Bangladesh Bank speeds up financial inclusion, says governor Atiur Rahman

From The Daily Star
Bangladesh Bank (BB) Governor Atiur Rahman yesterday said the central bank has intensified financial inclusion movement to ensure sustainable development.
It increased credit flow to agriculture, small and medium enterprises and environment-friendly projects, he said.
“The central bank has taken various steps to help the government ensure sustainable development and equitable economic growth for poverty reduction,” the governor said while addressing the reunion of the finance alumni of Dhaka University Finance Department.
During global economic crisis, Bangladesh efficiently maintained macroeconomic balance, he said, adding that despite external and internal risks, sustainable agricultural growth and sensible expansion of service and manufacturing sectors helped Bangladesh achieve a 6.7 percent GDP growth in last fiscal year.
“The government is expecting a 7 percent growth in the current fiscal year. During the last three years, the country achieved 47 percent growth in export, and inflow of remittance also witnessed a 20 percent growth and forex reserve reached $9.35 billion,” said the BB governor.
He said the euro zone has been facing a new financial crisis. To avert its negative impacts, the BB will have to closely monitor the possible overall economic risks side by side, playing a proactive role to minimise those risks, he added.
“For achieving long-term sustainable growth, we’ve to diversify our export products and look for new markets,” he said.
“We’ve to discourage import of unproductive luxurious products and check unnecessary state and social expenditures,” he added.
Rahman said Bangladesh needs to continue its hunt for new labour markets, and steps must be taken to increase manpower exports to the existing markets. Internal demand for manpower must be increased through expanding social safety net for the hardcore poor, he added.
The governor said economic cooperation must be strengthened at regional and international level to face possible economic crisis.
Especial emphasis will be given on intensifying intra-regional trade and cooperation through using the regional network such as Asian Clearing Union and Saarc, Rahman added.

Celebrating the successes of small efforts

From The Daily Star
‘NO society can surely be flourishing and happy, of which by far the greater part of the numbers are poor and miserable’ - Adam Smith in The Wealth of Nations (1776). Sadly, poverty is still a scar on humanity’s face and a denial of every ‘basic human right’—health, education, housing, food, water and energy, and access to fairer banking and credit.
The idea of small, ‘collateral-free’ loans for poor—developed by Nobel Peace Prize-winning Bangladeshi economist Muhammad Yunus in 1976, followed by founding the Grameen Bank (village bank) in 1983 -- or microcredit as a tool to alleviate poverty has become a global phenomenon. After two decades, this movement has gained a centre-stage with Microcredit Summit Campaign planted in 1997, followed by its year-on-year strength. The Global Microcredit Summit 2011 marked the 15th year of this campaign.
As the editorial lens of this excitingly new journal defines, the purpose of a more ‘encompassing economics paradigm’ is to progress the productivity and sustainability of our next generation out of every community. From this perspective, bold entrepreneurial challenges emerge all over the world in which developed nations can gain a lot from going back to basic community-grounded lessons as Bangladesh has shown the way and is branded as the epicentre.
And, our attempt to develop a special ‘Action Research’ issue of this journal to match the aspirations of the fifteen years of the microcredit summit campaign would refresh readers with what Dr John Hatch of the Foundation for International Community Assistance (FINCA) emphasised at the US-based citizens lobby—RESULTS’ International Conference in 1994 calling for a microcredit summit to launch a vigorous campaign to reach the world’s poorest families:
“Behold the largest self-help undertaking in human history—bringing hope, dignity, and empowerment to tens of millions of the world’s poor and poorest families. Behold a movement with global outreach that has penetrated beyond city slums and market towns to even the most isolated villages. Behold an industry that embraces thousands of NGOs, credit unions, public and private banks, and an infrastructure of hundreds of thousands of community-based peer lending groups that are enabling many of the planet’s most disadvantaged households to generate the additional income and savings they need to keep their children alive, nourished, healthy, and able to attend school.”
Just a couple of days after the first microcredit summit held in Washington, DC, USA from February 2-4 in 1997, Prince Charles during his visit to Dhaka met the ‘real-world’ microbanker Prof Muhammad Yunus, who, he—as expressed in a Foreword to Banker To The Poor (1998) -- found remarkable, speaking the greatest good sense … “I have since done all I can to encourage a wider consideration and appreciation of micro-credit... It has a use, too, in the developed world—whether in remote rural Norway or run-down suburbs of British cities. It is remarkably cost-effective. It has a proven track record ... Best of all, it allows poor and disadvantaged people to take control of their own lives, make something of themselves and improve the lot of their own families.” His expression resonates what microcredit enthusiasts in Europe now advocate, it could just easily help the unemployed in Europe, where a sovereign debt crisis and eventual public spending cuts are currently compounding stubbornly high jobless figures. Even in normal circumstances, it could help those—with pitiful credit scores and the lack of collateral—who don’t stand a chance of getting loans from traditional lenders, pull themselves off welfare by staring their small businesses. In this context, European Commission’s new 10-year plan to boost economic growth and create jobs, known as ‘Europe 2020’, presents an opportunity to integrate microcredit into EU priorities. But existing regulatory obstacles to micro-finance institutions (MFIs) operations in Europe need to be lifted.
Recently, Microcredit champion Prof Yunus and European Commission President José Manuel Barroso had discussions on the prospect and promotion of microcredit in Europe to lift disadvantaged communities out of poverty, and the urgency of introducing appropriate laws and regulations. It is, however, a welcome development that a consortium of 20 law firms are now working for a major study on the regulatory obstacles to microcredit across the EU’s 27 member states. Maria Nowak, founder of ADIE International, the biggest MFI in Western Europe, is actively assisting in this move.
In the face of worsening global economic crisis the battle between the macroeconomics that disinvests in youth’s futures and sustainability, and the entrepreneurial economics that improves the net generation’s productivity, is accelerating. The lack of a pro-youth investment mindset virtually poses a challenge to transformative economics. It would seem probable that both developed and developing worlds now need to learn the transparent truth about the models that microcredit summit set out to empower worldwide knowledge exchanges around the first Microcredit Summit in 1997. In other words, all of our media now needs to value the leadership and working heroes and heroines of Bangladeshi microcredit now more than ever. As an innovative micro-up route to economic transformation, among other things, the success of micro initiatives represents aggressive use of market forces and sustainable business practice to achieve substantive social goals. Both BRAC and Grameen Bank are classic examples of such a model. Also, originated in 1999, Jamii Bora is a recent addition. In this spirit, perhaps, Queen Sofia of Spain and Prince Charles of the UK were inviting wider audience to understand how Bangladeshi microcredit worked as a transformative system from assumptions that ‘fatal conceit’ economics has spun over the last 40 years. As such, this journal forms a part of wider movement to transform economics.
This special issue aims at celebrating connectivity between ‘basic human rights’ areas of health, education, housing, food, water and energy, credit and banking. And we have attempted to illustrate, alongside BRAC and Grameen, a number of micro initiatives/projects like Jamii Bora of Kenya which originated during the first 15 years of Microcredit Summit Campaign, with focuses on—does this programme integrate with other micro-practice areas or millennium development goals beyond financial impacts of ending poverty, what makes the model of the project sustainable, and what collaboration help is needed next?
The Microcredit Summit Campaign has recently shown that while more than 205 million people worldwide received a microloan in 2010, this multi-year campaign focuses on outreach to the poorest clients. According to the report, over the last 13 years, the number of very poor families with a microloan has grown more than 18-fold from 7.6 million in 1997 to 137.5 million in 2010. The latest data comes from more than 3,600 institutions worldwide, with more than 94 percent of the information having been collected within the last 18 months.
The Campaign’s goal set for 2015 that 175 million of the world’s poorest families, especially the women of those families, would be receiving credit for self-employment and other financial and business services. With an average of five in a family, this would affect 875 million family members.
Figures released by the Microcredit Summit Campaign on January 28 this year shows that nearly two million Bangladeshi households involved in microfinance, including almost 10 million family members, rose above the $1.25 a day threshold between 1990 and 2008. Dhaka-based Economic Research Group (ERG) undertook the survey between February and August in 2009, covering more than 4,000 Bangladeshi households. This survey included a large number of clients from BRAC and Grameen Bank—the two Bangladeshi institutions known for their groundbreaking efforts to end rural poverty.
While successes of micro initiatives leading to improved lives out of microloans continue, overindebtedness from multiple loans, coercive collection practices, exorbitant interest rates and mission drift arising out of two MFIs (Compartamos in Mexico and SKS in India) hugely profiting from initial public offerings (IPOs), appear as grey areas and pose a challenge to the sector’s direction. It is good that the summit’s plenary and workshops sessions were well designed to address, debate, interact and redefine the way forward while reasserting integrity of the MFI sector—not to benefit out of poverty and lose sight of its development focus. Also, many action learnings described in this special issue via deliberations by resourceful practitioners of exciting initiatives devoted to ultra-poor in rural areas and in urban slums, institutions offering student loans and scholarships to tens of thousands of children from extremely poor and illiterate backgrounds, and initiatives linking microfinance with health and clean energy, and with agriculture and clean water, will hopefully reinforce the promise of MFI sector.
It is an optimism that the Global Microcredit Summit 2011 in Valladolid, Spain, attended by over 2,000 delegates representing micro initiatives from all over the globe—remarkably BRAC, Grameen and Jamii Bora—would joyfully celebrate successes and remain as a lively, interacting assembly of understanding, respect and commitment towards microcredit borrowers worldwide—the millions of women and men who have set their great expectations on this summit.
Finally, this special issue of the Journal of Social Business carries the announcement of launching a new think and action tank by Adam Smith and Yunus scholars on Social Business Entrepreneurship and New Economic Ideas, known as “Global Institute for New Economics”. The think and action tank would develop an assembly of ‘social consciousness’ entrepreneurs and practitioners, policymakers and economists committed to action research on social intervention issues.

Bangladesh mobile operators’ infrastructure sharing at stake

From The Daily Star
A regulatory move is holding back Bangladesh’s mobile operators’ infrastructure sharing business with other service providers.
According to a decision of the regulator, the mobile companies will now have to share their network through a common network.
Also, the mobile operators will not be allowed to do such business in the areas where the common network—Nationwide Telecommunications Transmission Network (NTTN) -- has coverage.
Now two local companies—fiber@home and Summit Communication—have NTTN licences to provide services under the common network. But this network has a very limited reach.
Now if the mobile companies or other service providers want to rent their services, they will have to rent it at first to the two NTTN licensees, who will then rent those out to other service providers.
The move was taken unilaterally and will affect the business of the mobile operators, they said.
Zia Ahmed, chairman of Bangladesh Telecommunication Regulatory Commission (BTRC), said the commission is amending its previous regulations to this effect.
The BTRC move is aimed at encouraging local entrepreneurs, BTRC officials said.
The two NTTN licensees have been responsible for laying underground fibre optic cable across the country to lease out their cable to other service providers since 2008.
The NTTN operators could only develop their network in Dhaka, and fiber@home has developed some capacity outside Dhaka by taking rent of infrastructure from other mobile companies.
On the other hand, the mobile operators have already developed countrywide fibre optic infrastructure investing more than $400 million.
The mobile companies said, if the transmission infrastructure is used by a single company, their resources will be wasted.
The telecom operators also said, as the infrastructure will be rentable to the NTTN operators only, their huge capacity will remain unused. Internet cost of the end users will also go up, as the NTTN licensees will take rent of the line at first, and then rent it out to other service providers, they said.
Mahmud Hossain, chief corporate officer of Grameenphone, said the NTTN operators will take rent of the fibre optic cable from the mobile operators, and they will offer the service after making profit. It will increase the ultimate cost, he said.
Abu Saeed Khan, secretary general of Association of Mobile Telecom Operators Bangladesh, said the current regulatory action will inevitably increase the cost of bandwidth in Bangladesh which is grossly detrimental to the fundamental spirit of ‘Digital Bangladesh’ vision of the government.
The BTRC chairman said if the NTTN operators fail to provide the services, the mobile operators will be allowed to share their transmission network with other service providers.
Arif Al Islam, chief executive officer of Summit Communication, said it is not possible to develop the countrywide infrastructure overnight.
He said, when the third generation mobile technology will be launched in the country, a huge demand for bandwidth will be created, and a common infrastructure will be helpful then.
In the long run, the current regulation will be useful for all, he said.
An official of fiber@home said they are developing their network fast and will be able to provide all types of services required by their clients.
An internet service provider said they do not want to switch to the NTTN, as they fear this network will not be able to provide the services they need.
“We will need interfaces in several points which the NTTN will not be able to give us due to a lack of capacity,” said an official of the ISP, asking not to be named.
“They (the NTTN) have limited services outside Dhaka. Even if we enter their network, we will have to invest further in infrastructure development,” the official added.

United Airways to connect Muscat

From The Daily Star
Local private carrier United Airways (BD) will open flights to Muscat in January, targeting mainly Bangladeshi migrant workers in Oman.
The airline plans to start flying to the Arab state in the third week of the next month, it said in a statement yesterday.
“We have obtained permission from Muscat Civil Aviation Authority to operate on the route with our own Airbus-310 having 250 seats,” said Tasbirul Ahmed Choudhury, chairman and managing director of United Airways.
The nine-fleet carrier, which now operates on five international destinations, including Jeddah and Dubai, will fly on the Dhaka-Muscat route four days a week.
The airline inducted one A-310 in its fleet yesterday.
“The Gulf is the most important market for Bangladeshi airlines as one in two people who fly abroad goes to the six Gulf countries which employ more than 60 percent of the county’s over five million migrant workers,” Choudhury said.
United is one of the four local airlines that launched operations in 2007 to get a share of the pie of the migrant worker-dominated aviation market in Bangladesh.
“Bangladesh’s air traffic grew nearly 7 percent last year, making it one of the fastest-growing aviation markets in the region,” said the United Airways chief.
The airline, a listed company, also seeks to start flights to Riyadh and Dammam.
On the last trading day Thursday, United closed 1.67 percent higher at Tk 24.30 on Dhaka Stock Exchange.

Low prices cut into RMG export growth: analysts

From The Daily Star
A drastic reduction in prices of cotton, yarn and fabrics has slowed down export growth, analysts and exporters said.
As the prices of raw materials are low, the products have become cheaper and the buyers now pay less for their garment purchase, they said.
According to Export Promotion Bureau (EPB) statistics, overall exports grew by only 2.4 percent in November this year compared to the same month in the previous year. The growth was 15.44 percent in October and 2.29 percent in September.
But the fiscal 2011-12 started with a high hope -- 28.7 percent growth in export in July, the first month of the year, and 32.4 percent in August.
“We’re getting a lot of orders. The buyers now want to place orders for the next six months at a time to cash in on the present market price,” said Mahmud Hasan Khan, managing director of Rising Group that has both apparel and spinning business.
The prices of raw materials such as cotton, yarn and fabrics have come down by 50-60 percent now from that of January this year, he said.
The price of widely consumed 30-count yarn has come down to $3.2 a kg now from $5.5 in January.
“As the prices of raw materials went down significantly, growth in export in terms of value also slowed down,” said Khan.
Exports of knitwear and woven, which account for the country’s two-third of $22.93 billion export earnings per year, lag behind the strategic export target for July-November this fiscal year.
Bangladesh’s knitwear export was $3.99 billion during July-November of 2011-12, down by $105 million than the target for the same period. Similarly, woven export was less by $66 million than the target.
Mustafizur Rahman, executive director of Centre for Policy Dialogue (CPD), said this year’s export growth in terms of value would show a downtrend due to a sharp fall in the prices of raw materials.
“Depressed raw material market this year compared to last year could be a reason for a slowdown in export growth,” said Rahman. He said the prices of cotton and yarn were 60 percent up last year than their present value.
Still he sees challenges for Bangladesh’s exports due to the global economic situation.
“The current Euro debt crisis is likely to have adverse implications for Bangladesh’s exports in general, and exports of apparels in particular, in the EU. The first sign of this is already there,” said Rahman.
The CPD boss, however, forecasts a double digit growth at the end of this fiscal year.
The analysis found 10 major export sectors that earned $22.18 billion or about 97 percent of Bangladesh’s $22.93 billion worth of exports in fiscal 2010-11 are combinedly lagging behind the target so far this fiscal year.
The major export drivers are knitwear, woven, jute and jute goods, home textiles, frozen foods, agriculture products, engineering products, footwear, leather and specialised textiles.
The strategic target for these sectors for July-November period of the current fiscal year was set at $9.52 billion, but they combinedly earned less than $9.25 billion.
Jute and jute goods export was less than nearly 20 percent of the target, home textiles 21 percent and specialised textiles nearly 18 percent.

As euro steadies, fund managers hedge bearish bets

From Reuters
The European debt crisis roiled markets all year, producing the most volatile trading since the 2008-2009 meltdown. That is, except in one market -- the euro.
Fund managers that bet on a volatile, wild year of losses in the euro are paring back positions against the single currency going into 2012 after its surprising resilience to Europe's sovereign debt crisis damaged their portfolios.
Many still expect market turmoil arising from Europe's debt situation and have kept options strategies that will benefit from volatility. But they have put on trades that will pay off as well if the euro zone recovers from the crisis.
While Europe's debt drama kept markets on edge for most of the year, the euro is only down 2.6 percent against the dollar in 2011.
That is not as bad as headlines from the crisis might have suggested. This slashed returns for investors who paid premiums for strategies aimed at capitalizing on a sharp fall.
"Our mistake this year, especially in the first half, was looking a lot at headlines in the euro zone and trying to read the politicians' complete nonsense," said Harald Hild, portfolio manager at FX fund of funds Quaesta Capital in Zurich, Switzerland.
Hild runs the FX Volatility fund under the Quaesta group, with assets under management of about $3 billion.
"For most of the year, we were in a risk-off mode and we were paying high premiums for downside strikes in the euro and nothing really happened. So we started to look at it from a different perspective."
Investors generally pay for downside strikes, or lower exchange rates, when they believe the currency is going down.
Hild said the fund still expects the euro to go lower in 2012, but he'd rather hedge this view using calendar spreads, which involve entering a long and short position on volatility -- a measure of a currency's moves in either direction -- but with different tenors.
This strategy essentially plays on expectations of where volatility is headed over, say, a one-year period. If an investor expects euro/dollar volatility in the short term, but sees subdued price movement in 12 months, then he goes long one-month volatility and sells one-year volatility.
So far, Quaesta's volatility program has recovered, albeit slowly. The volatility fund was up 2.2 percent in November and 1.9 percent firmer so far this year in a performance that Hild describes as "disappointing".
WRONG-FOOTED
What appears to have wrong-footed investors betting against the euro in 2011 was that European banks sold assets abroad to bring funds back home to cushion against troubles in the European financial sector. This repatriation process provided unexpected support to the euro.
Particularly in October, currency managers were caught on the wrong side of the trade as stocks and commodities rallied and the euro gained 3.5 percent.
The Parker FX index, which tracks currency managers, was down 1.3 percent in October alone and 3.11 percent lower this year until the end of that month.
Despite a slew of negative headlines this year, ranging from wrangling within the euro zone to the latest warnings of downgrades from ratings agencies, the euro has held up relatively well.
The euro had a far more dismal year in 2010 when it dropped 6.6 percent and in 2008 when it posted losses of 4.2 percent.
Implied volatility on euro/dollar, or a broad measure of uncertainty in the options markets, has also remained subdued in recent sessions relative to the VIX index .VIX, the stock market's fear gauge, and gold's implied volatility .GVZ. There is anxiety in the currency options market about Europe's debt situation, but the tension has come down a lot.
Volatility, however, could ramp up again in 2012, with six European Union summits next year, two more than normal, on top of a host of extra Eurogroup events and meetings of finance ministers as they try to hammer out a comprehensive solution to the crisis. These events, for the most part, have been a major source of uncertainty for financial markets this year and that's unlikely to change in 2012.
SMALLER POSITIONS
London-based hedge fund GLC Ltd, with assets under management of about $1 billion, believes much of the mayhem in Europe has already been discounted and markets are not well-positioned for positive news.
As a hedge against the market's volatility, the fund has been running smaller positions than normal.
Even though GLC has been disenchanted with the way European leaders have handled the crisis, it believes the euro will survive and the situation in Europe's debt markets will improve, though in a volatile manner.
"Europe's policymakers, however, have left it too late to avert recession and much of the rest of the world is also suffering from an economic slowdown," said GLC in its latest note to clients and investors.
MARKET TURMOIL
FX Concepts, one of the largest currency hedge funds with assets under management of $4.3 billion, is still long volatility, calling for a U.S. recession and a breakup of the euro zone. But as a hedge to the firm's bleak view of the economy, "we have introduced models that have actually a positive tail," said Ron DiRusso, managing director of FX Concepts' Volatility Fund.
Positive tails suggest an upbeat outcome arising from either a resolution of Europe's debt crisis, or a more brisk pace of the U.S. economic recovery.
"So even in periods where mood is risk-on, or if the carry trade comes back, we have parts of the program that would make money in that environment," DiRusso said.
In several interviews with Reuters, FX Concepts chairman and chief investment officer John Taylor had painted a gloomy scenario for the global economy -- one in which the S&P 500 would precipitously drop to below 1,000 points and the euro would slide to parity against the dollar.
However, there were several months in the year, particularly October, when volatility declined and most risk markets and currencies such as the euro, Australian dollar, and emerging markets recovered.
FX Concepts' Volatility Program was down -0.88 percent so far this month and 5.85 percent weaker this year. The firm's Global Currency Program was down more than 19 percent as of December 22.
Bottomline, most fund managers are taking an "either-or" approach -- either the euro zone breaks up or everything is fine and well. And as the year winds down, more and more managers are looking at the latter scenario.
"Europe is not finished. We're not talking about Zimbabwe here. The euro is not a currency that will suddenly become worthless," said Simon Smollett, senior currency options strategist, at Credit Agricole in London.

Helping euro states vital for Germany, says Merkel

Reuters, BERLIN, June 11: Helping indebted European countries get back on their feet is vital to Germany's economic health, Chancellor Angela Merkel said on Saturday in a message aimed at the general public.

The comments come a day after Germany's parliament approved a non-binding resolution supporting extra emergency loans to fellow euro zone member Greece, but only on the condition that bondholders be made to share the bailout burden.

Asked in a weekly podcast if the euro zone debt crisis could threaten Germany's economic recovery, Merkel said: "If we don't take action in a positive way, that could happen, but it is exactly what we want to prevent."

"Therefore we should not simply allow the uncontrolled bankruptcy of a state -- instead we must see how we can increase the competitiveness of countries in difficulty and give them the chance to work off the debt," she added.

European Union leaders are due to finalize a new rescue package for Greece at a Brussels summit on June 23-24, which officials say will total 120 billion euros and ensure the country is funded through 2014.

German Finance Minister Wolfgang Schaeuble urged parliament on Friday to back additional aid for Greece but said private creditor participation in a new package was "unavoidable" and that he favored a bond swap that would push out Greek debt maturities by seven years.

In her podcast, Merkel said troubled members of the currency union must enact reforms, but warned that allowing one to go insolvent could trigger disastrous consequences for Germany.

"We should not do anything that would endanger the global recovery and put Germany back in danger," Merkel said, adding that the bankruptcy of investment bank Lehman Brothers had triggered a major recession in 2009.

"Such an event had not happened for decades and absolutely must be prevented," she said. The recession in Germany was its worst since World War II.