Managing Vulnerability and Risk in the Rural Space
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Transcript of Managing Vulnerability and Risk in the Rural Space
Managing Vulnerability and Risk in the
Rural Space
Joachim von Braun
International Food Policy Research Institute
Annual Agriculture and Rural Development Week
World Bank, Washington D.C.
March 31, 2005
Big pictures:
It is risky to live in the rural space of the
poor parts of the world
Food insecurity, and under-nutrition
Lack of rights and law enforcement
Lack of (market) institutions for coping
>>>poverty is risky<<<
Big picture: Insecurity, growth,
nutrition…
>>Poor rural economies have high political
instability<<
Political stability good for growth
Growth good for political stability…
So what? (both matter)
Insecurity & poverty (under-nutrition)
Not a simple relationship !
Africa:Prevalence of Child Malnutrition
and Degree of Insecurity (Xiaobo Zhang, IFPRI, 2004)
0
5
10
15
20
25
30
35
40
45
50
90 100 110 120 130 140
Degree of Insecurity
Pro
port
ion o
f C
hildre
n U
nder
Fiv
e a
nd U
nder
Weig
ht
(%)
AGOSDN
BDI
SLE
ZAR
ETH
TCD
RWA
MRT
CAF
UGA
ZWE
COG
BWA
ZAF
CMR
MOZ
MLI
NGA
TZA
SW
GAB
LSO
GMBKEN
NERMDG
BFA
ZMB
MWI
GHACIV
BEN
TGOGIN
NAM
SEN
Insecurity and under-nutrition:
Not so simple a relationship !
The challenge: reaching critical thresh holds of security for growth
But how???
1. Agricultural & Rural growth
2. Market policies and stabilization
3. Credit
4. Social protection
5. Insurance of people, not only crops
and: comprehensive public security action
1. Agricultural and Rural Growth
The strategies are increasingly understood:
Infrastructure, technology, research are key
Scaling up is central for most MDGs !
Implementation is a strategic matter, too
The tool box for getting strategies done is
deficient: capacity !!
Accelerated rural growth for reduced
vulnerability
A Time Bomb or an opportunity? the small farms in transition
Farm Size (ha) % of all farmsNumber of farms
(millions)
< 2 85 387.24
2 - 10 12 54.05
10 - 100 2.7 12.51
> 100 0.5 2.28
Total 100 456.07
Source: Von Braun (2003)
2. Market policies and stock holding
…market openness helps the poor in general
and in crises
Market openness helps in natural disastersExample: Bangladesh- Rice prices in the 1998 floods
But public action matters tooExample: countries with/without food stock programs
Period Coefficient of variation of
producer prices
Countries with food stock programs
India 1971-2002 0.13
Indonesia 1973-2002 0.10
Countries without food stock programs
Mexico 1971-2002 0.84
Brazil 1985-2002 0.77
Variability of producer prices for maize
Source: Hazell, Shields and Shields 2005
3. Credit…
The biggest Bank serving the poor is…?
Family and friends
Credit mechanismsExample: formal and informal rural credit in China
All
households
(650)
Took loan
(31%)Took no loan
(69%)
Loan sourcesLoan use
Agricultural
production
(34%)
Bank (30%)Private
(70%)Other
production
(14%)
Consumption
(52%)
All
households
(650)
Took loan
(31%)Took no loan
(69%)
Loan sourcesLoan use
Agricultural
production
(34%)
Bank (30%)Private
(70%)Other
production
(14%)
Consumption
(52%)
Loan structure and use pattern among poor households
Source: Ling, Zhongyi and von Braun (1997)
The poor need “consumption” Credit: Example: 1998 Bangladesh floods- outstanding loans
Outstanding loans as a percentage of household expenditure for the poorest 40
percent of households
(59.7)
(64.0)
(7.6)
(72.9)
0
20
40
60
80
100
120
140
160
180
Dec '97 Nov '98 May '99 Nov '99
% o
f to
tal
mo
nth
ly
ex
pen
dit
ure
Note: Figures in parentheses denote the percentage of households with outstanding loans
Source: del Ninno and Dorosh (2002)
4. Social protection programs
… address chronic and transitory risks
Direct nutrition action is needed …
with fostering behavioral change.
Social ProtectionExample: Conditional Cash Transfers in Nicaragua,
Impact on food expenditures, school enrollment and health
Average effect
on per capita
annual food
expenditures (in
Nicaraguan
Cordóba)
Average effect on
enrollment, 7-13
years old in 1st-4th
grade (in
percentage points)
Net effect on the
percentage of
children under 5
years old who are
underweight (in
percentage points)
Difference
2002-2000 556 17.7 -6.0
Source: Maluccio and Flores, IFPRI 2004
5. What Insurances?
Production ?
People ?
Insurance mechanisms
Example: India- Index based weather insurance
Weather volatility in India: big risk faced by
non-irrigated farmers
ICICI-Lombard index-based rainfall insurance
• Based on a rainfall index
• Pilot program in Andhra Pradesh groundnuts
and castor farmers
• Win-win outcome: Farmers insured, banks
benefit from increased lending, reduced needs
for emergency assistance
Community and Household Insurance
MechanismsExample: rural Ethiopia
Illness of household head…
• did not affect basic food consumption
>Reliance on own production and/or
community gifts<
• BUT, lowered nonfood consumption
(education, health etc.) by 24 %
Potentially large welfare gains from
community (health) insurance schemes
(Asfaw and von Braun 2004)
Strategy for managing risk and vulnerability
in the rural space
is about this PORTFOLIO
1. Agricultural & Rural growth
2. Market policies and stabilization
3. Credit
4. Social protection for food security
5. Insurance of people, not only crops
and: comprehensive public security action
And how to prioritize among these ?
Context, institutions, capacities!
Experimentation and trans-national learning
Scenarios: Risks and Opportunities
Progressive Policy Actions Scenario:
New Focus on Agricultural Growth and Rural
Development
Policy Failure Scenario:
Trade and Political Conflict, rise in protectionism
worldwide
Technology and Resource Management Failure
Scenario:
Adverse technology/natural resource interactions
Three Scenarios to 2050: Undernourished Children, Sub-Saharan Africa
0
5
10
15
20
25
30
35
40
45
50
1997 2015 2030 2050
Mill
ion
ch
ildre
n
Progressive Policy
Actions
Policy Failure
Technology and
Resource
Management Failure
Source: IFPRI IMPACT projections (September 2004)