The Bangladesh Growth Story

Historically, Bangladesh has been one of the most impoverished regions in Asia. The 1971 war of independence left Bangladesh with a huge financial deficit. The end result was that the country was facing extreme poverty and famine for many years after their independence. Even before the independence, West Pakistani politicians would often call Bangladesh (then East Pakistan) a roadblock in their path to economic growth.

However, now the Bangladeshi economy is flourishing. For the past decade or so, Bangladesh has consistently recorded higher GDP growth when compared to Pakistan. Also, Bangladesh’s population control measures seem to be working. The Bangladeshi population is growing only at 1% as compared to the 2% rate of Pakistani population growth. The end result is that Bangladesh’s per capita income has skyrocketed. It has already taken over Pakistan and is poised to take over India’s per capita income given the fact that India is likely to face a recession in the near future.

Hence, the Bangladeshi growth story is nothing short of remarkable. In this article, we will have a closer look at some of the key points which have contributed to this growth story.

Reasons behind This Remarkable Growth

Some of the reasons commonly cited as the driving factor behind Bangladesh’s economic growth are as follows:

  • Microfinance: The Bangladesh microfinance has become famous all over the world. This great financial innovation has come from a country which had one of the least underdeveloped financial markets in the world. Mohammed Younis from Bangladesh pioneered the Grameen Bank. This bank would make extremely small loans to poor people. These customers were generally not covered by traditional banks. Younis figured out that individuals do not default on their loans if they face community pressure. Hence, he made loans to the entire community. If one individual defaulted on their loans, the entire community would be blacklisted and would receive no further loans. The microfinance loans enabled the unemployed Bangladeshi person to buy small capital equipment and start their own cottage industry. The microfinance revolution has created a class of self-employed workers which are not found either in India or Pakistan.
  • Women Empowerment: Employment of women in productive activities is not a common sight on the Indian subcontinent. However, women have played an important role in the Bangladesh growth story. While most rural women in other Asian countries are engaged in household activities, Bangladeshi women have started undertaking productive employment. They have formed self-help groups and now have access to capital. The gainful employment of women in rural areas has led to the doubling of income in many Bangladeshi households.
  • Labor Laws: Bangladesh has become the factory for most garment brands across the world. Global brands like Zara and Nike outsource their production to companies in Bangladesh. There are multiple reasons behind this. Firstly, Bangladeshi labor is cheap and can be found in abundance. To top it up, Bangladesh does not have any restrictive labor laws. Companies have to spend very less in order to comply with the laws in Bangladesh. This is not the case in India or Pakistan. In both these places, labor laws are extensive. This is the reason why even though the cost of production might be similar in all three countries, garment manufacturing brands prefer Bangladesh. There have been accusations that the Bangladeshi economy is comprised of sweatshops which are based on the exploitation of people. However, most economic commentators agree that working in less than perfect labor conditions is better than facing poverty and famine. However, most commentators also agree that Bangladesh’s economy is based on the non-existence of stringent labor laws. The day such laws are enacted, garment manufacturers will simply move out of Bangladesh leaving the nation in the throes of poverty.
  • Avoidance of Debt: Lastly, the Bangladeshi government has been very careful about its finances. Firstly, since it is in peace with neighboring countries, there is no need for extensive military financing. Most of the money collected as a tax by the government of Bangladesh is being used for economic development. Since Bangladesh is not indulging in any wasteful expenditure, they were not forced to undertake any debt. This is in stark contrast to Pakistan which has been fuelled by debt. Pakistan has taken 4 to 5 IMF bailouts since the Bangladeshi liberation of 1971. Bangladesh has approached the IMF fewer times as compared to Pakistan.

Also, Bangladesh has been funding its own infrastructure projects. Other countries like Pakistan and Sri Lanka have borrowed extensively from China. However, Bangladesh has stayed clear of these Chinese loans because of China’s reputation for building debt traps for its borrowers. This is the reason that Pakistan is now facing a balance of payments crisis whereas most of Bangladesh is now facing an economic boom. This boom is likely to penetrate deeper into the remote areas of Bangladesh, as the number of infrastructure projects increase.

To sum it up, Bangladesh has become a role model for other young, poor countries. By following prudent economic policies, the nation has grown into a regional economic powerhouse within a few years. If Bangladesh continues down the right track, very soon it will be a force to reckon with.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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