Managing Vulnerability and Risk in the Rural Space
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Managing Vulnerability and Risk in the Rural Space

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World Bank, Washington D.C.

World Bank, Washington D.C.
March 31, 200

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Managing Vulnerability and Risk in the Rural Space Managing Vulnerability and Risk in the Rural Space Presentation Transcript

  • 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) Proportion of Children Under Five and Under 50 45 ETH BDI NER 40 MDG TCD MLI 35 BFA TZA MRT ZAR AGO 30 SDN Weight (%) SW NGA ZMB MOZ RWA NAM SLE 25 MWI CIV TGO GHA GIN CAF BEN SEN UGA 20 GMB KEN CMR COG 15 LSO ZWE 10 GAB BWA ZAF 5 0 90 100 110 120 130 140 Degree of Insecurity
  • 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 Number of farms Farm Size (ha) % of all 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 disasters Example: Bangladesh- Rice prices in the 1998 floods
  • But public action matters too Example: 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 mechanisms Example: formal and informal rural credit in China All households (650) Took loan Took no loan (31%) (69%) Loan sources Loan use Private Agricultural Other Bank (30%) Consumption (70%) production production (52%) (34%) (14%) 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 180 (72.9) 160 140 (64.0) 120 % of total monthly (59.7) expenditure 100 80 60 40 (7.6) 20 0 Dec '97 Nov '98 May '99 Nov '99 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 Protection Example: Conditional Cash Transfers in Nicaragua, Impact on food expenditures, school enrollment and health Average effect Average effect on Net effect on the on per capita enrollment, 7-13 percentage of annual food years old in 1st-4th children under 5 expenditures (in grade (in years old who are Nicaraguan percentage points) underweight (in Cordóba) 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 Mechanisms Example: 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 50 45 40 35 Million children 30 Progressive Policy 25 Actions 20 Policy Failure 15 Technology and 10 Resource Management Failure 5 0 1997 2015 2030 2050 Source: IFPRI IMPACT projections (September 2004)