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Informal Sector and Economic Development in Bangladesh

The document discusses the informal sector in Bangladesh, highlighting its significance as it employs about 90% of the workforce, including various jobs in agriculture, industry, and services. It also examines the role of micro-credit through institutions like Grameen Bank in promoting self-employment and economic development. Additionally, it addresses the challenges and potential of industrialization and the importance of the financial sector in supporting industry growth.

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shikhorj
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3 views11 pages

Informal Sector and Economic Development in Bangladesh

The document discusses the informal sector in Bangladesh, highlighting its significance as it employs about 90% of the workforce, including various jobs in agriculture, industry, and services. It also examines the role of micro-credit through institutions like Grameen Bank in promoting self-employment and economic development. Additionally, it addresses the challenges and potential of industrialization and the importance of the financial sector in supporting industry growth.

Uploaded by

shikhorj
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

5

4 (a) Read the following extract about the ‘informal sector’.

The informal sector in most developing countries accounts

for the biggest share of employment. About 90 % of the

workforce in Bangladesh works in the informal sector. This

includes workers in the informal agricultural, industrial and

service sectors.

Fig. 4

(i) Name two specific examples of work in the ‘informal sector’. [2]

(ii) Describe the characteristics of employment in the informal sector. [5]

(iii) Is the informal sector important to the people and the economy of Bangladesh? Give

reasons for your answer. [5]

(b) Industrialisation is important to the overall development of Bangladesh.

Explain the obstacles that Bangladesh needs to overcome in order to develop her industries.

[8]

(c) The lack of capital prevents all types of development.

Describe how banks can help industries to develop. [5]

© UCLES 2006 7094/02/M/J/06 [Turn over


8

3 (a) Study Photograph A and the text below.

Photograph A

Aisha is a client of the Grameen Bank, and raises poultry with a loan of 80 000 taka,

which she needed to buy the hen house and the chickens.

The Grameen Bank was established as an alternative to traditional banking, providing

credit and loans to the poor without the need for collateral. It also reduced the

exploitation of the poor by money lenders.

This micro-credit scheme has created opportunities for self-employment among

unemployed people in rural Bangladesh, allowing them to invest for the future.

(i) Why did Aisha take out a loan? [1]

(ii) Why might Aisha have chosen the Grameen bank rather than a traditional bank? [3]

(iii) Describe how the Grameen bank works. [4]

(iv) How does micro-credit help both people like Aisha and also the economy of

Bangladesh? [3]

© UCLES 2008 7094/02/M/J/08


9

(b) Study Fig. 5, which shows how much money each sector contributed to Bangladesh’s

economy in 1988 and 2005. (The figures are in constant 1996 prices).

Sector 1988 earnings 2005 earnings % change

(millions taka) (millions taka) 1988 to 2005

Agriculture 338 560 +165%

Construction 69 232 +336%

Electricity, gas and water 14 42 +300%

Manufacturing 141 424 +300%

Mining 10 29 +290%

Trade 139 361 +260%

Transport and communications 108 256 +237%

Other 317 637 +201%

Income from abroad 28 151 +539%

Average

Total 1164 2692 +232%

Fig. 5

(i) List the top five sectors for 2005 in order of the amount of money they earned. [2]

(ii) Which sector increased the most

- in proportion?

- in amount? [2]

(iii) Choose either agriculture or manufacturing from Fig. 5 and explain the reasons for its

growth between 1988 and 2005. [3]

(c) All sectors in Bangladesh have a significant share of informal activities, which are known as

the ‘informal economy’.

(i) What is the ‘informal economy’? [2]

(ii) Give four examples of jobs in the informal economy. [1]

(d) Consider the following opinion:

‘The informal economy should be encouraged as the best way for Bangladesh to develop.’

(i) Give two pieces of evidence that support this opinion. [2]

(ii) Give two pieces of evidence that do not support this opinion. [2]

[Total: 25]

© UCLES 2008 7094/02/M/J/08 [Turn over


10

5 (a) Study Fig. 8, which shows employment and the contribution to the Gross Domestic Product
(GDP) of each sector of Bangladesh’s workforce.

Employment Contribution to GDP


0% 0%

Primary
Secondary
Tertiary

50% 50%
Fig. 8

(i) Name two examples from Bangladesh for each of:


• Primary sector
• Secondary sector. [2]
(ii) What percentage of Bangladesh’s workforce is employed in the tertiary sector? [1]
(iii) What percentage of Bangladesh’s GDP comes from the tertiary sector? [1]
(iv) Suggest why the secondary sector contributes a higher percentage to GDP than it does
to employment. [2]

(b) Study Fig. 9, which shows the number of teachers employed in different types of education,
an example of a formal service in the tertiary sector.
240

220

200

180

160

140
Thousands Public
of teachers 120 Private

100

80

60

40

20

0
Primary Secondary College Uni- Madra- Profes-
versity sah sional
Types of education
Fig. 9
© UCLES 2011 7094/02/M/J/11
11

(i) How many teachers are employed in primary education? [1]


(ii) Which type of education has the largest number of teachers in the private sector? [1]
(iii) Which type of education has the largest proportion of teachers in the private sector? [1]

(c) (i) It is estimated that about half of all service jobs in Bangladesh are in the informal sector.
What is meant by ‘the informal service sector’? [2]
(ii) Explain why the informal service sector is so important in Bangladesh. [3]
(iii) What are the disadvantages of the informal sector? [3]

(d) Finance is required if a service is to become part of the formal sector.

(i) Name two possible sources of finance in Bangladesh.


(ii) Give one advantage and one disadvantage of each source. [4]

(e) Choose one from the list below of possible providers of services. For the one you have
chosen, explain what you consider are its advantages and disadvantages.

Government
Private sector
Non Governmental Organisations (NGOs) [4]

[Total: 25]

© UCLES 2011 7094/02/M/J/11


9

(e) Study the statement below.

‘Developing the service industry is the best way forward to improve the economy of
Bangladesh.’

(i) Give one piece of evidence which supports this statement.

...........................................................................................................................................

.......................................................................................................................................[1]

(ii) Give one piece of evidence which does not support this statement.

...........................................................................................................................................

.......................................................................................................................................[1]

(iii) Do you agree with the statement? Give reasons for your answer.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

.......................................................................................................................................[3]

[Total: 25 marks]

© UCLES 2015 7094/02/M/J/15 [Turn over


15

(b) (i) Describe how government policies protect new industries in Bangladesh.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

.......................................................................................................................................[3]

(ii) Explain how Bangladesh can overcome obstacles to industrialisation, other than ways
mentioned in (b)(i).

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

.......................................................................................................................................[3]

(c) (i) Explain why the financial sector is important for industry in Bangladesh.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

.......................................................................................................................................[2]

(ii) What is meant by ‘micro-credit’?

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

.......................................................................................................................................[2]

© UCLES 2016 7094/02/M/J/16 [Turn over


16

(iii) Explain why micro-credit has been successful in Bangladesh.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

.......................................................................................................................................[2]

(d) Study the two statements below.

A ‘Bangladesh’s increased economic growth depends on expanding the small scale industrial
sector.’
B ‘To maintain economic growth Bangladesh needs to improve its large scale industries.’

(i) Give one piece of evidence which supports statement A.

...........................................................................................................................................

.......................................................................................................................................[1]

(ii) Give one piece of evidence which supports statement B.

...........................................................................................................................................

.......................................................................................................................................[1]

(iii) Which statement do you agree with the most? Give reasons for your answer.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

.......................................................................................................................................[3]

[Total: 25 marks]

© UCLES 2016 7094/02/M/J/16


17

(b) (i) What is meant by the term ‘informal sector’?

...........................................................................................................................................

.......................................................................................................................................[1]

(ii) In Bangladesh, nearly 90% of the total number of jobs are in the informal sector. Explain
why so many people work in the informal sector.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

.......................................................................................................................................[5]

TURN OVER FOR QUESTION 5(c)

© UCLES 2018 7094/02/M/J/18 [Turn over


25

(ii) Compare Bangladesh’s population growth rate with that of Pakistan and that of India as
shown in Fig. 5.2.

Comparison with Pakistan ..................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Comparison with India ........................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [4]

(iii) Suggest reasons why Bangladesh’s population growth rate has decreased.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [5]

(c) Most people in Bangladesh work in the informal sector.

(i) What is the informal sector?

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Give two examples of jobs in the informal service sector.

1 ........................................................................................................................................

2 .................................................................................................................................. [2]

© UCLES 2019 7094/02/M/J/19 [Turn over


26

(d) Study the statement below.

‘Having a large number of jobs in the informal sector has many benefits for Bangladesh.’

(i) Give one piece of evidence which supports this statement.

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Give one piece of evidence against this statement.

...........................................................................................................................................

..................................................................................................................................... [1]

(iii) How far do you agree with the statement? Give reasons for your answer.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

[Total: 25]

© UCLES 2019 7094/02/M/J/19

Common questions

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Micro-credit has been successful in Bangladesh due to its accessibility to rural and marginalized populations who lack collateral for traditional loans. It empowers individuals, particularly women, by enabling them to start or expand small businesses, thus enhancing income levels and improving living standards. The impacts on rural communities are significant, including increased self-employment opportunities, reduced poverty levels, and strengthened community resilience as more individuals become economically active and self-sufficient .

Bangladesh faces several obstacles such as inadequate infrastructure, limited access to technology, and insufficient skilled labor. These issues hinder industrial development. Banks can facilitate industrial growth by providing capital investment, offering credit facilities for technological upgrades, and enabling access to financial resources needed for industrialization. By supporting both traditional and microfinance banking, they help industries tackle capital shortages and scale operations, playing a crucial developmental role .

Advantages of the informal economy include providing employment opportunities for a large portion of the workforce who might be excluded from the formal sector and allowing for flexibility and entrepreneurship. However, disadvantages include lack of job security, absence of benefits like health insurance or retirement plans, and higher vulnerability to economic shocks. This sector's prevalence can also result in lower tax revenues for the government and hinder long-term sustainable economic development .

The secondary sector typically includes industries like manufacturing that have higher productivity per worker compared to the primary sector, which involves activities like agriculture. In Bangladesh, this relation results in a smaller workforce contributing significantly more to GDP because manufacturing processes often involve value addition, technological inputs, and higher efficiency. Thus, fewer employees can produce greater economic output relative to sectors employing more labor but producing less per capita .

The growth of the informal sector in Bangladesh significantly outpaces mainstream economic activities in terms of employment, with around 90% of the workforce engaged in informal jobs. This sector provides vital economic functions, offering jobs where the formal sector cannot absorb growing labor supply. However, informal economic activities often lack regulatory oversight and stability, posing challenges such as increased economic vulnerability and reduced efficiency compared to the more structured and sustainable development offered by mainstream economic activities .

The financial sector is pivotal for industrial development in Bangladesh as it provides necessary capital through loans and credit facilities essential for starting and expanding businesses. Stable financial markets also enable businesses to hedge risks and invest in innovation and technology, thus fostering industrial growth. Additionally, the financial sector's integration with global markets allows industries to access international funding and enhances their capability to participate in global supply chains .

Microcredit from institutions like the Grameen Bank helps individuals by offering loans without the need for collateral, which empowers them to start small businesses and become self-employed. This financial inclusion reduces exploitation by money lenders and fosters entrepreneurship among rural and poor populations. Economically, these microcredit schemes boost consumer spending, increase small business activities, and contribute to economic growth by integrating marginalized sectors into the formal economy .

Bangladesh's population growth rate has decreased significantly, contributed to by improved access to education, particularly for women, and increased availability of family planning services. Government initiatives focused on healthcare improvements and awareness programs about population control have also been influential. These factors collectively lead to a decline in birth rates and promote sustainable population growth, which in turn supports socio-economic development by easing pressure on resources .

The informal sector in Bangladesh is characterized by employment that is unregulated by the government, lacks formal contracts, and offers little to no social security benefits. It predominantly comprises workers in agriculture, industry, and services who do not have access to formal job securities or occupational safety measures. This sector absorbs the majority of the workforce, around 90%, providing vital employment opportunities despite the absence of standardized regulatory frameworks .

Government policies in Bangladesh protect new industries through measures like tariffs on imports to reduce external competition, subsidies to lower the cost burden, and investment incentives to attract capital. These policies aim to nurture nascent industries until they achieve competitiveness while ensuring that emerging sectors receive the support needed to develop infrastructure and meet global standards. Such policy frameworks are crucial for fostering an environment where new industries can thrive amidst regional and international competition .

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