
Commentaries | Mar 16,2019
Aug 7 , 2021
By Risto Rönkkö ( Research assistant at UNU-WIDER ) , Kunal Sen ( Director at UNU-WIDER ) and Stuart Rutherford ( Founder of Shohoz Shonchoy, a pro-poor microfinance provider. )
The Hrishipara Daily Diaries Project has been tracking the daily spending of 60 poor households in rural Bangladesh for the last six years. Analysis of the data collected – especially the changes to spending patterns that have occurred during the pandemic – reveals four areas where policymakers should step in, write Risto Rönkkö and Kunal Sen, research assistant and director at UNU-WIDER, respectively, and Stuart Rutherford, founder of Shohoz Shonchoy, a pro-poor microfinance provider.
Even as rich countries begin to glimpse the light at the end of the pandemic tunnel, developing countries are struggling to contain COVID-19. But there are important lessons from the past year that can help governments to devise more effective policies and programs to support their poorest residents amid continued outbreaks and lockdowns.
One valuable source of such lessons is the Hrishipara Daily Diaries Project (HDDP), which has been tracking the daily financial transactions of 60 poor households in rural Bangladesh for the last six years. Analysis of the data collected – especially the changes to spending patterns that have occurred during the pandemic – reveals four areas where governments should step in.
First, policymakers should ensure access to emergency cash. The rural poor are no strangers to shocks to their livelihoods. Droughts and floods are recurrent features of their lives, as are serious illness and job losses. But they usually have some access to lifelines: they can tap into family-based mutual-aid networks or borrow from microfinance institutions, money lenders, and friends and family.
That was not true during the COVID-19 pandemic. Restrictions on movement meant that households could not visit extended family to seek financial support. And even if they could, with everyone’s livelihoods squeezed at the same time, friends and family often had nothing to offer.
Harsh lockdowns in many places also forced microfinance providers and other financial institutions to close, preventing households from borrowing or even withdrawing their savings. The 60 Bangladeshi households in the HDDP study halted almost all financial transactions during the government-imposed lockdown.
This highlights the urgent need for large-scale unconditional cash transfers from the state, disbursed directly to the poor with minimal paperwork. A crisis of this magnitude is no time for fiscal rectitude.
Second, poor people’s capacity to exercise agency and entrepreneurial spirit should be supported. The HDDP households were agile and resourceful in their response to the COVID shock, and showed impressive money-management skills.
Sometimes this took an entrepreneurial form. For example, Samarth, a farmer who grows crops and rears dairy cows on a tiny parcel of land, quickly recognised that barriers to road transport were driving up prices of goods from the capital, thereby driving down the prices of local produce that were usually exported. Thus, Samarth bought produce from desperate local farmers at very low prices and sold it at a temporary street market he set up inside Hrishipara. Local people, confined to their neighbourhoods, provided the demand, and Samarth ended up with a major boost to his daily income during lockdown.
Policymakers rarely account for such entrepreneurial instincts in devising programmes to support the poor. This should change, with policies that encourage and reward these instincts – and improve poor households’ ability to harness them. For example, low-income households could be brought into consideration when devising “ease of doing business” regulations.
The private sector also has a role to play. In particular, the financial sector should develop flexible products that enable poor people to take advantage of opportunities that come their way. Of course, this also requires that governments ensure uninterrupted access to financial services during lockdowns.
Third, the poor need generous food aid, especially during lockdown. Even under the most difficult of circumstances, the HDDP subjects found ways to put food on the table, but at the cost of drastic cuts in other expenditures. Our analysis shows a sharp reduction in recurrent household expenditures other than food in the first month of lockdown (April 2020). Moreover, it was only in October – several months after lockdown ended – that those expenditures returned to pre-pandemic levels.
Finally, low-income households’ cash reserves need to be protected. Most of the HDDP subjects kept some cash at home for emergencies. The COVID-19 pandemic – and especially the lack of access to savings – meant that they kept those reserves to buy food and meet other basic needs.
Government and the financial sector should find ways not only to help secure these home-based reserves but also to make it easier for the poor to replenish them. Expanding the scope of cash disbursements, and making delivery more efficient, is vital, as is keeping mobile-money agents open during crises.
The Hrishipara diaries show that, during COVID-19 lockdowns, the poor had to fend mostly for themselves. Thanks to their ingenuity, money-management skills, personal networks, and past crisis planning, they managed to survive. But they also had to make great sacrifices. As governments devise strategies to support the poor not only during COVID-19 lockdowns but also in future crises, they should reflect on what happened to the HDDP households during the pandemic so that, next time, such sacrifices will not be needed.
PUBLISHED ON
Aug 07,2021 [ VOL
22 , NO
1110]
Commentaries | Mar 16,2019
View From Arada | May 18,2019
Agenda | Dec 28,2019
Viewpoints | Oct 03,2020
Fortune News | May 08,2021
Life Matters | Aug 03,2019
Agenda |
Viewpoints | Apr 04,2020
Radar | Dec 10,2022
Sunday with Eden | Dec 26,2020
Photo Gallery | 69115 Views | May 06,2019
Photo Gallery | 60970 Views | Apr 26,2019
Fortune News | 52908 Views | Jul 18,2020
Fortune News | 52680 Views | Sep 01,2021
Dec 24 , 2022
Biniam Mikru heads the department of cabinet affairs under Mayor Adanech Abiebie. But...
Jul 2 , 2022 . By RUTH TAYE
On a rainy afternoon last week, a coffee processing facility in the capital's Akaki-Qality District was abuzz with activ...
Nov 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
Nov 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
May 27 , 2023
Tauted as a somnolent giant, Ethiopia's financial scene now stirs, roused by favourab...
May 20 , 2023
The pungent irony wafting from Pretoria last week was hard to miss. Cyril Ramaphosa,...
May 13 , 2023
In March this year, Kamala Harris, the United States Vice President, visited Ghana, T...
May 6 , 2023
The history of the Ethiopian labour movement dates back to the 1940s, marked by perio...
May 27 , 2023
In a triumph over the trials of the pandemic, a rising tide of construction costs and inflation, Zemen Bank has opened a stunning 32-storey...
May 27 , 2023 . By BERSABEH GEBRE
Meqelle is in an animated bid to reclaim control of the management of companies under the Endowment Fund...
May 29 , 2023
Officials at the Addis Abeba City Administration have recently changed the title transfer fees following...
May 27 , 2023 . By MUNIR SHEMSU
The absence of technological equipment to control the contraband trade near national borders and low-qual...