Bangladesh is one of the most disaster-prone countries in the world. Hazards that could potentially cause considerable loss of life and catastrophic physical damage and disruption to society and the national economy include exceptionally widespread riverine flooding, severe tropical cyclones and associated coastal storm surges, drought and earthquakes. In addition, flash flooding, tornadoes and riverbank erosion are frequent causes of more localized, but nevertheless intense, human suffering and losses. According to the survey of German Watch, Bangladesh is among the top three climate-disaster affected countries of the world in number of events; and in terms of losses per unit of Gross Domestic Product (GDP), it is in fourth position. Bangladesh also experiences manmade disasters in the form of political unrest and clash, fire and other accidents that have caused huge business, economic and reputation loss over the years.
Climate-related hazards like floods, droughts, cyclones and others from which Bangladesh has been suffering from a long period of time, have aggravated following climate change. Especially, a significant part of the coastal region is threatened by salinity intrusion and submersion due to sea level rise. The general predictions are: more floods, untimely floods, more droughts, drainage congestion, salinity intrusion and more cyclones with higher intensities with extreme severity of hazards.
To deal with risks originating from disasters, one needs to identify the hazards in the context of livelihood systems and their level of impacts. Bangladesh experienced deadly cyclones in 1962, 1970 and 1985. Drought in 1971, 1974 and 1982 were severe when price level of daily commodities increased two to three folds. The cyclone Sidr in 2007 caused damage, amounting to 2.6 per cent of GDP. The direct annual cost of natural disasters to the national economy over the last decade (damage and lost production) is estimated between 0.5 per cent and 1.0 per cent of GDP. It is well known that political conflicts during early 2013 caused notable life and asset loss and GDP losses in the country. The June 2017 floods and landslides in the Chittagong Hill Tract region and surrounding areas killed 156 people. Some recent examples of manmade disasters, which cost lives and infrastructures (soft and hard) losses, include Rana Plaza collapse in 2013, Tazreen Fashions fire in 2012 and boiler explosions in garment factories in 2017. Though there is no precise estimation, there is no doubt that banking and financial sector was also impacted by these incidents.
As regards national-level disaster risk management, the 'National Disaster Management Council', headed by the Prime minister, is the highest body. In line with the constitutional obligations and international commitments to human rights, Bangladesh targets to be a country in which sustainability of development is ensured through better protection from climate change and natural disasters, as mentioned in 'Perspective Plan of Bangladesh 2010-2021'. As part of the plan, the government developed Bangladesh Climate Change Strategy and Action Plan and National Adaptation Programme of Action in 2009 to respond to climate change-induced development risks and National Plan for Disaster Management in 2010 to respond to disaster risks. Considering the importance of climate change financing in public financial management, a 'Climate Fiscal Framework' was created in 2014 jointly by the Finance Division and the Planning Commission.
Focusing on the severity of different types of disaster, the government has adopted the Disaster Management Plan, 2016-20 to tackle disasters in an integrated manner under its 'Disaster Management and Relief' initiatives. Besides, it is building Flood Shelters and Relief Silos and constructing and renovating Mujib Killas in disaster-prone districts. These investments, in many cases are supported by development partners. As per the budget document, the Government has decided to develop a policy on Disaster Risk Reduction financing, considering different financing models, and allocate sufficient fund in national budget to initiate action while welcoming international contributions in support of national efforts to deliver sustainable enhancement of disaster resilience.
Intergovernmental organization and donors have been playing notable roles in addressing disasters in Bangladesh. The United Nations Development Programme (UNDP) has been providing policy advisory services and capacity development to the Government of Bangladesh in risk mitigation and effective humanitarian response. After cyclone Sidr in 2007, the World Bank (WB) and the Asian Development Bank (ADB) worked with the Government to repair embankments and construct new cyclone shelters. The Department for International Development (DFID) of the United Kingdom has been contributing to the Climate Change Multi-donor Trust Fund which was initiated by GoB. USAID works with a number of NGOs and universities to support institutional capacity-building activities as well as community disaster response simulation drills. USAID is in the process of integrating Disaster Risk Reduction in all their aid programmes and supporting advocacy and programming for disaster risk reduction.
At the institutional level, financial institutions have some initiatives to address disaster risks. Microfinance institutions (MFIs) offer a number of services, which can help clients in coping with the impact of catastrophes. The services include provision of temporary loans, loan forgiveness, rescheduling of loan, asset replacement, housing loans, and loans for starting new activities. Several leading MFIs have implemented small-scale livestock micro-insurance programmes to protect their investment loans for dairy cattle and water buffalo livestock producers. Generally, the MFIs operate their own internal livestock indemnity funds without any form of catastrophe reinsurance protection. In a recent development, a 'meso-level' index-based flood insurance is being piloted in some districts with the support of some donor agencies. A few other index-based insurance products are also being piloted by international donors. Though the country has a good number of insurance companies, a vast majority of the population, especially in rural areas, is left outside the insurance coverage.
Banking industry of the country has suffered notable financial losses due to natural and manmade disasters over the years. Though at a slow pace, the banking sector has started responding to disaster risks. Several relevant issues have been incorporated in the policy and supervisory documents of the Central Bank in recent times, and the banking sector has been engaged in addressing disaster risks mainly as part of their corporate social responsibility (CSR) activities. However, the growing challenges and concerns demand much more for optimising the risk management initiatives for sustainability of the banking industry.
Dr. Shah Md Ahsan Habib is Professor and Director (Training) at the Bangladesh Institute of Bank Management (BIBM).
ahsan@bibm.org.bd