Avoiding Risk For Poor Rural Households

Avoiding and managing risk is a prerequisite for poor rural households to move out of poverty, and it is thus to their livelihood strategies, ‘IFAD 2011 Rural Poverty Report’ revealed.

The report dubbed’ New realities, new challenges: new opportunities for tomorrow’s generation’ is  an in-depth study of rural poverty.

The findings in the report come from a collaboration among dozens of experts in the field of poverty reduction-both inside and outside IFAD. They also come from the poor rural people themselves.

At the household level, decisions about how to allocate and use cash, land and labour are a function not only of available opportunities.

But also of the need to minimize the possibility of shocks that can throw the household into poverty, prevent it from moving out of it, or reduce its ability to spend on its primary need, the report said.

In many cases, however, the need to minimize these possibilities undermines people’s ability to sieze opportunities, which generally come with a measure of risk.

According to the IFAD 2011 report, rural households typically manage risk through diversification:  smallholders  may use highly diversified cropping or mixed farming systems.

And many households use non-farm activities to complement and reduce the risks attached to farming-or vice versa.

Asset accumulation-including money, land, livestock and other assets-is also critical to build a buffer against shocks, and a crucial component of risk management strategies at the household level, stated the report.

Shocks are the major factor contributing to impoverishment or remaining in poverty, said IFAD  report, adding that poor rural people have less resilience than less-poor people may have to resort to coping strategies that involve incurring debt, selling assets, or foregoing on education opportunities for children and youth-all of which leave them that much more vulnerable to future shocks.

The risk environment confronting poor rural people is becoming more difficult in many parts of the world. Not only do poor rural people face long-standing risks related to ill health, climate variability, markets, the costs of important social ceremonies and poor governance-including state fragility-but today they must also cope with many other factors. These, the report added, include natural resource degradation and climate change, growing insecurity of access to land, increasing pressure on common property resources and related institutions, and greater volatility of food prices.

In this environment, the report stated new opportunities for growth in rural areas are likely to be beyond the reach of many poor rural people.

It added that in many cases, innovative policies and investments are needed to address the new or growing risks, and to enhance responses to long-standing ones.

Putting a proper appreciation of risks and shocks at the centre of a new agenda for rural growth and poverty reduction requires a multi-approach.

On the one hand, it requires that the conditions they face be made less risky, be it in terms of markets, health care and other essential services, natural environment, or security from conflict.

The report explained that specific areas of focus include strengthening community-level organisations and assisting them to identify new mechanisms of social solidarity; promoting the expansion and deepening of a range of financial services to poor households to build their assets, reduce and more easily invest in profitable income-generating activities.