Fifty years ago, Bangladesh declared its independence. At the time, it was considered by some to be an unsalvageable basket case. Despite this, Bangladesh has gained ground and even moved past its peer group and some of its neighbors, graduating from low-income to lower-middle-income country status.
While Bangladesh has done well-raising incomes, its outstanding progress has been in human development. Bangladeshis are healthier, live longer, and enjoy more schooling. Critically, these human gains are especially evident among girls and women.
Bangladesh is also home to one of the largest microfinance and digital finance industries globally. CGAP estimates that at least 1 in 3 Bangladeshi households regularly use these formal financial services. Families have used microcredit, for example, for the past two to three decades to help accumulate capital to seize opportunities like sending a family member abroad for work or meeting an emergency medical need.
Digital payments also help city earners send money to their village quickly and help keep regular meals on the table. Social enterprises like BRAC, which I have worked with for years, have pursued large microcredit operations and spun off the largest digital financial services provider bKash.
While correlation doesn't equal causation, Bangladesh is one of only a few countries to have started in great poverty, and advanced alongside large-scale microcredit and digital payment services. It’s hard to imagine the first 50 years of Bangladesh without the important roles these financial services played.
Bangladesh’s experience highlights three core lessons for developing nations, as we look to build back from the pandemic.
A magic ingredient? There isn’t any
International development donors tend to support two- to three-year project cycles. On the one hand, this is understandable. Many philanthropists and private foundations have well-intentioned desires to see clear, measurable impact. It is tempting to look for a magic ingredient that will produce significant economic development, achieve intended impact quickly, and free up resources for something else.
The 316% rise in Bangladesh’s gross national income per capita over the last two decades was not fueled by natural resource extraction or infrastructure. It was driven by people.
—But these strategies miss the reality that economic transformations happen over generations, and financial inclusion contributes to development over a long period of time. This enables financial services to grow in scale and to be relied upon as a planning and coping tool, which supports families to make successive intergenerational investments to work themselves out of poverty.
Success can happen, but it happens over decades. Individual project cycles and one-year studies must at least be matched with longer strategies.
Weave economic and human development together
Like its famed garment industry, Bangladesh’s development has been possible because the economic and human threads have been woven together. There have been large investments in basic human development that contributed to strong human development indicators, such as reduced infant mortality.
There have been widespread investments in hygiene and clean water. Credit and savings have complemented these advances by helping families pool capital to meet health emergencies or pursue higher-income earning opportunities that help tide over seasonal strains of traditional agricultural cycles.
Access to capital has also enabled families to seek higher-earning through farm work. Finance helps families manage their journeys out of poverty.
The renowned book “The Portfolios of the Poor: How the World's Poor Live on $2 a Day,” draws heavily on evidence gathered from poor families in Bangladesh and illuminates how the poor are intensive money managers. Credit and savings facilities help families invest to pursue better economic opportunities and also to meet costly expenditures such as weddings and education.
Such financial diaries reveal that in the hands of families — particularly in women — financial services have enabled Bangladeshis to improve their livelihoods by supporting their families back in the village, starting a new enterprise, sending a nephew abroad, or helping a daughter-in-law relocate to a factory town for work.
They also reveal how Bangladeshis leverage financial services for resilience when a family member gets sick or must manage through an unfortunate downturn in income.
These choices do not always work out: there are risks and, at times, indebtedness. But financial services put useful tools into the hands of families, enabling them to better manage shocks, improve their livelihoods, and better their own situation.
Invest in people, especially women
Lessons on creating equal market access for women entrepreneurs
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There has been a lot of talk about building back better following the pandemic. The 316% rise in Bangladesh’s gross national income per capita over the last two decades was not fueled by natural resource extraction or infrastructure.
It was driven by people.
It is useful to highlight the two largest contributors to raising incomes in Bangladesh. First, international remittances have come from workers, mostly men, who had gone abroad. Second, the ready-made garments industry — the second-largest global exporter — in which the majority of workers are women, has helped boost incomes.
Entering the formal and informal labor force at home and abroad has been a central part of many Bangladeshi households’ economic strategy. One or two members of each family may tend the farm, while others seek out higher-earning opportunities by setting up a local, small, off-farm business, or by seeking wage labor in a factory town. Others move to the Gulf for foreign exchange earnings.
Financial services have enabled families to move up the ladder of development by planning and pursuing these opportunities, including enabling women to find higher-earning opportunities in the informal and formal workforce.
Putting it all together
Bangladesh is a story of progress by empowering people — especially women. Credit, savings and payments services provided to millions are tools in the hands of families made available over multiple decades and generations, they have worked in tandem with human development investments, and they have served the aspirations of the main agents of progress — millions of Bangladeshi families.
Bangladesh’s story reminds us that long-term investments in people, particularly women, lie at the heart of the solution to poverty.
Congratulations to Bangladesh on all that it has accomplished and taught us in its 50 years.