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Plucking rural savings to safety
For our own interest we must keep our farmers happy and content. Subsidising their savings in a bank is a novel way to help the cultivators feel pleased with their disposable income kept in a rural bank branch the way government-owned banks offer loans to farmers at a rate of interest lower than their cost of fund. Of course, the government in that case have to defray the banks with the cost of funds thus incurred for subsidising interests on both savings and loans for rural people, writes Maswood Alam Khan
TOO many bankers in Bangladesh have been chasing too few prospective savers to build up their deposit portfolios, the lifeblood of a bank for investment. Prime banks which used to bask in their surplus liquidity of cash have of late started feeling the crunch as they are finding it strenuous to maintain their statutory requirement of minimum deposits for smooth functioning of their banking business. Promoters of banks have already been fielded for aggressive deposit hunting with their innovative products to motivate depositors to save their disposable income with them, but not with much success.
Small depositors are crushing their savings to meet rising prices of their daily necessities. Clients who developed a smooth saving habit by setting aside a small amount of their disposable income every month to build their pension funds through a variety of pension plans of different banks are either going for premature encashment of those schemes or are loath to start afresh the same scheme on maturity of the previous ones. On the other hand, people belonging to big and medium income groups are finding investments in stock market or in real estate more lucrative than in any deposit product of a bank – in an attempt to hide their black cash from the glare of tax and anti-corruption authorities.
As inflation exceeds interest rates offered by our banks, genuine holders of cash, especially wage earners with their savings made out of their hard labour abroad, opt for buying lands, shops or apartments with a view to protecting their savings from being eroded by inflationary pressures.
But, a majority of intending buyers of real estate properties in Bangladesh land themselves in the traps of unscrupulous estate dealers in the absence of any strict punishment against manipulators and cheats who foist defective titles of real estate upon naive buyers.
With an expectation of making quick money a number of people belonging to small and medium income groups having no expertise or experience on technical and fundamental analyses on stock picking are of late blindly following in the footsteps of their peers or a frequenter to the corridors of stock markets to play with equities – landing themselves into another booby trap if they don’t know how to distribute investment risks by not putting all their nest eggs in one basket.
In short, people in general are distancing themselves from banks for their investments if their disposable income or cash savings exceeds a limit that is too glaring. They also apprehend the bankers no more can guarantee maintaining strict confidentiality of their transactions the banks once in the distant past had a reputation to uphold, especially after strict enforcement of the Money Laundering Act.
‘Saving’ differs from ‘savings’. ‘Saving’ connotes to an increase in one’s assets, an increase in net worth, whereas ‘savings’ refers to single part of one’s assets, usually cash deposits in his/her savings account with a bank. Saving refers to an activity occurring over time, a flow variable, whereas savings refers to something that exists at any one time, a stock variable.
Saving is closely related to investment. By not using income to buy consumer goods and services, if the resources are instead invested as fixed capital to buy, for instance, machinery, the saving thus derived contributes directly to economic growth.
Savings with a bank is also not always a good sign for a vibrant economy, especially when savings far exceeds investments for a long time – foreboding a general glut and recession. So, to discourage long-term savings, interest rates are adjusted with an abnormal rise in savings to divert idle money out to stimulate investment in the market.
But, when depositors withdraw their savings from banks en masse to stash the same under a mattress or to deploy the fund in fixed and silent assets like land and apartments which are not directly so much related to day-to-day business cycles banks get dried up of their lifeblood – an ominous signature of stagflation. Savings taken out from banks and kept hidden elsewhere may mean no decrease in total savings, but may result in a decrease in investment through banks in economic activities causing a shortfall of demand rather than to economic growth – a situation often termed as the ‘paradox of thrift’.
Given the poor health of most of the companies enlisted with our stock markets the windfall gains and profits from the shares changing hands are ephemeral in nature that may at one stage hit a holder of a share with a real hard time at the end of the day. Although experts report success in determining future gains from a share through ‘technical analysis’ and ‘fundamental analysis’ of the companies concerned many economists suggest that because of ‘efficient market theory’ it is also unlikely that any amount of analysis can help an investor make any gains above the stock market itself. In a normal distribution of investors it is always ironically the richest, the outliers, who in a game of chance have always flipped the heads and the poorest the tails.
The poor people, especially the farmers who are permanently living in rural areas, set aside and preserve in their indigenous warehouses a part of their harvests for future use, for personal consumption as well as for sale to meet their future cash requirements. They are not really interested in holding money in a bank’s savings accounts for future needs as interest rates offered by banks are not commensurate with the gain they expect from future sale of their hoarded harvests, though they incur a substantial amount of loss from pilferage and wastage of their hoards due to unscientific way of preservation and thievery.
They, however, save their disposable income with some NGOs who offer them much higher rates of interests compared to government-owned banks who offer only one per cent more interest than in urban areas. And the NGOs to cover their cost of fund lend the savings to intending borrowers at abnormally high rate, thereby making the poor in need of loans utterly bereft. Moreover, exploiting the gullibility of the rural people some mushrooming NGOs, as we often find in newspaper reports, offer the lure of high return on deposits only to flee away with the poor’s money on a future date.
The rural people who toil in the fields to grow crops for our survival will have to gradually leave their profession of cultivation if their stay in the villages and engagement in the fields are not made attractive and financially rewarding and if the government fails to protect their savings from losing their value. It is only the government-subsidised banks that can help a cultivator shield his savings of hoarded crops if the cultivator finds his sale proceeds not eroding in a bank – a scenario possible, if the bank offers him insurance against inflation.
There is already a disturbing symptom visible as we find women working in the fields as cultivators and also in the construction sites as haulers of heavy loads they are not at all physically fit for instead of taking care of their in-house chores and rural men pulling rickshaws and driving locally fabricated ‘nasiman’ vans (a hotchpotch made of unscientific parts perilously plying on roads and highways) instead of working in the fields they are bodily fit for.
Such a trend of women shunning their time-honoured and feminine roles inside homesteads and men shying away from their traditional and masculine roles as cultivators does not really augur well for our future.
Tonnes of money that our government spends to subsidise fertiliser or power for the poor pass a plethora of intermediaries who take cuts to line their own pockets and only a minuscule amount of the subsidy ultimately percolates to the pockets of the rural poor. Stopping all kinds of present subsidies in cash or kind if only savings and loans offered by banks for the rural poor are heavily subsidised by the government – to the extent of two per cent above inflation for savings and two per cent below bank rate for credits – a broad base of national savings with the banks could thus be developed easing the present crunch of liquidity and a wider rural population could enjoy all kinds of banking accommodation.
Such subsidy of savings in the rural areas will encourage our cultivators to sell their produces immediately after harvest instead of taking risks of hoarding their food grains in their homesteads once they would learn that their savings with a bank will always be guarded by an interest rate above inflation which means a cultivator will enjoy 12 per cent of interest rate for his savings with a government-owned bank, if the present rate of interest is 10 per cent.
Poor people in the rural areas are not as fortunate as rich people in the urban areas who buy government bonds like ‘savings certificates’ at rates higher than the inflation rate. Because, village people cannot really accumulate enough money to buy those certificates of high denominations and there is no scheme floated by the government that may allow a rural saver to save a small amount of money every month to earn as high as 12 per cent interest like that of a ‘savings certificate’.
Moreover, a cultivator does not also get much opportunity to buy those ‘savings certificates’ of high denominations from a rural outlet of a bank even if he can manage money by selling their harvests, as bankers serving in rural areas feel loath to sell those government-issued ‘saving certificates’ out of fear that their banks would be deprived of their own deposits they have garnered once the rural people get the taste of high-interest bearing government-issued certificates.
Duel interest rates for savings – higher rates for government-issued savings certificates and lower rates for bank-issued fixed or savings deposits – have made bankers dubious about counselling their clients with better ideas on savings. If the banks were allowed to retain sale proceeds of ‘savings certificates’ for lending to cultivators – instead of transferring the proceeds forthwith to the central bank – the bankers would have been more encouraged to motivate the rural people to buy those ‘savings certificates’, thereby also enriching the deposit bases of the banks. And the banks cannot afford to offer to the cultivators interest rates for their own deposit products as high as that of ‘savings certificates’ unless the government heavily subsidises the deposit products meant for rural poor.
The reason behind huge subsidisation in agricultural sectors in any developed country is not merely for currying favours with the rural people to win votes. The amount of money defrayed to cultivators in Japan or in any western country as subsidies for agricultural produces is more than enough to import many times the same quantity of the produces from countries where cost of labour is too low.
Still, peasants in any developed country are guaranteed to enjoy perpetual agricultural subsidisation. One of the reasons behind agricultural subsidy is to keep the community of farmers engaged in their cultivating profession so that people, in case of a war or any natural calamity when importation of food from abroad may not be possible, don’t die from hunger due to lack of farmers on fields.
Once a farmer gets the taste of working in the comfort of shades inside a factory or in an air-conditioned office – we must remember – he won’t go back to the fields under the scorching sun to toil whatever the incentives offered in the event of a war. His progeny too would be too used to sedentary professions in the towns to hold ploughs in villages in a future emergency.
So, for our own interest we must keep our farmers happy and content. Subsidising their savings in a bank is a novel way to help the cultivators feel pleased with their disposable income kept in a rural bank branch the way government-owned banks offer loans to farmers at a rate of interest lower than their cost of fund. Of course, the government in that case have to defray the banks with the cost of funds thus incurred for subsidising interests on both savings and loans for rural people.
Maswood Alam Khan is general manager, Bangladesh Krishi Bank. maswoodalamkhan@gmail.com
Post Muhamalai: time for civil and religious society to reflect
The other source of hope must lie in civil and religious society that is independent, and is not co-opted by power politics, whether of the government, opposition or the LTTE. These sectors of society are in a position to withdraw their support from the militarism of the government and LTTE, and seek instead their transformation. The Vietnamese Buddhist monk and peace activist, Thich Nhat Hanh, has written, ‘Understanding is the most important component for transformation,’ and for understanding there is a need for dialogue,
writes Jehan Perera from Colombo
LAST week was a costly one in terms of both life and military hardware that was lost. The wail of sirens on Friday night as they sped to Colombo’s hospitals carrying the victims of a bus bomb at the suburban town of Piliyandala brought home the cost of the war. The bomb that was put on to the bus by a suspected LTTE cadre had been packed with steel balls for maximum damage to their human targets, office workers, schoolchildren and other unsuspecting commuters. But dwarfing the 26 lives lost, and 62 injured in Piliyandala was the casualty figure from the battlefield of Muhamalai in the north.
The reports that have been coming in about the fighting at Muhamalai have been contradictory. It is evident that the government and the LTTE are seeking to maximise their gains for propaganda purposes and to minimise their losses. Without independent verification it is difficult to ascertain the truth. The government says that the LTTE initiated the battle while the LTTE says it was the government that launched the attack. The government claims to have killed over a hundred LTTE cadre while the LTTE claims to have done the same to the government troops. The government also claims to have advanced 500 metres and taken control of frontline LTTE bunkers, while the LTTE posted photographs on its websites showing dead soldiers in trenches.
This has been the third successive occasion within the space of 18 months that the government has sought to break through the LTTE’s forward defence lines in Muhamalai. On the two previous occasions, the government lost large numbers of soldiers who stepped on minefields and were hit by artillery fire as soon as they left the safety of their own frontlines. It appears that this time too the casualties have been high, even though the government denies this, with sections of the media reporting the death toll to be more than three times larger than the government’s figure of 47 confirmed killed in action.
There is circumstantial evidence that suggests that the army has indeed suffered heavy casualties. The Free Media Movement has issued a statement alleging that the media has been restricted in gaining access to hospitals where the army casualties are being treated. The military has also been reported as saying that the decision to launch the offensive against the LTTE positions was taken as a collective decision and not by the army commander alone. The reluctance to take the full responsibility could be on account of the high level of costs.
Continuing confrontation
The question is whether the high costs of the Muhamalai battle will translate into a change of approach on the part of the government and the LTTE. Anyone in their proper senses who values human life above all other values would be inclined to seek another way to resolve the conflict after such a bloodbath. The total casualty figure on both sides including the dead and injured could be close to or even exceed the one thousand mark. Unfortunately, the immediate response of both the government and the LTTE suggest that neither of them intends to change their confrontational and battlefield centred approaches.
The LTTE’s ability to bomb a passenger bus in the vicinity of Colombo at the same time as it held the Sri Lankan army at bay in the north would take the gloss off the government propaganda that the LTTE is weak, poorly motivated and a speedy end to its resistance is in sight. On the contrary, the government’s losses in the battlefields of the north, coupled with its inability to keep the south clear of terrorism, would begin to raise the level of doubt in the minds of most reasonable people. They would wonder at the actual progress that the government has made in defeating the LTTE and soon ending the scourge of terrorism. They may now see a bleak future that stretches indefinitely ahead.
The message being put out by the LTTE is also a very discouraging one that it is ruthless in its efforts to undermine the government and is prepared to inflict any cost on civilians to get its way. The LTTE’s willingness to target civilians demonstrates a frame of mind that is unprepared to respect humane values that peace negotiations require if they are to be successful. The bombing of the bus would strengthen the position of those in the government who argue that the LTTE will not be prepared to negotiate for peace and therefore it has to be eliminated at all costs.
The government has shown no immediate sign that it is prepared to reconsider its strategy towards the LTTE. Its response to the high costs of the Muhamalai battle has been to claim that the LTTE has paid the higher price and to shift public attention to the recapture of the Madhu church in the north. The government’s decision to give publicity to the recapture of the Madhu church would be to impress the general population that it is making steady progress in the north that wrests territory away from the LTTE, even if it has been slower than expected.
Seek transformation
Unfortunately, therefore, the immediate future presents a bleak picture of a continuation of military operations without concern for the human and economic costs. It appears that both sides can only see gains in terms of territorial victories and in killing as many members of the other side as possible, even if they be civilians. The government claims that after the Muhamalai battle it has gone forward 500 metres, but the important LTTE administrative and military centres are located another 50 kilometres away. Going further forward is likely to become increasingly difficult and costly.
In these cruel circumstances, the hope for change will necessarily lie outside the realms of the government and the LTTE as they are presently constituted. The electoral process is one method by which democratic societies provide for change to occur. The forthcoming provincial council election in the Eastern Province on May 10 provides an opportunity for the issue of a military or political solution to be canvassed among the people. As the Eastern Province is multiethnic and has experienced a war in which there has been a decisive military outcome, the verdict at this election can turn out to be a catalyst of change.
One of the more positive features of the present time has been the implementation of procedures to conduct the elections in the east. So far there has been relatively little open violence during the election campaign. There has also been a high degree of interest in the elections with a record number of candidates seeking election to a provincial council. The verdict at this election could either strengthen the government’s determination to continue with its military approach, or it could de-legitimise it by showing that this is not what the people want.
The other source of hope must lie in civil and religious society that is independent, and is not co-opted by power politics, whether of the government, opposition or the LTTE. These sectors of society are in a position to withdraw their support from the militarism of the government and LTTE, and seek instead their transformation. The Vietnamese Buddhist monk and peace activist, Thich Nhat Hanh, has written, ‘Understanding is the most important component for transformation,’ and for understanding there is a need for dialogue.
Without the transformation of the government and LTTE, and leadership in such transformation given by civil and religious society through programmes of increasing understanding, there can be neither peace nor justice in Sri Lanka.
Jehan Perera is media director of the National Peace Council in Colombo, Sri Lanka. jehanpc@sltnet.lk
Business with saline
From newspaper reports, we have learnt that an artificial crisis of oral saline has been created in the market as the number of diarrhoea patients has increased manifold due to heat and humidity.
Oral saline is an essential item, especially for diarrhoea patients. Therefore, the authorities concerned must take immediate steps to handle this crisis and ensure that oral saline is available in the market.
Mushfique Wadud
Stamford University Bangladesh
Price hike and the middle-class
We are all deeply disturbed at the recent price rise of essentials. Our family had a car, but my father sold that off because he was not able to meet the maintenance cost (driver’s salary, fuel, repair cost, etc.) of our car.
I don’t know the plight of the poor, but the scenario must be gloomier than ours.
Scionara Shehry
Dhanmondi, Dhaka
Dr Kamal Hossain’s comment
I do not consider Dr. Kamal Hossain an honourable politician because he made political somersaults on many occasions but I accept his recent remark without reservation.
Who are these people who agitate and ask for un-conditional release of corrupt politicians and businessmen? Surely they are those who are the cohorts and beneficiaries of corruption of those politicians or businessmen now in jail or awaiting trial.
These people are ready to do anything to get back their patrons in power again if and when there is an election in the country.
Tayeb Husain
On e-mail
Conviction of war criminal
It is a good initiative. One of the many ordinances approved by the military-controlled government suggested the banning of convicted war criminals from local polls. Now, the government should take initiatives to try and convict war criminals.
The sooner, the better. This process must be completed before national polls are held. If for some reason this job cannot be completed within a short period, local polls can be deferred.
The people of Bangladesh are not pressing for hurriedly organised local polls now.
MH Khan
On e-mail
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The Local Government Ordinance 2008 kept a provision for a ban on the war criminals convicted by any local or international court or tribunal.
Are the caretaker government and the EC happy in making such a vague ordinance without the trial of those criminals when millions of our people were killed, a large section of the intellectual community of Bangladesh were murdered, numerous women were tortured, raped and killed during the war?
Gopal Sengupta
Canada
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