LightCastle Partners conducted a study, between the 11th and 13th of April, 2020, to comprehend the repercussion on the livelihood of LIC and LMIC rural population as a result of the whole system disruption due to the novel coronavirus pandemic and advocate a guideline for the betterment of the situation. The study was conducted across the eight divisions of Bangladesh with a total of 160 respondents, engaged in a variety of professions, especially agriculture. The respondents were randomly sampled from LightCastle’s data bank of more than 300,000 respondents representing various social strata of the Bangladeshi populace. Respondents were interviewed over phone calls by the core team members. and the responses were recorded and analyzed to formulate recommendations.
COVID-19 to Snatch Away the Success in Poverty Reduction in Bangladesh
The COVID-19 pandemic in Bangladesh has caused serious ramifications on income opportunities for rural communities due to a total system breakdown. The breakdown of the system is the repercussion of the nation-wide lockdown to hinder the spread of the virus. This lockdown, on the other hand, resulted in several things. For example, a demand-supply mismatch in the labor market due to scarcity of agricultural labor because of unavailable transportation and unequal distribution of farm laborer across the country, plunge in demand for transportation by companies and consumers because of restrictions on movement, etc. Then, there is also the demand-supply mismatch of consumer goods and services since there is a nosedive in demand by urban consumers for commodities and transport services. All these resulted in a nation-wide supply chain malfunction and the ferocity of the overall supply chain malfunction was felt mainly because of our decentralized market systems. Though the pandemic has an overall negative impact on the economy, the rural people are the most vulnerable because of the type of occupation they are involved in. According to the Labour Force Survey of 2016-2017, majority (41.2%) of the rural labor force in the labor force are involved in skilled agricultural, forestry and fisheries.
The prediction of the International Monetary Fund’s (IMF) 40-year low GDP growth of only 2% for this financial year explains how the pandemic has adversely affected the economy’s longstanding macroeconomic stability, potentially leading to reversals in terms of poverty reduction. This economic downturn can raze all the success Bangladesh achieved in taking down its poverty rate to 20.5% over the last decades. In Bangladesh, although the contribution of agriculture to GDP has gradually declined to 14.10%, the agrarian society, which is mainly situated in rural Bangladesh, solely depends on agriculture for their livelihood, and the sector warranties the livelihood of 40.6% of the population.
Short- and Long-Term Support Required to Elude the Repercussions of the Slump in Income
In the study, the majority of the respondents (49.83% of 160) from all the eight divisions were involved in agriculture (paddy, and other crops farming, vegetable farming, agricultural day labor, and fish farming). It was confirmed by the rural households that there has been a consistent decrease in income across all the regions and the nation-wide monthly average income of the rural lower-income population came out to be BDT 10,320, BDT 7,234, and BDT 4,325 for February, March, and April respectively. Amongst the eight divisions, the lower-income group from Dhaka, Rangpur, and Barisal experienced the sharpest fall in income of 64%, 53%, and 44% respectively for the month of April compared to March. The Daily Transport workers, i.e. Rickshaw pullers, Van, and Truck drivers faced the sharpest drop of 84.78% in April compared to March because the lockdown decreased movement of people.
Additionally, although the government confirmed that transport carrying daily necessities and agricultural products will be operating regularly, in real terms, the movement of transportation significantly reduced and resulted in job losses for many. Other professions experiencing the hardest hit of at least a 65% reduction in income for the same time period are vegetable farming and daily agricultural labor. The agricultural laborers mentioned that summer is the prime time for their income generation and a majority of their income comes from the Boro rice harvesting every year but this year they encountered a huge slump in their income. Because these day laborers could not even go to their respected destination of rice harvesting due to the nation-wide lockdown and social distancing regulations. As the majority of the respondents in the study were involved in agriculture and the coronavirus pandemic has shaken the entire value chain, this type of slump in income was quite expected. Due to this consistent shortfall in income, more than half (54.72%) of the rural workers and farmers mentioned that they were out of cash savings and this will be exacerbated in the long run if the current inactive segments of different value chains are not rejuvenated. Currently, for the shorter run what they need for survival is cash grants, free foods, free medicines, low-cost loans, etc.
As the source of income for the majority of the rural workers and farmers were affected, they were asked the state the type of support they required. Here, most of the rural workers and farmers (45%) mentioned that they required free food and medicines as survival was at a stake for many of them, 31% of the rural workers and farmers mentioned that they required cash grants and 14% of the rural workers and farmers who were comparatively at a better situation required low-interest loans as preparation for restarting work as soon as the situation gets better.
Calling for Reviving the Inactive Segments of the Value Chain
With the entire country under lockdown along with certain social distancing regulations, maintaining a plain sailing value chain, especially for a labor-intensive agriculture sector, is quite challenging. Thus, the major food value chains are tethering on the edge of a major catastrophe, which is also evident from the study. Rural farmers who were involved in different segments of the agricultural value chain mentioned that the major reason behind the value chain disruptions was lower consumer demand (78%), and lack of transportation (41%).
Conversations with a number of rural workers and farmers revealed the reasons behind the value chain distortions in different industries of the agricultural sector, such as poultry, fisheries, dairy, and crops and vegetables. The sales in the poultry industry dropped as the consumers are restricted due to the lockdown. There has been a striking slump in demand for meat and eggs, as a result, hatcheries are being forced to sell the hatched eggs at a throwaway price. On the other hand, the production of poultry also decreased to 70 to 75% due to the scarcity of raw materials that are stuck at the ports.
The situation of the fish farmers was found to be even worse, especially in the Rajshahi division. The sales volume and prices of fish plunged significantly throughout the nation. The fish farmers are in a dilemma as they can neither sell nor store their products. The farmers who mentioned that they are being forced to sell their products at a lower price than production cost also added that they experienced a slump in demand and a shortage of transportation vehicles.
Though immediately after the lockdown the dairy industry faced an increased demand, in recent times the demand has decreased in all levels, local mills, direct consumers, etc. The prices of liquid raw milk dropped from BDT 36-52/litre to BDT 20-28/litre. The rural people who are involved in the production of perishable products are in severe loss because of the dearth of storing facilities.
Paddy and vegetable farmers are in jeopardy because of the pandemic. Boro, which is the highest-produced paddy in Bangladesh, might face a significant slump in Boro harvesting due to the high scarcity of farm laborers as the farm laborer distribution across the country is highly unequal. Though the rural paddy farmers mentioned that there has been an increase in the prices of paddy compared to the previous month, this does not mean that this has ameliorated the lives of the farmers. The increased prices might not have covered higher production costs that have attributed by the scarcity of laborers. Farmers producing summer vegetables are at greater risk as the prices of perishable vegetables plunged deeply. This dip in prices has led to farmers cutting their losses by selling products before they are spoiled. Thus, most of them are unable to even regain their investments in this scenario.
The COVID-19 induced lockdown struck all parts of the agricultural value chain because of social distancing, breakdown in logistics and storage facilities, scarcity of laborers, etc. And all these distortions have resulted in shaken production, price distortions, and uncertain living conditions of the rural lower-income people.
Insufficiency in Preventive Measure to Control the Probable Upcoming Waves
The rural workers and farmers were also asked about their awareness regarding the challenges imposed by the coronavirus and the implications of the deadly disease, and 70% of the rural workers and farmers mentioned news/media as the source of their information in this regard. To keep in line with the knowledge regarding awareness, 85% of 160 rural households were washing their hands regularly, 47% of 160 were maintaining cleanliness, etc. On the contrary, only 22% of the rural households mentioned that they have been avoiding crowded places and only 4% of the rural households prayed at home as a precautionary measure. This is contrary to what the government has prescribed as a short time highly effective method of deterring the contagion. The importance of home quarantine must be further instilled further into the general populace if we are to maintain or control the level of infection and death and combat the upcoming probable waves.
Fastidious Execution of Policies to Lessen the Hit on the Farmers and Rural Workers
By taking a look at the economic and welfare situation of the rural lower-income population to bring out the key challenges faced by the rural workers and farmers, recommendations for major system bodies, for example, government, development sector, and community-driven institutions, have been strategized.
The factors that led to an increase in the volatility of this situation are major distortions in the agricultural value chains, high dependency on agriculture for the livelihoods of most of the people rural people, seasonal effect, low savings, etc. Focusing on these factors, a guideline for ensuring the betterment of the rural workers and farmers has been customized.
According to the study, the government should procure food outputs directly from areas of high production and redistribute those to the areas in need to tackle price and market distractions government. Direct sourcing from farming communities can ensure the money spent is cascading to those in need. Many rural workers and farmers mentioned that they have zero savings for survival, and in real terms, the absolute number of these people is even higher.
The government needs to identify and provide in-kind and cash support for the people. For the current fiscal year banks still have BDT 14,500 crore remaining for the grains and crops of the agricultural sector. So, Bangladesh bank gave more attention to the other sectors of agriculture (Flower and Fruit Farming, Pisciculture (Fish Farming), Poultry, Dairy, and Livestock) while declaring the stimulus package of BDT 5,000 crore in its Agricultural Credit Division Circular No – 01.2 However, deployment of the fund might get delayed due to bureaucratic red-tape. Rapid deployment of these loans must be ensured by Bangladesh bank and commercial banks in the country have a huge role to play here too. Microfinance Institutions can play a pivotal role in this too.
The rural workers and farmers are the ones who are economically the most affected. As these groups cover a large portion of our population, the entire economy heavily relies on their revival. So, to ensure the revival certain short-term and long-term policies have been considered. Starting from cash and in-kind support as a short-term solution to the rural financing scheme as a long-term solution is essential for reviving the source of income of the rural households. However, as much as fastidious the execution of these policies has to be, the proper execution plan is a must. But none of the major system bodies mentioned anything about the execution plans.
Author: Nahian Hasnin, Business Analyst, LightCastle Partners
The LightCastle team has been analyzing the macro and industry level picture and possible impacts wrought about by the Covid-19 crisis. Over the following days, we’ll be covering the major sectors shedding light on the possible short and long term ramifications of the global pandemic. Read all the articles in the series.
- 1. Bangladesh GDP growth to hit 40-yr low at 2pc this FY: IMF – New Age
- 2. Poverty rate lowers to 20.5pc in 2018-19 – New Age
- 3. Agricultural Credit Division (ACD) – Circular No – 01 – Bangladesh Bank