Cash support for the needy

As the pandemic continues to unfold in Bangladesh and other countries in a vigorous manner, the priorities should indeed be on how to mitigate and contain the spread of the Covid-19 virus along with addressing the rapidly deepening poverty and hunger in a number of hotspots.

Firstly, there is a need to ramp-up testing in emerging hotspots using proxy indicators (e.g. unexpected deaths, sudden increase in respiratory complications and related hospitalisation in local hospitals) and greater institutional coordination between the government and NGOs with extensive field presence to isolate the virus-infected population.

It is heartening to see that one NGO (JKG Healthcare) has already come forward to set up a number of well-designed and safe Testing Kiosks following the South Korean model to expedite the process of testing of Covid-19 virus. That's the way we should encourage GO-NGO collaborations in fighting this war against the invisible enemy.

I wish other non-governmental initiatives will come forward to join hands with the government at this critical hour. Also, there is an imperative for a listening governance architecture where the stakeholders can deeply engage and synergise the level of trust factor which is so crucial in a disaster situation.

Frontline health workers are not yet fully protected, and the contradictory messaging from policy makers has further eroded their morale. Things are, however, improving, and we are looking forward to marked improvement in the preparedness of the health system before it is too late.

Undoubtedly, we cannot move forward without massive up-scaling of the testing, and here we will need more doctors and health professionals including volunteers in coming days. Our health system has always been underfunded and under focused. So it should be an appropriate moment to go back to the drawing board and start reforming the system.

The government has been announcing stimulus packages one by one to address the short and medium term needs of the groups who may be in crisis. Starting with salary support to the RMG sector, the government went for larger packages for industrialists and SMEs. Lately, it has declared a Five thousand crore Taka package for farmers.

In addition, the government has been distributing relief and subsidised food to vulnerable groups. While the local administration along with support from locally elected representatives and NGOs are regularly providing this support to the needy, the situation in and around Dhaka and other major cities looks a bit problematic.

Four to five million poor, many of whom are not covered by formal social safety nets, have suddenly lost their daily earnings. Although most migrant workers have gone back to the villages, a part of them are still in the cities.

The micro and small enterprises are depleting their working capital and may soon face closure of the enterprises. The MFIs with more than thirty three million borrowers are in deep crisis as they cannot collect instalments from their borrowers who are in even greater hardship. 

The medium-term macroeconomic projection also looks pretty bleak. The latest growth projection by the World Bank looks alarmingly low not only for Bangladesh (2-3 percentage) but for the entire South Asia as well. My own hunch is that if the crisis does not prolong much further, the packages announced by the government and the humanitarian response from society at large will help Bangladesh make a quick rebound and remain on a much higher trajectory of the growth process.

However, it will finally depend on the quality of implementation of these packages where the banking sector will have to play the lead role. Banks alone cannot implement these packages. They must find partners in MFIs who are now working with mostly micro and small enterprises.

Enough policy space and regulatory flexibility must be made available to ensure quality implementation of these packages.

I am delighted to see Bangladesh Bank being highly proactive in injecting extra liquidity for the sector along with subsidising interest to increase the inflow of funds to the real sector.

It is also working to create new refinance lines to reach the needy. We have demonstrated our resilience during the last Global Financial Crisis and continued our inclusive growth process despite many challenges.

The latest stimulus on agriculture provides me this hope as this is the bedrock of our economy. Bangladesh Bank is also contemplating a few other refinance schemes for both the marginal farmers with Taka Ten no-frill accounts and also for small entrepreneurs who may have access to the low cost fund to be created under the SME stimulus package. We are approaching the boro harvest.

There may be acute labor shortage in haor and northern districts. The government may have to subsidise more to farmers to bill their harvest cost. The community may even think of organising volunteers maintaining social distance to help the farmers harvest. The procurement of boro should start right away at the already declared price. The farmers can be paid the price of the crops and they may deliver it later to the government when the corona dust finally settles down.

The government should not think much about the increased money supply which is being created by these stimului as the inflation spike may remain subdued due to lower oil price and over all import cost and sudden slowdown of the economy. The government can certainly borrow a couple more percentages of GDP from the central bank through its Ways and Means Accounts providing time-bound overdraft facilities.

The refinances from the central bank are also not going to affect the budget deficit target of the government. Instead proper investment of this money in the real sector in a prudent way could even surprise many of the skeptics who are portraying a bleak picture. It will depend to a large extent how skilfully we can take 'out of box' strategies to navigate through this health disaster. 

Since most of the vulnerable are now stuck in their homes and cannot undertake normal income-earning activities, they are having an acute shortage of cash to buy food. Some relief supplies may have been coming from the local government, NGOs or even individuals.

However, there is no regular flow of these supplies. The best response will be if they can be given cash support through either conventional bank accounts or mobile financial services accounts or agent banking accounts.

Bangladesh has a strong legacy of financial inclusion, particularly for the earlier unbanked population. Since 2009 Bangladesh Bank gave a special drive to bring the unbanked population into the banking system. Nearly 10.2 million farmers now have Ten Taka bank accounts. For these the account holders do not have to pay any fees.

These accounts were created to provide agricultural loans and subsidies to farmers. The extreme-poor belonging to various poverty reduction programs have about 2.66 million of such accounts. The beneficiaries of various social safety net programs have about 5.6 million accounts.

The RMG workers, the cleaners of city corporations, the freedom fighters, the physically challenged and many others have these special accounts. Together there are 20.5 million such accounts.

In addition, there are about seventy million mobile financial services accounts. More than half of these accounts are active and make regular transactions. If you add Agent Banking accounts to this you will get a few more millions of bank accounts. Most of these financial service providers have been providing great financial services to the unbanked and under-served.

These providers are working closely with government departments in providing social safety net benefits to the targeted population. Now they are busy preparing ground for providing salaries to RMGs and other export earning industry workers as a part of the government's stimulus package. The EKYC facilities and the higher tiered agents are helping workers get their MFS accounts in just minutes.

The NIDs given by the Election Commission have been a great boon in verifying their identities. Bangladesh Bank has asked for the pay roll sheets for the months of December, January and March from factory owners with MFS or bank accounts of the workers. Nearly two million of them had these accounts. Another million are facing difficulty to open the accounts and pass these on to the owners.

If completed, this will ensure transparent implementation of the stimulus plan of Taka 5000 crore declared by the government. This can be an example for providing agricultural subsidies and grants for buying seeds to the farmers in a transparent way as well.

If this can be done for RMG workers and farmers, why can we not send a sum of say Taka 3000 each month to about four million vulnerable people involved in the informal sector.

It may be noted here that Brazil has started disbursing $134 to each of the 54 million mobile financial services accounts that belong to such a vulnerable population, particularly from the informal sector.

This amount (Taka three thousand) may be good enough for securing food for four members of a family for a month. Let the ward commissioners and some designated NGOs mobilise this vulnerable population to get the mobile financial services accounts and pass on to the Mayors in addition to their normal food support.

The mayors can certainly request the central bank to send the money to these accounts on behalf of the government. BRAC is already working on developing a map of poverty pockets in urban areas. The government, other NGOs and even tech-savvy youth may volunteer to beef up this initiative.

If the crisis prolongs, the government will be well advised to prepare a more integrated data base of this vulnerable population using their geo-locations, KYC information, Wallet Usage and cross-checking with known profiles including nature and timing of the transactions, the balance remaining in their accounts, the use of recharge etc. Once established, these poor or near poor can be sent the fund provided by the government. If you are transacting money to the poor, take the central bank on board. They will guide you through.

Dr Atiur Rahman is the Bangabandhu Chair Professor at Dhaka University and former Governor of Bangladesh Bank. He may be reached at [email protected]