Vulnerability and poverty in Bangladesh

Poverty reduction will continue to be a principal objective of development policy. Despite the wealth of information on poverty in Bangladesh, rigorous quantitative studies to address the risks and poverty are scarce. This paper attempts to fill the gap by examining quantitatively the linkage between risks and movement in and out of poverty using nationally representative cross-section data. <br /><br />This study attempts to measure ex ante poverty and vulnerability of households in Bangladesh using Household Income and Expenditure Survey (HIES) data in 2005. The results show that vulnerability measurements give a better indication of the concept of poverty as a substantial share of those currently above the poverty line are highly vulnerable to poverty. Taking into account the dynamic dimensions of poverty, the present study estimates the ex ante welfare of households as opposed to the traditional poverty assessments, which can only present a static and ex post picture of households&rsquo; welfare. <br /><br />Policies to address poverty reduction therefore should not only highlight poverty alleviation interventions to support those who are identified as the poor ex post, but also the poverty &ldquo;prevention&rdquo; interventions to help those who are poor ex ante, that is, prevent those who are vulnerable to shocks not to fall into poverty. <br /><br />The study finds that agricultural households or those without education are likely to be the most vulnerable. For the chronically poor who lack economic assets, priority should be given to reduction of consumption fluctuations and building up assets through a combination of protective and promotional programmes. Access to financial services, for example, through microcredit programmes, might help poor households build up assets as it smoothes income and consumption, enables the purchase of inputs and productive assets, and provides protection against crises. On the other hand, the transient poor and high vulnerable non-poor households are most likely to benefit from combination of prevention, protection, and promotion which would give them a more secure base to diversify their activity into higher return, higher risk activities.