Wednesday, November 21, 2012

Muhammad Yunus and Bangladesh government battle over Grameen Bank


The 8.3 million women who form the bulk of the Nobel-winning microfinance bank's shareholders could be the losers



WHEN TASLIMA Begum, a housewife turned entrepreneur from the north of Bangladesh, accepted the Nobel peace prize in Oslo in December 2006, it was a proud moment for Bangladeshi women. The Nobel citation said the prize was awarded to Muhammad Yunus and Grameen Bank "for their efforts to create economic and social development from below".

Begum, who had used her first 1,500 taka (£12) microloan to buy a goat in 1992 and went on to become an elected director of Grameen's board, said: "My parents gave me birth, but Grameen Bank gave me a life."

Six years on from Oslo, the 8.3 million women who make up the bulk of the microfinance bank's shareholders are facing an unexpected challenge. The bank that received the Nobel prize for its work in fostering socio-economic development from below is fighting to stave off moves from its own government to enforce decisions from above.

In August, the government of Bangladesh amended the 29-year-old law governing Grameen Bank, giving more power to the government-appointed chairman to choose the bank's chief executive. The government, a minority shareholder, also constituted a commission of inquiry, the Grameen Bank Commission, which is expected to recommend further changes to the governance structure of the microlender.

Critics say the move amounts to a government takeover of the institution.

Yunus said there had been no failure in the running of Grameen to warrant an investigation, and he questioned the need for a commission of inquiry.

"People are copying Grameen's management system in other countries," he said. "This is unique not only in Bangladesh but in the [rest of the] developing world. Our staff members transport millions of taka in the villages without armored cars or armed guards. Nobody steals our money. Surely we're doing something right with our management model."

This is the latest in a long-running tug of war between Yunus and the government, which removed Yunus as the head of Grameen last year, saying he had passed retirement age.

Mirza Azizul Islam, a prominent economist and former economic adviser to the government, said the trend was towards diluting the role of the board of directors and concentrating power in the hands of government appointees.

"With these unnecessary changes, the government is tinkering with a system that has allowed Grameen to prosper while many state-run banks are embroiled in scandals," said Islam. "If the basic structure of Grameen is changed, the worry is that the poor women who are the rightful owners of the bank will be disenfranchised."

Grameen is governed by a 12-member board, nine members of which are elected from among the borrowers while the other three, including the chairman, are nominated by the government. The government owns 3% of the bank based on equity, while the rest of the shares are held by the bank's members, mostly women.

"Grameen Bank was formed as an institution owned by its borrower members, who are poor women," said Yunus. "Through its unique decision-making process, Grameen Bank has given millions of women the means to emerge from the shadows in a male-dominated society and to make something of themselves."

Tahsina Khatun, an elected director of Grameen, says the bank's independence is non-negotiable. "Grameen is our bank," she said. "We bought shares bit by bit with our savings. Now the government has started saying this is a government bank. How can we accept that?"

Khatun said Grameen, which gives small loans without collateral, runs on a system based on trust. "If the trust is ruined, the bank will certainly be affected."

At the heart of the dispute are conflicting interpretations of the bank's ordinance. A government review committee concluded last year that since Grameen was created under a special law, it was a statutory public authority – in other words, a government bank.

Yunus contends that Grameen is an independent specialised bank which, according to its founding charter, is run by its board of directors, not by the government. Grameen's employees do not take their salaries from the government budget, which means they are not public servants.

The Awami League-led government's antipathy towards Yunus has been made clear by a series of public comments made by government ministers. The prime minister, Sheikh Hasina, has criticised microfinance institutions for "sucking blood from the poor".

Last week, finance minister Abul Maal Abdul Muhith caused consternation when he quoted another Nobel laureate, the Indian economist Amartya Sen, as saying Yunus was responsible for tarnishing Bangladesh's image abroad. Muhith backtracked after Sen swiftly denied the comments.

Mozammel Haque, chairman of Grameen, denied the government was taking over the bank. "The government will not take over the bank," he claimed. "The bank's operations have been running smoothly according to the law." Haque said the change in the ordinance was necessary to resolve a stalemate over the appointment of a new managing director.

The government has reacted to the stiff opposition put up by Grameen's directors by asking a commission to look into the women's "qualifications" to serve as directors. Critics have accused the government of harassment. Yunus said: "I find it outrageous that people are calling into question the qualifications of these women who have become owners of the bank with their own money and through their hard work."

First published in the Guardian, London, Britain, 21 November 2012

Syed Zain Al-Mahmood is an investigative reporter and editor based in Dhaka, Bangladesh

Tuesday, November 20, 2012

Gearing up for a change of guard



 
INDIA HAS, in recent weeks, formally hosted two senior leaders from Bangladesh - both from the opposition parties. First it was the country's former ruler HM Ershad and then the former Prime Minister Begum Khaleda Zia, who was hosted for a whole week. Both met top Indian leaders and expressed satisfaction after the discussions. These discussions may not solve any of the bilateral issues that were discussed - but India's hosting of two opposition figures from Bangladesh at this juncture seems to be significant.

In Dhaka, the political class puts this down to "serious doubts" in the Indian establishment about the ruling Awami League's chances of coming back to power. Since democracy returned to Bangladesh after the ouster of Ershad's military regime, the Awami League and the BNP has turns, winning elections every five years. So a change of guard next year may not surprise anyone, except those who feel the Awami League's massive mandate in December 2008 may have helped it consolidate its position in a nation that was largely frustrated with Islamist excesses, murderous vindictive politics and rotten governance. That has not happened - and for various reasons. Poor leadership, corruptions scams, the needless spat with micro-credit guru Mohammed Yunus - and much more.

But some say the  Awami League has been badly let down by India, after all it has done for its large neighbour. In a country where agriculture is still the occupation of most, water is an emotive issue. India's failure to deliver on the Teesta Water Sharing Treaty has hit Hasina's government below the belt. Prime Minister Manmohan Singh was forced to back off on the issue due to the sudden opposition of West Bengal chief minister Mamata Banerjee. This has become a national embarrassment for Singh and India - but it has become favourite ammunition for attacking Hasina back home.

The same is true about the much-awaited, but the much-delayed, Land Boundary  Agreement involving the exchange of enclaves. Those who follow India's murky coalition politics may appreciate why Singh's hands are somewhat tied, but most in Bangladesh, specially those who gun for the Awami League, have a huge issue to run down the party as an "Indian stooge" that has got nothing for all it has done for India.

The present Awami League government has gone after Islamic radicals and separatist rebels from northeast India with a vengeance after it came to power. Most of the top guns of the northeastern insurgency, except the ULFA's elusive military wing chief Paresh Barua who perhaps fled Bangladesh at the right time, have been nabbed and handed over to the Indian authorities. Some of these leaders have been forced to start dialogues with Delhi after announcing ceasefires.

Bangladesh's security services have started massive operations against Pakistan-engineered operations to use Bangladesh for pushing in huge quantities of Indian counterfeit currency. Hasina's government is also ready to concede to most Indian demands from transit to use of Chittagong port - all that augurs well for India's northeast. But in diplomacy, one has to get something to be able to give something. This is where Hasina has been left high and dry and that, in no small measure, is contributing to the possible erosion of the Awami League's popularity.

As a major regional power, it is natural for India to anticipate a change of guard in a neighbouring country and prepare for it. But why not do it discreetly? The way Begum Zia and Ershad were hosted in Delhi has only convinced Bangladeshis that India has written off the Awami League's chances in the next parliament polls and so is preparing for the inevitable. It was natural for a trusted ally like Hasina to expect a payback from India, Teesta et al, in the run-up  to her poll campaign. The last thing she could have bargained for are the current signals from Delhi that India is preparing to change sides if she does not win.

First published in The Hindustan Times, November 18, 2012

Subir Bhaumik, a veteran journalist, is a Senior Fellow with the Kolkata-based Centre for Study in International Relations and Development

Monday, November 19, 2012

What lies beyond this U-turn?



Photo: REACHING ACROSS: President Pranab Mukherjee (right) with BNP leader Khaleda Zia at Rashtrapati Bhavan

HAROON HABIB

There is every possibility that Khaleda Zia’s recanting of her long-held anti-India views is mere pre-election posturing

KHALEDA ZIA, Bangladesh’s leader of the opposition in Parliament, made some significant statements during her October 28-November 3 visit to India that deserve scrutiny.

As far as her Bangladesh Nationalist Party (BNP) is concerned, the visit had a dual purpose: one, to establish a stronger relationship between the two countries, and two, to remove the mistrust that India perceivably has towards the BNP.

One of Ms Khaleda Zia’s close aides who accompanied her to New Delhi, said the high-profile visit, roughly a year ahead of the next general election, dispelled the perception that “India favours one political party” in Bangladesh.

During the visit, which was closely watched in both the countries, Ms. Khaleda Zia met key Indian leaders including President Pranab Mukherjee, Prime Minister Manmohan Singh, External Affairs Minister Salman Khurshid, leader of the opposition in Lok Sabha Sushma Swaraj, senior BJP leader L.K. Advani, BJP president Nitin Gadkari, National Security Adviser Shivshankar Menon and Foreign Secretary Ranjan Mathai.

In her meetings, Ms Khaleda Zia, for the first time, appreciated India’s security concerns and gave an assurance that terrorists and anti-India insurgents would not be allowed on Bangladeshi soil if she comes to power again.

The former Prime Minister, who was a staunch critic of the present Sheikh Hasina government’s improved relations with India, also reportedly supported India’s transit and transshipment through Bangladesh, and also India’s participation in a consortium with China to build a deep-sea port at Bangladesh’s Sonadia.

Like Ms Khaleda Zia, Jatiya Party chairman General H.M. Ershad and Awami League’s general secretary Syed Ashraful Islam had also visited India in recent times on New Delhi’s invitations. Reportedly, the main thrust of Indian interactions with Ms Khaleda Zia was sustaining the relations the two countries had built in the last four years.

This visit was certainly more important than her tour of India in 2006 as the Prime Minister; and is reminiscent of a similar high-profile visit to New Delhi by the then opposition leader, Sheikh Hasina, in 2006.

Happy host
The Indian External Affairs Ministry was also happy with the outcome as its spokesman quoted Ms Khaleda Zia as saying that the visit marked a “new beginning” and “let’s look forward and not look in the rear view mirror”.

There are varying interpretations of the visit. Some say it is in the interest of both India and BNP to build ties ahead of the next general elections in which the ruling Awami League may face a debacle due to anti-incumbency factors. According to pro-Khaleda analysts, the “positive changes” in the BNP were being closely watched by India, and these were first underlined when the then Finance Minister Pranab Mukherjee visited Dhaka in May this year. After a meeting with Ms Khaleda Zia, he said India was interested in building relations with Bangladesh and not just with one party.

Also, the visit took place at a time when international politics has changed. Myanmar’s willingness to come out of the cold and the United States’ overtures towards it have made Bangladesh’s geopolitical location of immense importance.

Watch the curve
A secular-democratic Bangladesh has no reason to be perturbed with Ms Khaleda Zia’s radical postures towards India. But it must keep a watch on the U-turn that she is making on her long-held policies.

It is possible that, as in the run-up to the 2001 election, Ms Khaleda Zia is trying to sell the line that a government led by her, despite its Islamist orientation and pronounced anti-India bias, is better suited to deliver on promises made to India than Sheikh Hasina’s secular Awami League. Arch rivals can turn friends, and true changes of heart are welcome. However, those on the vanguard of a secular-democratic Bangladesh doubt Ms. Khaleda Zia can follow through on her assurances while keeping parties like Jamaat-e-Islami and other Islamists in the fold. Therefore, the question remains: Is this a genuine change of heart or posturing ahead of the next general election?

Bangladeshis would recall her repeated statements when she was Prime Minister, calling India’s north-east insurgents “freedom fighters”. It was during the BNP-Jamaat alliance’s rule that a massive arms haul was made in Chittagong in April, 2004. The then Prime Minister reportedly had full knowledge of these arms, which were unmistakably meant for insurgent outfits like ULFA.

Bangladesh, which had enjoyed a liberal polity, also turned a happy hunting ground for religious extremists during her regime. Therefore, secular democrats would like to see verification of such pronouncements in action.

One would remember that on return to power in 2001, BNP and Jamaat-e-Islami went about implementing with full vigour their communal agenda, resorting to ‘minority cleansing’ on a scale that Bangladesh had never witnessed except for 1971 and turned the country into a sanctuary for international Islamist terrorist groups.

The present dispensation
When Awami League swept into power in the 2008 general elections, one of the priorities of Prime Minister Shiekh Hasina was to visit New Delhi to extend a warm hand of friendship. Despite stumbling blocks, it was Ms Hasina who boldly initiated a new beginning in India-Bangladesh ties — a first since the two joined hands in the 1971 war for independence of East Pakistan.

Indeed, the Hasina government has initiated a new era of regional connectivity and has also removed a vital security concern of India by bringing north-east insurgents to task.
All these actions, until her recent visit to New Delhi, were persistently challenged by Ms. Khaleda Zia and her Islamist allies, who termed the Hasina government, as usual, “an Indian stooge”.

Given the anti-incumbency factor, the government led by Sheikh Hasina may not be in a commanding position in the coming general election, especially in urban areas. But there is no credible sign that the ratings of the BNP and its Islamist allies have had a substantive rise. Therefore, the perceived defeat of the Awami League may be too hasty a conclusion.

Bangladesh’s politics is fundamentally linked to its Liberation War, and the ongoing trial of “war criminals” initiated by the Hasina government represents an effort to come to terms with the past. It is in the interest of a strong, secular Bangladesh that justice be done. But the BNP, a staunch ally of the Jamaat-e-Islami which has many of its leaders among the top accused, has demanded the trial be suspended and the accused freed.

Ms. Khaleda Zia’s high-profile visit to India has also sent confusing signals to the secular parties and grouping. Rhetoric apart, the confusion can be judged from a recent remark by Awami League’s spokesman Mahbub-ul Alam Hanif, who said that having failed to get support at home, the BNP was trying to get back to power with Indian support.

Despite all the debates, the fact is that Ms. Khaleda Zia has announced a considerable shift from what she and her party have stood for ever since she took over the reins of BNP in the early 1980s. If this change of heart is real and durable, it is welcome in the interest of restoring a healthy regional environment based on understanding and cooperation.

Haroon Habib is a journalist, writer and liberation war veteran. He is Bangladesh correspondent for The Hindu for 3 decades.

Wednesday, November 07, 2012

Bangla Begum’s India Visit: Real or Ephimeral?

BHASKAR ROY

Can ideology and political agenda change overnight? At least, that is the message Bangladesh Nationalist Party (BNP) Chairperson and former Prime Minister Begum Khaleda Zia carried when she arrived in India on October 28 for an eight-day visit.

Begum Zia came at the invitation of the Government of India.  There have been some comments that this is a change in India’s Bangladesh strategy.  This is not correct.

Certainly, following the assassination of Sk. Mujibur Rahaman in August 1975, New Delhi felt betrayed.  The operation to kill Sk. Mujib was a cooperative venture between the USA (read mainly Secretary of State Henry Kissenger), Pakistan, and a group of Bangladeshis who pretended to be pro-liberation but were trying to reverse history.  Hence, not only the government of India but the Indian people at large burst out with a series of emotions.

Relations began to improve when Gen. H.M. Ershad became president of Bangladesh.  From the 1990s, the Indian government adopted the policy that India will be nice to Bangladesh and ‘hope Bangladesh’ would reciprocate.  And this policy was irrespective of the political party in power at the centre.

With economic liberalization in the early 1990s under Prime Minister Narsimha Rao and architected by Finance Minister Dr. Manmohan Singh, India began to grow.  But the growth story would be a greater success if the neighbours also grew together.

But that did not happen.  Pakistan expectedly remained the spoiler.  But there was a great opportunity for Bangladesh to join India.  The entire Bangladeshi policies went through a regressive storm, especially during the BNP’s rule from 2001 to 2006.  The ruling four-party alliance comprising mainly of the BNP  and JEI marked India as the main enemy.  Those were tense years.  The JEI spoke about winning the majority in Parliament by 2013 and bringing Bangladesh under Sharia law.  Some BNP leaders also floated an idea of confederation type of relationship with Pakistan.

The BNP-JEI coalition gave enough opportunities to India to react strongly on the ground.  It was not only of attacks on Hindus just after the elections which saw Hindu migration to India.  An Indian Border Security Force (BSF) officer was abducted from Indian Territory by Bangladeshi villagers assisted by the Bangladeshi border force, the BDR, tortured and killed, and his body taken around tied to a bamboo pole, and photographs widely printed in the media.  Had the BSF retaliated, the BDR would have been routed.  But calmer political counsel prevailed in New Delhi.  Then were many other incidents of provocation.

A major insurgency in North-East India was prevented when ten-truck loads of arms landed in the Chittagong port in April 2004 was accidentally detected.  The BNP-JEI government tried to paper over the incident.  These arms were meant for the Assam insurgents ULFA, the Naga insurgents and others.

This case is in the court now, and witness’ statements  reveal that those involved include Begum Zia’s elder son Tareq Reheman, de facto leader of the BNP, the then Minister of State for Home, Lutffozaman Babar, JEI Chief Motiur Reheman Nizami, and a host of intelligence officers.  Pakistan’s ISI funded the operation through a media front.  The arms were brought from China.

During her meeting with Prime Minister Manmohan Singh and Foreign Minister Salman Khurshid, Begum Zia assured they will support anti-terrorism policy and would not allow Bangladesh’s territory to be used against India.  When asked by journalists on the BNP’s position on the Chittagong arms haul case, one of Khaleda Zia’s spokesmen said if they returned to power the case would be reinvestigated by an independent body.  This gives lie to all the nice pronouncements.

Khaleda Zia is on record to say that if her party came to power all agreements with Indian signed by the present Awami League government would be annulled.  The BNP opposed the transport corridor for India to its North-East on several grounds.  The most important reason proferred was if an India-China war broke out, India will be able transfer arms and troops quickly through Bangladesh to its border, and it would annoy China.

The BNP cannot do without the JEI and the other anti-India radical parties.  The JEI has its fixed agenda and has close relations with the terrorist organizations some of which have begun to stir against.  Connections of some of the BNP leaders including that of Tareq Reheman with terrorist organizations is well known and recorded.  BNP-JEI terrorists form a triangular relationship which Khaleda Zia cannot discard.  She knows that if she does so, she will be creating two new and dangerous enemies.  She is caught in that vicious trap.  Khaleda cannot afford to support the Liberation War Crimes trial because it would be counter-productive.

Begum Khaleda Zia’s sudden change is a riddle.  Before coming to India she visited China on a party invitation and a high level Chinese led by Politburo Standing Committee member Li Changchun was in Dhaka and held discussions with her and her party leaders.  At the moment the Chinese do not want instability in South Asia and would have advised Khaleda to mend relations with IndiaChina had in the past months also advised Pakistan to improve relations with India. For Beijing, Indian influence is preferable to American influence.

After a whole history of anti-Indianism, a sudden showering of goodwill from the BNP is difficult to digest.  For India it will be good if the BNP adopts a normal relationship with India.  If not, the status quo will remain and Bangladesh’s economic development will be hurt.  It will be for the voters of Bangladesh to judge that at the next elections just over a year ahead.

The article is first published in South Asia Analysis Group, Paper No. 5281, November 6, 2012

Bhaskar Roy is a New Delhi based strategic analyst. He can be reached at e-mail grouchohart@yahoo.com

Tuesday, November 06, 2012

Bangladesh: From 'basket case' to model

Lessons from the achievements--yes, really, the achievements--of Bangladesh

Photo Caption: In this Sept. 30, 2012 photo, Sathi Akhtar, a 29-year-old Bangladeshi woman known as Tattahakallayani or Info Lady shows a 15-minute video played in a laptop at one of their usual weekly meetings at Saghata, a remote impoverished farming village in Gaibandha district, 120 miles (192 kilometers) north of capital Dhaka, Bangladesh. Dozens of Info Ladies bike into remote Bangladeshi villages with laptops and Internet connections, helping tens of thousands of people - especially women - get everything from government services to chats with distant loved ones.

In 1976, five years after independence, a book appeared called "Bangladesh: The Test Case of Development."
It was a test, the authors claimed, because the country was such a disaster that if development could be made to work there, it could surely work anywhere. At the time, many people feared that Bangladesh would not survive as an independent state.
One famine, three military coups and four catastrophic floods later, the country that former U.S. Secretary of State Henry Kissinger once dismissed as "a basket case" is still a test. But no longer in the sense of being the bare minimum that others should seek to surpass. Now, Bangladesh has become a standard for others to live up to.
In the past 20 years, Bangladesh has made extraordinary improvements in almost every indicator of human welfare. The average Bangladeshi can now expect to live four years longer than the average Indian, though Indians are twice as rich. Girls' education has soared, and the country has hugely reduced the numbers of early deaths of infants, children and mothers.
Some of these changes are among the fastest social improvements ever seen. Remarkably, the country has achieved all this even though economic growth, until recently, has been sluggish and income has risen only modestly.
Bangladesh might seem like a special case. Because of its poverty, it has long been a recipient of vast amounts of aid. With around 150 million people crammed into a silted delta frequently swept by cyclones and devastating floods, it is the most densely populated country on Earth outside city-states. Hardly any part is isolated by distance, tradition or ethnicity, making it easier for antipoverty programs to reach everyone. Unusually, it has a culture that is distinct from its religion: although most Bangladeshis are Muslims, their culture and language are shared with the non-Muslim Indian state of West Bengal. Religious opposition to social change has been mild. Not many nationalities have so unusual a collection of traits.
The female factor
That said, the most important of the country's achievements can serve as a model for others. Bangladesh shows what happens if you take women seriously as agents of development. When the country became independent, population-control policies were all the rage (this was the period of China's one-child policy and India's forced sterilizations). Happily lacking the ability to impose such savage restrictions, the government embarked instead upon a program of voluntary family planning. It was stunningly successful. It not only halved the rate of fertility within a generation, but also increased women's influence within their own households. For the first time, wives controlled the size of families.
Later, the textile industry took off -- and four-fifths of its workers are female. Bangladesh was also the home of microcredit, tiny loans for the poorest. By design, these go to women. Thus, over the past two decades women have earned greater influence in the home and more financial autonomy.
And, as experience from around the world shows, women spend their money differently from men: typically, on their children's food, health and education. Child welfare has been underpinned by a quiet revolution in the role of women.
That is not all there was to it. Thanks to remittances from abroad and to the Green Revolution, Bangladesh has done better than most at reducing persistent rural poverty. It has maintained a broad consensus in favor of basic social spending despite military coups and a toxic politics dominated by the bitter infighting of the "battling begums" (the widow and daughter of former presidents, who lead the two main parties).
Bangladesh also has benefited by letting non-governmental organizations (NGOs) get on with what the state itself has been too weak or corrupt to do: experiment with different programs and scale up those that work. Much of its success is attributable to local NGOs like Grameen and BRAC.
Bangladesh has shown that countries can transform the lives of the poorest without having to wait for economic growth. But it does not show that growth is irrelevant. The country surely would have done better still if its economy had expanded faster.
As people's education and expectations rise further, it will be all the more important to provide new jobs and opportunities for advancement.
This article was first published in THE ECONOMIST, November 5, 2012

Bangladesh and development: The path through the fields


Bangladesh has dysfunctional politics and a stunted private sector. Yet it has been surprisingly good at improving the lives of its poor


DHAKA AND SHIBALOY, MANIKGANJ DISTRICT

ON THE outskirts of the village of Shibaloy, just past the brick factory, the car slows to let a cow lumber out of its way. It is a good sign. Twenty years ago there was no brick factory, or any other industry, in this village 60 kilometres west of Dhaka; there were few cows, and no cars. The road was a raised path too narrow for anything except bicycles.

Now, Shibaloy has just opened its first primary school; it is installing piped water and the young men of the village gather to show off their motorcycles at the tea house. “I have been a microcredit customer for 17 years,” says Romeja, the matriarch of an extended family. “When I started, my house was broken; I slept on the streets. Now I have three cows, an acre of land, solar panels on the roof and 75,000 taka ($920) in fixed-rate deposits.”

Bangladesh was the original development “basket case”, the demeaning term used in Henry Kissinger’s state department for countries that would always depend on aid. Its people are crammed onto a flood plain swept by cyclones and without big mineral and other natural resources. It suffered famines in 1943 and 1974 and military coups in 1975, 1982 and 2007. When it split from Pakistan in 1971 many observers doubted that it could survive as an independent state.

In some ways, those who doubted Bangladesh’s potential were right. Economic growth since the 1970s has been poor; the country’s politics have been unremittingly wretched. Yet over the past 20 years, Bangladesh has made some of the biggest gains in the basic condition of people’s lives ever seen anywhere. Between 1990 and 2010 life expectancy rose by 10 years, from 59 to 69 (see chart 1). Bangladeshis now have a life expectancy four years longer than Indians, despite the Indians being, on average, twice as rich. Even more remarkably, the improvement in life expectancy has been as great among the poor as the rich.

Bangladesh has also made huge gains in education and health. More than 90% of girls enrolled in primary school in 2005, slightly more than boys. That was twice the female enrolment rate in 2000. Infant mortality has more than halved, from 97 deaths per thousand live births in 1990 to 37 per thousand in 2010 (see table). Over the same period child mortality fell by two-thirds and maternal mortality fell by three-quarters. It now stands at 194 deaths per 100,000 births. In 1990 women could expect to live a year less than men; now they can expect to live two years more.

The most dramatic period of improvement in human health in history is often taken to be that of late-19th-century Japan, during the remarkable modernisation of the Meiji transition. Bangladesh’s record on child and maternal mortality has been comparable in scale.

These improvements are not a simple result of increases in people’s income. Bangladesh remains a poor country, with a GDP per head of $1,900 at purchasing-power parity.

For the first decades of its independent history Bangladesh’s economy grew by a paltry 2% a year. Since 1990 its GDP has been rising at a more respectable 5% a year, in real terms. That has helped reduce the percentage of people below the poverty line from 49% in 2000 to 32% in 2010. Still, Bangladeshi growth has been slower than India’s, which for most of the past 20 years grew at around 8% a year. Nevertheless the gains in its development have been greater. The belief that growth brings development with it—the “Washington consensus”—is often criticised on the basis that some countries have had good growth but little poverty reduction. Bangladesh embodies the inverse of that: it has had disproportionate poverty reduction for its amount of growth.

How has it done it?
Four main factors explain this surprising success. First, family planning has empowered women. If you leave aside city states, Bangladesh is the world’s most densely populated country. At independence, its leaders decided that they had to restrain further population growth (China’s one-child policy and India’s forced sterilisation both date from roughly the same time). Fortunately, Bangladesh’s new government lacked the power to be coercive. Instead, birth control was made free and government workers and volunteers fanned out across the country to distribute pills and advice. In 1975, 8% of women of child-bearing age were using contraception (or had partners who were); in 2010 the number was over 60% (see chart 2).

In 1975 the total fertility rate (the average number of children a woman can expect to have during her lifetime) was 6.3. In 1993 it was 3.4. After stalling, it resumed its fall in 2000. After one of the steepest declines in history the fertility rate is now just 2.3, slightly above the “replacement level” at which the population stabilises in the long term. When Bangladesh and Pakistan split in 1971, they each had a population of 65m or so. Bangladesh’s is now around 150m; Pakistan’s is almost 180m.

Because of this Bangladesh is about to reap a “demographic dividend”; the number of people entering adulthood will handsomely exceed the number of children being born, increasing the share of the total population that works.

In giving women better health and more autonomy, family planning was one of a number of factors that improved their lot, and by so doing did much to reduce poverty. The spread of primary education was one of the others (the government has been better than many at helping women this way); the proportion of girls who get schooled has increased much more than the proportion of boys. And both the boom in the textile industry and the arrival of microcredit have, over the past 20 years, put money into women’s pockets—from which it is more likely to be spent on health, education and better food.

Second, Bangladesh managed to restrain the fall in rural household incomes that usually increases extreme poverty in developing countries. Between 1971 and 2010 the rice harvest more than trebled, though the area under cultivation increased by less than 10%. This year the country once supposedly doomed to dependence on food aid could be a small exporter of rice. One-sixth of the population remains undernourished, which is a blight; but it is an improvement on 20 years ago, when more than a third of the population was underweight or stunted.

Yield alone is not the whole story. The new crops of the Green Revolution allowed rice growers to move to two harvests a year. The rice of the Ganges delta used to be monsoon, or aman, rice; it was planted before the annual rains and harvested after. Nowboro rice, planted and harvested in winter, is the main crop. For people just above the poverty line, the sort of event most likely to plunge them into extreme poverty is a sudden external shock, such as an illness or a harvest failure. By expanding the winter crop, boro rice reduces the risk of a harvest failing in a way that shocks a household into abject poverty. Between 2007 and 2012 Bangladesh went through three global food-price spikes and two cyclones. Almost everyone expected a spike in poverty to follow. It did not.

The villages have also found resources from beyond agriculture—and, indeed, beyond Bangladesh. Around 6m Bangladeshis work abroad, mostly in the Middle East, and they remit a larger share of the national income than any other big country gets from migrants. In the year ending in June 2012 they sent back $13 billion, about 14% of annual income—more than all the government’s social-protection programmes put together. The majority of migrant workers send their remittances back to family members in the village they came from. Because emigrants are more likely to come from better off families, those families benefit most. But knock-on effects on rural wages benefit landless labourers. The World Bank calculates that between 2000 and 2010, real agricultural wages rose 59%, compared with 42% for all sectors. Most countries have seen a reduction in rural living standards, and a resultant increase in extreme poverty. Bangladesh has not.
Remittances and family planning have not attacked extreme poverty directly. That is where the government comes in.

Bangladesh comes 120th (out of 183) on the “corruption perceptions index” kept by Transparency International, a think-tank in Berlin. It has had episodes of military rule interrupting periods of democracy in which the “battling begums” (daughter and widow of two early presidents) engaged in a sort of Judy and Judy show of vicious political infighting.

Yet despite the political circus, the country’s elite has maintained a consensus in favour of social programmes. Bangladesh spends a little more than most low-income countries on helping the poor. About 12% of public spending (1.8% of GDP) goes on social safety-nets to protect the poorest: food for work, cash transfers and direct feeding programmes, which most poor countries do not have. As well as spending more on the poor, the state also focuses more than many on the role of women.

That said, the amounts that go on education (2.2% of GDP) and health (3.5%) in Bangladesh are below the average for low-income countries. And even that spending might well have been wasted but for one further influence: the extraordinary role played by non-governmental organisations (NGOs) in the country. Without the state’s schools, clinics and cash-transfer schemes, says Rehman Sobhan, the head of the Centre for Policy Dialogue, a think-tank, other interventions would not work. It is the things which NGOs do, though, that make Bangladesh’s way of fighting poverty unique.

BRAC (which originally stood for Bangladesh Rehabilitation Assistance Committee, but now is the only name the organisation needs) invented the idea of microcredit, that is, tiny loans to the destitute. Then another NGO, Grameen Bank, made them work by targeting them on women and holding weekly meetings of borrowers who would identify and support anyone who was falling behind on repayments. Their growth since has been explosive. Grameen has 8.4m borrowers and outstanding loans of over $1 billion; BRAC has 5m borrowers and loans of $725m. The poor account for roughly a fifth of the total loan portfolio of the country, an unusually high proportion.

Since their establishment, microcredits have spread around the world. Their benefits have been both exaggerated and attacked. The backlash has shown that microcredits have not, as some claimed, led to a surge of entrepreneurial activity. In some cases they have left borrowers worse off than before. Their impact in the land of their birth, though, has been mostly positive. Mohammad Razzaque of Dhaka University looked at two groups of people with similar incomes and household assets, one of which contained regular borrowers from a variety of microfinance institutions and the other of which did not, to see whether microcredit helped. Among the first group the poverty rate fell ten percentage points, from 78% in 1998 to 68% in 2004. Among the second, poverty still fell, but only half as much, from 75% to 70%.

The magic ingredient
The real magic of Bangladesh, though, was not microfinance but BRAC—and NGOs more generally. The government of Bangladesh has been unusually friendly to NGOs, perhaps because, to begin with, it realised it needed all the help it could get.

BRAC began life distributing emergency aid in a corner of eastern Bangladesh after the war of independence. It is now the largest NGO in the world by the number of employees and the number of people it has helped (three-quarters of all Bangladeshis have benefited in one way or another). Unlike Grameen, which is mainly a microfinance and savings operation, BRAC does practically everything. In the 1980s it sent out volunteers to every household in the country showing mothers how to mix salt, sugar and water in the right proportions to rehydrate a child suffering from diarrhoea. This probably did more to lower child mortality in the country than anything else. BRAC and the government jointly ran a huge programme to inoculate every Bangladeshi against tuberculosis. BRAC’s primary schools are a safety net for children who drop out of state schools. BRAC even has the world’s largest legal-aid programme: there are more BRAC legal centres than police stations in Bangladesh.

The scale is a response to one of the biggest challenges of development: that solving one problem leads to others. This happens in economic development as well as the social kind. In the 1950s South Korea’s Samsung had a big woollen mill. It found that to expand, it had to make its own textile machinery; then, to export, it built its own ships; and so on. Samsung now has around 80 companies and is the world’s largest information-technology firm. BRAC is a sort of chaebol (South Korean conglomerate)for social development. It began with microcredit, but found its poor clients could not sell the milk and eggs produced by the animals they had bought. So BRAC got into food processing. When it found the most destitute were too poor for micro-loans, it set up a programme which gave them animals. Now it runs dairies, a packaging business, a hybrid-seed producer, textile plants and its own shops—as well as schools for dropouts, clinics and sanitation plants.

The innovative NGO now has 100,000 health volunteers with mobile phones (mobile-phone coverage is widespread in Bangladesh). When a volunteer finds a woman is pregnant, she texts the mother-to-be with advice on prenatal and, later, postnatal care. This is helping BRAC build up a database of maternal and child-health patterns in remote villages.

BRAC goes out of its way to involve everyone. When it set up a programme for the ultra-poor in Shibaloy, the whole village gathered to decide who should be eligible. They drew a map of the households in the dirt so everyone could see who was involved and ensure that nobody was missed (the same process, in a different village, is pictured below). BRAC argues that such things encourage a sense of ownership of the programmes and reduces waste and corruption.

A balance-sheet
Bangladesh still has formidable problems. Its nutritional standards are low and stalled for a few years in the early 2000s. While the government has managed to increase school enrolment, the quality of education is abysmal and the drop-out rate exceptionally high (only 60% of pupils complete primary school, much less than the regional average). Only a quarter of eleven-year-olds have reached the required standards of literacy and numeracy.

Most of the big improvements have taken place in rural areas, but Bangladesh is urbanising fast, which will bring a different suite of problems. Dhaka is one of the ten largest cities in the world, but has the infrastructure of a one-buffalo town.

And as if all that were not enough, the government seems intent on killing one of the geese that lays the golden eggs. Incensed that the founder of Grameen Bank, Muhammad Yunus, should have had the temerity to start a political party, the prime minister, Sheikh Hasina, has hounded him from his position as the bank’s managing director and is seeking to impose her own choice of boss on the bank, overriding the interests of the owner-borrowers. This is sending a chilling signal to other NGOs.

But Bangladesh’s record is, on balance, a good one. It shows that the benefits of making women central to development are huge. It suggests that migration is not just the result of a failure to provide jobs at home but can be an engine of economic growth. Indian’s rural-development minister, Jairam Ramesh, said recently that “Bangladesh’s experience shows…that we don’t have to wait for…high economic growth to trigger social transformations. Robust grass-roots institutions can achieve much that money can’t buy.”

Bangladesh is still poor and crowded. With the lowest labour costs in the world (textile workers make about $35 a month) it should be growing faster than China, not more slowly than India. It is badly governed, stifled by red tape and faces severe environmental problems. But in terms of the success of its grass-roots development, it has lessons for the world.

First published in the Economist, November 3rd 2012