What is the way to establish a democratic welfare state

Since the mass uprising of 2024, significant discussions have emerged around the creation of a democratic welfare state. A welfare state is not built on charity or benevolence—it must be grounded in rights. The state is responsible for guaranteeing the fulfillment of citizens’ fundamental needs based on their rights. Basic necessities such as food, housing, education, and healthcare must be secured. To be truly democratic, a state must uphold fundamental rights.

Despite the ongoing conversation about institutional restructuring, the role of NGOs remains largely absent. Yet, NGOs and microfinance institutions are highly active in the economy. A total of 724 microfinance institutions have disbursed approximately Tk 1.59 trillion in loans, serving about 32 million borrowers.

To achieve national welfare goals, it is essential to move these economic NGOs and microfinance institutions beyond the traditional roles of credit, service delivery, and relief distribution. Given their resources and reach, these organisations have the potential to reshape market systems. They can play a vital role in stabilising food prices, ensuring farmers' incomes, and providing affordable housing.

At the same time, the independent voice of civil society must be protected. Civil society plays a crucial role in building public opinion, advocacy, community organising, and demanding accountability. These functions must continue—and even be expanded—in the interest of democracy.
Breaking oligarchy through cooperative markets

Skyrocketing food prices are a major driver of the ongoing, long-term inflation—a story of systemic deprivation. According to the Bangladesh Bureau of Statistics, food inflation in June 2024 stood at 14 per cent, the highest in a decade. Household Income and Expenditure Survey data shows that food still accounts for the largest share of household expenses—45.76 per cent. However, farmers receive only a small portion of the prices paid by consumers. The bulk of the profits goes to middlemen who control storage, transportation, and wholesale trade.

NGOs can challenge this entrenched system by establishing farmer-owned cooperatives and retail networks. The example of Spain’s Mondragon Corporation shows how removing intermediaries can reduce consumer prices while increasing producers' incomes. Their supermarket chain, Eroski, operates based on cooperative principles.

Collective ownership can help make products more affordable. A strong example of this is India’s Amul dairy cooperative, which united small-scale rural milk producers and transformed them into a powerful collective force. This was made possible by establishing local collection systems, processing infrastructure, and direct retail marketing channels.

In Bangladesh, microfinance institutions could adopt a similar tripartite model—involving producer organisations, integrated supply systems, and branded retail distribution—for essential goods like rice, vegetables, and lentils.

To implement this in practice, three steps can be taken:

Formation of Legal Producer Organisations: NGOs can organise small farmers into legally recognised producer groups, enabling them to negotiate collectively and strengthen their bargaining power.

Investment in Cold Storage and Transportation Networks: By improving logistics and infrastructure, farmers can retain more of the value from their produce.

Use of Digital Platforms and Escrow Accounts: Through platforms managed by microfinance institutions, buyers can connect directly with producers via escrow account, ensuring secure and fair transactions.

These combined measures could increase farmers’ share of retail prices by 15–30 per cent, disrupting the dominance of middlemen, brokers, wholesalers, and hoarders. At the same time, retail prices could decrease by 10–15 per cent, increasing consumer surplus and reducing overall inflationary pressure.

Among South Asian cities, Dhaka has the highest land and housing costs relative to income. In central Dhaka, one square meter of apartment space costs about USD 717—an unaffordable amount for most working-class individuals whose real wages have stagnated. According to the 2022 Household Income and Expenditure Survey, housing costs now account for 10.25 per cent of family expenditures, up from 6 per cent in 2000. Due to unplanned urbanisation, land speculation, and weak regulatory enforcement, homeownership has become increasingly out of reach for the majority.

However, NGOs are capable of developing innovative housing solutions tailored to local realities. Viable models from other countries offer inspiration:

Mexico’s Infonavit provides micro-mortgages to informal sector workers at 4–6 per cent interest, helping them bypass traditional banking barriers.
Rent-to-own schemes, as seen in South Africa’s People’s Housing Process, allow gradual homeownership through phased payments.

Community Land Trusts (CLTs) offer a third model. NGOs can develop housing on their own land, retaining collective ownership to shield properties from speculative price hikes. The Champlain Housing Trust in the US is a notable example—it removes land from the speculative market and anchors housing within community-based systems.

A fourth model could involve government provision of land and subsidised infrastructure loans, while NGOs manage the full development and operation of housing projects.

To implement such initiatives effectively, reforms in oversight mechanisms are essential. For example, when NGO-run initiatives supply goods at socially determined prices, there must be a specific legal framework in place to support them. Tax incentives could be offered if profits are reinvested for social purposes. The warehouse receipt system should be integrated with microfinance loans, allowing farmers to use stored goods as collateral. To ensure stable demand, government procurement—such as food for schools or hospitals—can be sourced from NGO-managed systems involving farmers and cooperatives.

Housing policy reform and infrastructure financing must also be ensured. At the same time, affordability clauses should be mandatory for housing units developed with government support. Given the dominance of profit-making in Bangladesh’s political economy, protective regulations are essential. Governance structures must include elected boards representing both producers and consumers. Regular audits, transparent procurement, and mandatory pricing regulations must also be enforced.

A government supervisory commission could be established to oversee NGO-run market management systems. This commission might include representatives from the finance ministry, microfinance regulatory authorities, civil society, and producers. Governance standards can be developed using bilateral and multilateral technical assistance.

These reforms would not only reduce inflation and housing costs—they would also democratise access to economic opportunities and help advance the agenda of a welfare state. In parallel, they would contribute to price stability.

In the path ahead, technocratic solutions alone will not suffice. A renewed social contract and a shift in mindset among stakeholders are required. By transforming NGO-led institutions into platforms for collective bargaining, fair pricing, and inclusive development, they can play a pivotal role in institutional transformation.

The path to a democratic welfare state will not emerge on its own. It demands bold, community-rooted partnerships guided by a comprehensive social vision.

*Rashed Al Mahmud Titumir is Professor, Department of Development Studies, University of Dhaka

*The views expressed are the author’s own.