Views expressed in this section are of the author, which may not necessarily be shared by members of ERG. Economic Research Group is committed to promote professional exchanges in the field of economics and development issues. This is the second in the series of writings on contemporary issues, and will hopefully, encourage others to contribute. For query and contribution to this section, please write to info@ergonline.org. The following paper of Dr. Sajjad Zohir reached ERG in April 2006.

Summary

Reaching the Extreme Poor
Challenges, Constraints and Opportunities

 by Sajjad Zohir
Senior Research Fellow, BIDS
Executive Director, Economic Research Group

<An earlier draft of this paper was prepared at the request of the Swiss Agency for Development Cooperation (SDC), Dhaka; and was presented at a workshop in Dhaka on 8th March 2006.>

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Bangladesh had a successful expansion of the microcredit sector during the last two decades of the 20th century. During the early years of success, microcredit was deemed to be the instrument for helping poor graduate out of poverty. Such a perception had shaped the discourse on poverty in Bangladesh during subsequent years, even when empirical studies unveiled the limits of microcredit programs to reach out to the very poor. It is therefore important to revisit the conceptual framework that underlies our priors in setting the parameters of development and poverty discourse in Bangladesh as well as elsewhere. It is also critical to reconstruct some of the concepts shaping the discourse so that the challenging issues pertaining to programs for the extreme poor, discussed in the subsequent sections, may be appropriately structured. Following the discussion on concepts, the paper draws upon secondary sources to highlight limited experiences in reaching out to the extreme poor in Bangladesh. The exercise is meant to throw light on the potentials and limits of microcredit in addressing the needs of the extreme poor. Some of the alternatives (to microcredit) are only highlighted in the concluding section without great deal of elaboration.

The primary focus of the paper is on the pro-extreme poor interventions in the sphere of microcredit - whether these be as safety net programs, graduation into regular microcredit programs, graduation out of poverty or packaged with both safety net and graduation elements. It is important to recognize that these do not exhaust the list of approaches one may take to address one’s concern for the extreme poor. The paper digress into two other forms of interventions only when certain inadequacies in the first approach are evident from the query.

Some of the questions addressed in the paper are listed below:

• What are the various microcredit programs currently addressing extreme poor and what are the salient features of the products these programs offer?
• Are these products reaching the extreme poor? If yes, why? If not, why not?
• Can the non-poor, moderate poor and the extreme poor be differentiated by the nature (characteristics) of their demand for financial support/services?
• Where does ‘flexible products’ fit in the total canvass? Does it have an edge over other financial products in assisting extreme poor?
• Is microcredit adequate to assist extreme poor in graduating out of poverty?

Following the last question mentioned above, few additional queries may be pursued. These are,

• Future challenges in product design for extreme poor – what should be the mix of administrative targeting and self-targeting built into the product design?
• How can microcredit institutions be viable and still serve the extreme poor?
• How can the stakeholders at higher tiers support creating enabling conditions so that the microcredit institutions can continue to play pro-poor role?

Upon reviewing the current programs and proposing alternative perspectives to assess the scope of microcredit to meet the special needs of extreme poor, the paper makes the following concluding observations:
The discourse on microcredit and its role in addressing extreme poor and poverty is currently caught amongst ‘trees’ – which refers to ‘micro management’ of problems. Much effort has been given into identifying poor in a country that has an abundance of poor people! In the name of research, the counting exercise has been perfected and intricate accounting techniques have been brought to the fore without adding much to our a priori mental constructs. Such engagements have often got caught in petty agenda-settings by the providers and ‘facilitators’, and kept us removed from looking for ways to find spaces for coalition-building in fighting poverty. Given that the institutional capacity of some sort has surfaced with the engagement in microcredit, the future challenges lie in creating an enabling environment so that these institutions may remain/be motivated to pursue their initiatives to assist extreme poor and fight poverty. Some such challenges, which call for supports from other stakeholders (policymakers, educational institutions and aid agencies) as well, are proposed at the very end of the paper.