Rural Financing in Bangladesh with Special Reference to Natore District - A Comparative Study of Grameen Bank (GB) and the Bangladesh Rural Advancement Committee (BRAC)"

Abstract

Bangladesh is one of the world's least developed and most densely populated country, with 941 person per sq. km. (BER. 2006, XVII). It is predominantly a rural economy. The agriculture that is the prime sector of the economy contributes about 19.59 percent of the total GDP, occupying 51.69 percent of the employed labour force and over 80 percent of total population live in the rural areas (BER, 2006, 8). The majority of the rural people remain unemployed or underemployed for about most of the time. Rural Bangladesh is. characterized by landless, low income and unemployment resulting in high incidence to poverty which was 33.7 percent by using lower poverty line, while this stands 49.8 percent if upper poverty line is used.1 The incidence of poverty is much severe in rural areas much as 53.1 percent in against of 36.6 percent in urban areas (BER, 2003, 147). Incidence of poverty by Administrative Divisions has been shown in Table-1.1,( Page-18) Among the divisions of the country the highest incidence of poverty was observed in Rajshahi Division (61.6%) and the lowest in Sylhet Division (28.4%). In case of poverty gap, the highest poverty incidence was also found in Rajshahi Division (18.1%) and the lowest in Dhaka division (7.7%). Regarding the squared poverty gap, the highest incidence accounted for Rajshahi Division (6.9%) and the lowest was obtained in Dhaka division (2.6%). All these three measures of income poverty show that the highest poverty incidence prevails in Rajshahi Division (BER, 2005, 186). Though land is the main productive asset in the rural areas of Bangladesh, but distribution however is highly skewed. As statistical data show, about 57.1 percent and 70.6 percent of the rural households are landless according to lower line and upper line of poverty respectively, and 42.7 percent households owned up to 0.04 acres of land, 38.1 percent households owned up to 0.5 acres of land and 11.7 percent households owned more than 2.5 acres of land according to lower line of poverty (BER, 2003, 149, 2004, 173). It is evident from Table-1.2,( Page-19) that the gap between the poorest of the poor (bottom 5 percent) and richest of the rich (top 5 percent) is widening so as far as the Distribution aspect of income is concerned. In 1995-96 the accruing to top 5 percent of the households was 23.62 percent while income share of the lowest 5 percent was 0.88 percent implying the gap of income differential by 27 times. Comparatively, in 2000, income accruing to top 5 percent of the households (30.66 percent) is 46 times higher than the income accruing to lowest 5 percent of the household (0.67). The share of income of the bottom 5 percent has decreased from 0.88 percent in 1995-96 to 0.67 percent in 2000. On the contrary, the share of income of the top 5 percent has increased from 23.62 percent to 30.66 percent over the same period indicating highly skewed income distribution. Rising income inequality is also reflected in the Gini Coefficient, which reached to 0.472 in 2000 from 0.432 in 1995-96. In rural area the richest-poorest ratio in 2000 is found to be 35. 7 while in 1995-96 this ratio was 19. 73. in urban area this ratio increased to 53.4 in 2000 from 32.8 in 1995-96. Per capita income of the poor is found lowest in Rajshahi division (Tk. 468.89 and Tk. 526.44 respectively) measured against both lower and upper poverty line. Rajshahi Division shows the lowest per capita expenditure (Tk. 438.25 and Tk. 490.41 respectively) (BER, 2003, 150-151).