit their capacity to save, constrain their livelihood options and bind them in a state of poverty or near poverty. This level of poverty is not measured by their location slightly above or below an arbitrarily constructed subsistence line, but by their degrees of vulnerability to a variety of risks originating in a market driven economic system. As a result, households may periodically move above the poverty line but could easily regress below it in the face of shocks. This paper sets out to explore the sources of asymmetrical risk, which leave some people more vulnerable than others, and to relate these asymmetries to the structurally derived variations in their socio-economic circumstances. Vulnerability that originates in ethnicity, gender and climate is also an important factor in exposure to asymmetrical risk. This paper limits its focus to a discussion of vulnerabilities originating in the inequitable economic opportunity structures, which circumscribe the lives of the poor. The paper initially examines the nature of such vulnerabilities and how this may serve to trap particular segments of the population in conditions of insecurity and poverty. It then goes on to relate these to the unjust socio-economic circumstances which create and perpetuate them. 

Is Microcredit a Debt Trap for the Poor? Sifting Reality from Myth

Author: S. R. OSMANI

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There appears to exist a deep-seated scepticism about microcredit in popular perception in Bangladesh. One manifestation of this scepticism is the oft-repeated allegation, based mainly on hearsay or anecdotes, that microcredit is leading hordes of borrowers into a “debt trap.” The present paper makes the first systematic attempt to empirically investigate the existence, nature and magnitude of debt trap among microcredit borrowers in Bangladesh. The investigation relies on a large-scale nationally representative rural household survey, covering the period 2007-2013. The paper begins by examining the prevalence of two inter-related practices – namely, “overlapping borrowing” and “borrowing to repay,” which are often taken as indicators of debt trap in popular discussion of the subject. The paper argues that although these practices could sometimes lead to a debt trap, neither of them necessarily does so, so that the magnitude of debt traps could not be deduced from the magnitude of these practices. After defining the criteria for identifying a debt trap, the paper finds that debt traps can be said to characterise at most 4.5 per cent of microcredit borrowers who engage in “borrowing to repay” and only about 1.4 per cent of all microcredit borrowers. Furthermore, even in these few cases, microcredit cannot generally be held responsible for their plight. Debt traps occur when extremely vulnerable households are faced with overwhelming shocks; and the role of microcredit here is to help people to cope better with such shocks rather than to cause them. 

Remittances and Poverty: A Comparison of Bangladesh and Pakistan, 2000–2016


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The aim of this paper is to examine the extent to which the decline in poverty in Bangladesh and Pakistan can be explained by the manifold increases in remittances in both countries and, more importantly, the mechanism through which this worked. The methodology used is not based on sophisticated economic modelling or growth accounting and while some regression analysis is undertaken, its basic approach is to identify the key economic factors that can explain this decline. The basic conclusions are two-fold. The first that there is strong evidence that remittances do not directly flow to either the poor or the poorest households and the main mechanism through which poverty was reduced in both countries is its indirect effect through generating jobs and incomes both overall but more so at the local or district level. Second, the evidence shows that Bangladesh was able to achieve sustained high economic growth in this period as a result of better macroeconomic management which remittances, by easing the foreign exchange constraint, made possible as compared to Pakistan which despite similar increases in remittances was unable to do so. In this case, the much better export performance of Bangladesh (mainly readymade garment) as compared to Pakistan was also an important factor besides remittances.

Structural Transformation and Absorption of Surplus Labour


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The process of economic growth and development involves transformation of the structure of economies that results in a reduction in the share of agriculture and a rise in the share of industries and services in total output as well as employment. Although manufacturing is expected to play the role of the engine of growth and absorption of surplus labour, the experience of developing countries shows that all countries have not been equally successful in this regard. That has led to the search for alternative pathways to the absorption of surplus labour. The present paper addresses this question with particular focus on selected countries of South Asia, viz. Bangladesh, India and Nepal. The analysis is more detailed on Bangladesh, and focuses on whether surplus labour has been exhausted and on how effective the alternative pathways can be. The empirical evidence presented in this paper indicates that it is difficult to utilise the available surplus labour fully and productively without industrialisation. Of course, there are differences in conditions and possibilities even within South Asia. But the limitations of the service sector as an engine of overall economic growth and as a means of absorbing surplus labour seem to be clear. For Bangladesh, data on real wage trends and the persistence of low quality employment show that despite labour market tightening, the economy of the country continues to exhibit signs of the existence of surplus labour.

Changes in the Situation of Agricultural Labourers in Bangladesh


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Agricultural labour as an occupation has gone through a change over the last few decades. Attached labourers’ dependence on the employer for basic food and housing has given way to more independent daily or piece rate contracts. This has been associated with a rise of real wages and earnings and thus a reduction of poverty incidence among this group. Nonetheless, this group still faces challenges in the form of seasonal variation of employment and wages and inadequate employment in the slack season. Therefore, the improvements may be sustained only if employment creation in both farm and non -  farm sectors is accelerated, so that the rising trend of real wages is not reversed, as has happened recently. 

Is there an Economics of Social Business?


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The idea of social business, as advocated by Nobel Peace laureate Muhammad Yunus, has drawn considerable attention from the global business community and many business schools around the world, but so far there has been little response from the mainstream economic profession. This paper explores the reasons for this apathy and the ways in which the concept of social business could be reconciled with economic theorising. It also argues that a rigid definition of social business may leave a grey area in between such businesses and the purely profit-motivated ones, particularly since the “social” element may exist in various shades in the running of a business. Although the paper primarily looks at the analytical aspects of the concept of social business, it does examine some of the risks and pitfalls involved in the actual implementation of such a business idea.

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