One breadwinner in every home is not a pipedream
Monday, 20 April 2009
Maswood Alam Khan
It is lamentable that many commentators and critics imprudently make funny caricatures of a commitment some candidates of the party-in-power had spoken about in their election campaigns that they would ensure creation of at least one job in every house in Bangladesh if people would have chosen them to run the government. The political commitment of job-creation on such a huge scale may sound tall and preposterous, but fulfilling the pledge as a matter of fact is very much possible if the government adopts proper strategies and undertakes a crash programme for quick employment generations.
Given limitations of budgetary constraints and involuntary job cuts can the government assume a gigantic assignment of creating jobs enough to absorb shocks of recession and also to fulfill their election commitment? The pragmatic answer is: Yes, definitely we can if banking policy, inter alia, is redesigned with the target of 'employment generation' taking precedence over other commercial targets of banks. A new way of affixing business target of a bank, for instance, may thus be "50,000 new jobs to be created in 2009-2010," instead of usual target like "Taka 8.0 billion (800 crore) in operating profit".
Achieving the target of creating 50,000 new jobs through bank finance can easily yield profit of Taka 8.0 billion (800 crore) or more, but no private or state-owned bank would agree to accept the target of profit tightly tagged with the number of new jobs to be created as a corollary. A bank will readily accept and achieve a target to make annual profit of even Taka 10 billion (1,000 crore), provided the conditionality of creating jobs is an option of low priority. Ready answers against 'job creation through bank finance' bankers are apt to say: "Increase of jobs is concomitant of increase of investment". Their answer, however, is a half-baked truth in the context of Bangladesh.
There is a secret behind this paradox a banker feels shy to disclose in public. The government is also hoodwinked by the bankers into believing that the banking job is to make only profit by maintaining as much performing assets as possible; creating new jobs is none of their business. That is why the traditional targets assigned to bankers are prioritized as 'deposits', 'loans and advances', 'seasonal disbursements', 'recovery of performing and nonperforming assets (loans)' and 'profit' -- all these targets highlighted in large and bold fonts.
Bankers are, however, given by the government an additional target which is printed in small fonts at the foot of the shortlist of the major targets. The not-so-significant target to bankers is "15 per cent new loans to be disbursed to new borrowers"; this is the target banks, especially private banks, traditionally circumvent without provoking the ire of the government. Ironically, this is the target of new loans which, if it could be achieved every year, would yield the same amounts of profits the banks have been making and at the same time would have generated, as a bonus, millions of employments by this time.
Instead of giving loans to borrowers who can generate employments in both rural and urban areas, the banks find it hassle-free to enhance every year the loan amounts of only select big borrowers without much bothering about new small loans. Both the government and the central bank are, however, kept content and happy with the figures of profit the bankers make by bestowing favours only on the blessed and the affluent -- a notorious behavior of a banker that is well expressed in a Bangla idiom: "Teler mathai tel dewa" (rubbing one's already oiled hair with more oil).
If only the target of making new loans, with resultant employment generations clearly mentioned, were on the top of the shortlist of the banks' annual targets, bankers would not find any shortcut recourse in making profits without creating new loans that generate maximum new employments. The best way to alleviate our poverty and shield our economy from any recessionary shock is to assign to every bank primary target of generating specific number of employments to be followed by other conventional targets like those of deposit, advance, recovery, profit etc.
Recession in developed markets and slowdown in the Middle East have already begun to pose a threat to Bangladeshi exports and remittances. Bangladeshi wage earners have started losing their jobs abroad and are returning back to homes in hordes. In three months, from December, 2008 till February, 2009 about 14,000 Bangladeshi workers have returned home after losing their overseas jobs. Fifty per cent Bangladeshis are about to lose their jobs in Saudi Arabia very shortly. Export orders have slowed down to an alarming level. Price of Bangladeshi frozen shrimps has steeply declined from US$ 5.00 per kilogram to US$ 3.70. Job loss in jute sector will reach 50,000 by the end of 2009. Twelve spinning mills out of 341 have already been shut. Demand for labour in almost all sectors has greatly fallen.
On the 13th April the World Bank and the Bangladesh Bank both cautioned that days ahead may be pretty difficult if Bangladeshi young men continue losing their jobs both at home and abroad with waves of global recession devastating the developed countries and now lurking to hit the shores of developing countries like ours. The World Bank Country Director Xian Zhu in a report suggested immediate creation of an extra one million jobs in the Bangladesh as a recession guard and Bangladesh Bank Governor Salehuddin Ahmed suggested Bangladeshi expatriates working abroad not to invest in unproductive sectors.
Creating an additional one million jobs and attracting returning Bangladeshi wage earners to set up small and medium industries in the vicinity of their homes, in order to invest their savings in productive purposes, are now matters of paramount importance for our government. At this critical juncture when the government should undertake some essential stimulus measures like strengthening social safety nets, extravagances like subsidies to industries, enhanced pay bills for public servants, importation of unnecessary luxuries etc., should be avoided so that money thus saved may be invested in recruiting fresh employees only in state-owned banks which through offering small and medium enterprise (SME) loans to returning wage earners can help generate further employments in trade and commerce.
Such state-owned model enterprises may be Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB) which compared to any other organization can better help generate employments through infusion of new loans to new borrowers, especially to returning wage earners. Infusing any money by the government into private enterprises as doles in the name of 'stimulus package' would be a historically irreparable mistake.
More than fifty per cent of the total area of Bangladesh is supposed to be covered by betel leaf plants, ginger plants and banana trees if what is recorded in the ledgers of advances of BKB is true as regards crop-wise disbursement of loans. Reason: amount of loans (not number of new loans) disbursed and recovered is the mileage that determines a BKB field official's lucrative posting and promotion. Why on earth are the fields artificially filled by betel leaf creepers and ginger plants by the BKB field officials? The story behind the fact is a little unethical and quirky. Pressed under unbearable load of loans, a BKB field official, instead of scouting for new borrowers, foists enhanced amount of loan upon an old borrower with the same acreage of cultivable land by showing in bank ledger a false crop, betel leaves for instance, that qualifies a borrower for a maximum amount of loan, though in reality the borrower is perhaps cultivating in his land Aush paddy that qualifies him for the minimum. Allowable loan for Paan (betel vine) cultivation is Taka 74,800 per acre for land owner, Taka 32,970 for ginger, Taka 31,600 for banana, and Taka 13,200 for Aush paddy. Unbearable job pressure and lack of bare minimum logistics are the culprits behind such weird banking transactions.
When the ideal official-borrower ratio in rural Bangladesh is one field supervisor to 300 borrowers, at present one field supervisor, on an average, is taking care of 2,300 borrowers and in some remote areas, one supervisor is forced to bear the brunt of even 5,000 borrowers. The presence of excessive job pressure combined with a lack of organizational support creates an unhealthy work stress that can lead to a wide range of physical, psychological, and behaviourial forms of distress when a pressurized worker losing his sense of sanity takes resort to falsity or bribery to achieve his organizational goals.
BKB and RAKUB, two government-owned banks covering 90 per cent of the borrowers in rural areas, are the only institutions that cater to the financial needs of small farmers and traders by providing loans at the lowest interest rates both with and without collateral security. The burden of interest and other service charges imposed by non-government organisations (NGOs) and private banks is at least four times more than what is charged by these two agricultural banks. In spite of multifarious limitations including chronic shortage of manpower Krishi Banks have been disbursing loans at incremental quantum though it has not been possible for them to maintain the desired concomitant increment in the number of borrowers.
In 2004, BKB disbursed short-term loans including crop loans, the mainstay for our rural economic development, to a little more than 0.7 million borrowers, a figure that has not changed in subsequent years till June, 2008. Though the disbursed amount of short term loans increased from Tk 17.09 billion (1,709 crore) in 2004 to Tk 31.17 billion (3,117 crore) in 2008 the number of borrowers has remained almost constant at 'a little more than 700 thousand', meaning the bank's field officials could not have any breathing time or space to scout for the desired 15 per cent new borrowers who could be self-employed breadwinners and many of whom could also hire wage earners. For a poor country like ours such stagnation in employment generation through banks' assistance is simply suicidal.
Bygone is bygone. Let us take paper and pencil to see how immediate new recruits in both BKB and RAKUB, where perennial manpower shortage has long been taking its toll on loan management in the fields, can make wonders in generating quick employments-both self-employments and wage-based employments-in a matter of a few months. BKB and RAKUB combined can alone generate about six hundred and forty thousand new jobs (sounds unbelievable?) in the agricultural sector in a matter of one year, provided our government-the owner of the two banks-takes immediate steps to equip these two banks with sufficient manpower, in spite of the fact the two banks incurred huge losses in the past only for their social commitments.
Overwhelmed by the heroic contributions of BKB field officials in the late 1990s, a number of senior ministers including the then Finance Minister of the government had vowed that there would be at least one BKB branch in every union of Bangladesh. Now is the time, when recession is stalking us, the government of the same political party must turn their words of promise into actions. With BKB and RAKUB, if allowed to operate their branches in all the 4,451 unions under their jurisdictions, the collective strength of these two prodigious banks can easily make sure that at least half a million new jobs are created within one year to weather the storm of impending recession, as suggested by the World Bank.
One who remembers the valiant role BKB had played in financing the victims of 1998 countrywide colossal flood and 2007 SIDR cyclonic storm will believe that one field supervisor (I fondly call him a coast guard in emergencies), given a little latitude of freedom from his overload, is capable to process at least three new loans every month in addition to servicing his allotted quota of loans if he is entrusted with a maximum load of 750 loan portfolios instead of whopping 2,500 he has now been shouldering breathlessly.
Three new small loans-each of Taka 500 thousand or less-created means at least six new jobs to fetch 'dal' and 'bhat' (lentil soup and rice) for 24 members of six families. With two field supervisors in each union the total number of jobs generated will thus stand at 640,944 in one year and 32.50 million in five years which almost meets the commitment of the party-in-power to create 34 million jobs, that is one job in each home of 68,000 villages having 34 million homes, 50 homes being in each village on an average.
(Maswood Alam Khan is a banker. He may be reached on maswood@hotmail.com)
It is lamentable that many commentators and critics imprudently make funny caricatures of a commitment some candidates of the party-in-power had spoken about in their election campaigns that they would ensure creation of at least one job in every house in Bangladesh if people would have chosen them to run the government. The political commitment of job-creation on such a huge scale may sound tall and preposterous, but fulfilling the pledge as a matter of fact is very much possible if the government adopts proper strategies and undertakes a crash programme for quick employment generations.
Given limitations of budgetary constraints and involuntary job cuts can the government assume a gigantic assignment of creating jobs enough to absorb shocks of recession and also to fulfill their election commitment? The pragmatic answer is: Yes, definitely we can if banking policy, inter alia, is redesigned with the target of 'employment generation' taking precedence over other commercial targets of banks. A new way of affixing business target of a bank, for instance, may thus be "50,000 new jobs to be created in 2009-2010," instead of usual target like "Taka 8.0 billion (800 crore) in operating profit".
Achieving the target of creating 50,000 new jobs through bank finance can easily yield profit of Taka 8.0 billion (800 crore) or more, but no private or state-owned bank would agree to accept the target of profit tightly tagged with the number of new jobs to be created as a corollary. A bank will readily accept and achieve a target to make annual profit of even Taka 10 billion (1,000 crore), provided the conditionality of creating jobs is an option of low priority. Ready answers against 'job creation through bank finance' bankers are apt to say: "Increase of jobs is concomitant of increase of investment". Their answer, however, is a half-baked truth in the context of Bangladesh.
There is a secret behind this paradox a banker feels shy to disclose in public. The government is also hoodwinked by the bankers into believing that the banking job is to make only profit by maintaining as much performing assets as possible; creating new jobs is none of their business. That is why the traditional targets assigned to bankers are prioritized as 'deposits', 'loans and advances', 'seasonal disbursements', 'recovery of performing and nonperforming assets (loans)' and 'profit' -- all these targets highlighted in large and bold fonts.
Bankers are, however, given by the government an additional target which is printed in small fonts at the foot of the shortlist of the major targets. The not-so-significant target to bankers is "15 per cent new loans to be disbursed to new borrowers"; this is the target banks, especially private banks, traditionally circumvent without provoking the ire of the government. Ironically, this is the target of new loans which, if it could be achieved every year, would yield the same amounts of profits the banks have been making and at the same time would have generated, as a bonus, millions of employments by this time.
Instead of giving loans to borrowers who can generate employments in both rural and urban areas, the banks find it hassle-free to enhance every year the loan amounts of only select big borrowers without much bothering about new small loans. Both the government and the central bank are, however, kept content and happy with the figures of profit the bankers make by bestowing favours only on the blessed and the affluent -- a notorious behavior of a banker that is well expressed in a Bangla idiom: "Teler mathai tel dewa" (rubbing one's already oiled hair with more oil).
If only the target of making new loans, with resultant employment generations clearly mentioned, were on the top of the shortlist of the banks' annual targets, bankers would not find any shortcut recourse in making profits without creating new loans that generate maximum new employments. The best way to alleviate our poverty and shield our economy from any recessionary shock is to assign to every bank primary target of generating specific number of employments to be followed by other conventional targets like those of deposit, advance, recovery, profit etc.
Recession in developed markets and slowdown in the Middle East have already begun to pose a threat to Bangladeshi exports and remittances. Bangladeshi wage earners have started losing their jobs abroad and are returning back to homes in hordes. In three months, from December, 2008 till February, 2009 about 14,000 Bangladeshi workers have returned home after losing their overseas jobs. Fifty per cent Bangladeshis are about to lose their jobs in Saudi Arabia very shortly. Export orders have slowed down to an alarming level. Price of Bangladeshi frozen shrimps has steeply declined from US$ 5.00 per kilogram to US$ 3.70. Job loss in jute sector will reach 50,000 by the end of 2009. Twelve spinning mills out of 341 have already been shut. Demand for labour in almost all sectors has greatly fallen.
On the 13th April the World Bank and the Bangladesh Bank both cautioned that days ahead may be pretty difficult if Bangladeshi young men continue losing their jobs both at home and abroad with waves of global recession devastating the developed countries and now lurking to hit the shores of developing countries like ours. The World Bank Country Director Xian Zhu in a report suggested immediate creation of an extra one million jobs in the Bangladesh as a recession guard and Bangladesh Bank Governor Salehuddin Ahmed suggested Bangladeshi expatriates working abroad not to invest in unproductive sectors.
Creating an additional one million jobs and attracting returning Bangladeshi wage earners to set up small and medium industries in the vicinity of their homes, in order to invest their savings in productive purposes, are now matters of paramount importance for our government. At this critical juncture when the government should undertake some essential stimulus measures like strengthening social safety nets, extravagances like subsidies to industries, enhanced pay bills for public servants, importation of unnecessary luxuries etc., should be avoided so that money thus saved may be invested in recruiting fresh employees only in state-owned banks which through offering small and medium enterprise (SME) loans to returning wage earners can help generate further employments in trade and commerce.
Such state-owned model enterprises may be Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB) which compared to any other organization can better help generate employments through infusion of new loans to new borrowers, especially to returning wage earners. Infusing any money by the government into private enterprises as doles in the name of 'stimulus package' would be a historically irreparable mistake.
More than fifty per cent of the total area of Bangladesh is supposed to be covered by betel leaf plants, ginger plants and banana trees if what is recorded in the ledgers of advances of BKB is true as regards crop-wise disbursement of loans. Reason: amount of loans (not number of new loans) disbursed and recovered is the mileage that determines a BKB field official's lucrative posting and promotion. Why on earth are the fields artificially filled by betel leaf creepers and ginger plants by the BKB field officials? The story behind the fact is a little unethical and quirky. Pressed under unbearable load of loans, a BKB field official, instead of scouting for new borrowers, foists enhanced amount of loan upon an old borrower with the same acreage of cultivable land by showing in bank ledger a false crop, betel leaves for instance, that qualifies a borrower for a maximum amount of loan, though in reality the borrower is perhaps cultivating in his land Aush paddy that qualifies him for the minimum. Allowable loan for Paan (betel vine) cultivation is Taka 74,800 per acre for land owner, Taka 32,970 for ginger, Taka 31,600 for banana, and Taka 13,200 for Aush paddy. Unbearable job pressure and lack of bare minimum logistics are the culprits behind such weird banking transactions.
When the ideal official-borrower ratio in rural Bangladesh is one field supervisor to 300 borrowers, at present one field supervisor, on an average, is taking care of 2,300 borrowers and in some remote areas, one supervisor is forced to bear the brunt of even 5,000 borrowers. The presence of excessive job pressure combined with a lack of organizational support creates an unhealthy work stress that can lead to a wide range of physical, psychological, and behaviourial forms of distress when a pressurized worker losing his sense of sanity takes resort to falsity or bribery to achieve his organizational goals.
BKB and RAKUB, two government-owned banks covering 90 per cent of the borrowers in rural areas, are the only institutions that cater to the financial needs of small farmers and traders by providing loans at the lowest interest rates both with and without collateral security. The burden of interest and other service charges imposed by non-government organisations (NGOs) and private banks is at least four times more than what is charged by these two agricultural banks. In spite of multifarious limitations including chronic shortage of manpower Krishi Banks have been disbursing loans at incremental quantum though it has not been possible for them to maintain the desired concomitant increment in the number of borrowers.
In 2004, BKB disbursed short-term loans including crop loans, the mainstay for our rural economic development, to a little more than 0.7 million borrowers, a figure that has not changed in subsequent years till June, 2008. Though the disbursed amount of short term loans increased from Tk 17.09 billion (1,709 crore) in 2004 to Tk 31.17 billion (3,117 crore) in 2008 the number of borrowers has remained almost constant at 'a little more than 700 thousand', meaning the bank's field officials could not have any breathing time or space to scout for the desired 15 per cent new borrowers who could be self-employed breadwinners and many of whom could also hire wage earners. For a poor country like ours such stagnation in employment generation through banks' assistance is simply suicidal.
Bygone is bygone. Let us take paper and pencil to see how immediate new recruits in both BKB and RAKUB, where perennial manpower shortage has long been taking its toll on loan management in the fields, can make wonders in generating quick employments-both self-employments and wage-based employments-in a matter of a few months. BKB and RAKUB combined can alone generate about six hundred and forty thousand new jobs (sounds unbelievable?) in the agricultural sector in a matter of one year, provided our government-the owner of the two banks-takes immediate steps to equip these two banks with sufficient manpower, in spite of the fact the two banks incurred huge losses in the past only for their social commitments.
Overwhelmed by the heroic contributions of BKB field officials in the late 1990s, a number of senior ministers including the then Finance Minister of the government had vowed that there would be at least one BKB branch in every union of Bangladesh. Now is the time, when recession is stalking us, the government of the same political party must turn their words of promise into actions. With BKB and RAKUB, if allowed to operate their branches in all the 4,451 unions under their jurisdictions, the collective strength of these two prodigious banks can easily make sure that at least half a million new jobs are created within one year to weather the storm of impending recession, as suggested by the World Bank.
One who remembers the valiant role BKB had played in financing the victims of 1998 countrywide colossal flood and 2007 SIDR cyclonic storm will believe that one field supervisor (I fondly call him a coast guard in emergencies), given a little latitude of freedom from his overload, is capable to process at least three new loans every month in addition to servicing his allotted quota of loans if he is entrusted with a maximum load of 750 loan portfolios instead of whopping 2,500 he has now been shouldering breathlessly.
Three new small loans-each of Taka 500 thousand or less-created means at least six new jobs to fetch 'dal' and 'bhat' (lentil soup and rice) for 24 members of six families. With two field supervisors in each union the total number of jobs generated will thus stand at 640,944 in one year and 32.50 million in five years which almost meets the commitment of the party-in-power to create 34 million jobs, that is one job in each home of 68,000 villages having 34 million homes, 50 homes being in each village on an average.
(Maswood Alam Khan is a banker. He may be reached on maswood@hotmail.com)