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The picture of vulnerability, on natural and financial sides, is similar
in Terai Nepal. To cope with food insecurity and financial difficulties,
several rural households from Nepal are going to Punjab for different
reasons: less rural employment in Nepal; average real wages are 1.5 higher
in Punjab; potential for longer employment in Punjab; fear of armed
conflict in Nepal.
However, there are few other causes of vulnerability and risk in investing
time and finance in agriculture in Nepal. Beside natural disasters (flood,
drought, landslide, insects, etc), lack of financial assets or means to
sustain agricultural production, not organized markets, there are three
other dimensions that are important in the livelihoods decision making
process of the rural communities: land, conflict and caste systems.
In Nepal, the agrarian structure characterized by very small farm size
(0.78 ha per holder in average and 60% having less than 0.5 ha), high land
fragmentation and high people to land ratio (9 people per ha in average,
15 people per ha in average for holders having less than 0.5 ha) is not
conducive for agriculture-based development. 50% of the rural households
sustain their rural way of life by wages and off-farm activities, 30%
still ensure a certain level of food security through subsistence and
commercial agriculture, and 20% are potentially in position to invest in
commercial agriculture. Increase of land and crop productivity, either by
intensification, diversification and increased of yield will be
translated, for about 50% of rural households, by a per capita labor
productivity growth covering only part of the food gap. Consequently, for
50% of land holders, agriculture is considered as a survival solution but
not a development solution. For them, rural way of life is sustained and
financed by wages and off-farm activities. Comparatively, wages in Punjab
may cover all the food requirement, and the reimbursement of the debts to
local money lenders. Best options to ensure food security and little
saving is to seek off-farm emmployment (Construction, tourism, transport,
etc.), migrate to India or migrate to Gulf and Malaysia.
Since 2001, the armed conflict, especially in Mid and Far western regions,
has affected the agrarian and agriculture patterns. Larger land owners,
most of them from high castes, have been threatened by insurgents. Some
found refuges in Kathmandu and secondary towns protected by army, other
are not investing in land because of the risk factors. Some share croppers
ant tenants may benefit of the situation because they temporarily do not
share the 50% production with absentee owners, but insurgents ask 30% of
the production. The situation of the land use situation is not solved
anayway. The relationship between land owners, share croppers and tenants
in conflcit areas are not clear and may further degradate. In conflict
area, the mobility of food, goods and people is restricted by both army
and insurgents, that limit access to inputs, markets and labor.
The caste system in several parts of Nepal still determine the
relationship between people and their level of access to resources and
economic opportunities. Low castes groups and vulnerable ethnic groups
such as Magar and Tharu, representing about 25% of the population, most of
them landless or marginal farmers, sustain their livelihoods from their
labor in farm and off farm employment. Only 15% of the ocupation castes
(Dalit) continue their traditional occupation as main activity. The risk
factor in engaging in the agriculture sector as farmers, laborers or share
croppers towards socio-economic development is very high: 1) As laborer,
the real farm wage has not increased since the last 10 years with a
decreasing purchasing power over the period (US$ 1 per day for men in
average, US$ 0.7 per day for women), keeping them in poverty and in
survival strategy; 2) as farmers, they have so little (less than 0.05 ha
per family member) that the benefit will only cover 1-4 months of food
security; 3) as share cropper, they have to give 50% of the production to
the owner, and pay for all inputs, that make in reality 70% benefit fo the
owner, 30% for the share cropper) - system that keep them in food
insecurity; 4) as dairy farmer, the status of untouchability make
difficult to sell te milk, or to sell processed milk either in village
based milk collection centers or in te shops.
Consequently, the rural livelihood trends show that men are giving
priority for off-farm activities (labor productivity 2-3 times higher than
farm wages), including migration to town, India and oversea migration, and
women stay home to keep house and children, farming for their consumption
with low input-low output strategy, and accepting local farm-wages to fill
part of the food insecurity gap. This trend show that the nature and level
of vulnerabilities for 50% of the rural households in investing in
agriculture is very high, and addressing causes or build on assets in
agriculture is not really relevant for the development of the poorest
groups. Adressing some causes of the vulnerability in the agricultural
sector may be too late in the sense that it will not provide now much
value and benefit (implementation of the land reform (made in 1962), still
practised Hindu inheritance system agaisnt the inheritance law from the
constitution, monitoring of the discriminatory behavior, etc.). For
laborers, agriculture is the less preferred option because of the low
labor productivity.
The question now is, given the agrarian structure of Nepal, the economic
and social environment, the very high density of population by agriculture
land area,and the security situation, all providing their sets of risks
and vulnerabilities, to decide if agriculture can still be the engine for
economic growth and poverty reduction, or if non agriculture development
including oversea migration is to be facilitated to sustain the rural way
of life and rural traditions, allow more efficient development and reduce
overal vulnerabilities in the process? Keeping investing in agriculture
may be interesting for the government development agenda and for ensuring
a certain level of national food security, but may keep rural people in
increasing poverty, without preparing the new generation in more labor
productive alternatives?
Laurent Chazee
Agriculture and rural development Specialist
"Vinay Chand" <<address removed>>
Sent by: <address removed>
04/30/2004 05:14 AM
To: <<address removed>>
cc:
Subject: living with risk
The usual picture portrayed about the farmer is that they live with risk
mainly in the form of natural factors such as weather, disease and pests.
These are wild cards that the farmer is vulnerable to. Many try to work
out insurance schemes that will protect farmers against these. The trouble
is that when natural problems come they can come in series, so it may be
possible to do something about one bad harvest but two or three bad ones
in a row would be difficult to provide for. In any case, the vulnerability
of the small farmer is best expressed by the fact that he is in a week
position to take out insurance in any form. The Government can pay the
premiums for a private insurance scheme but if the Government recognises
its role as protector then there is no reason to pay premiums.
Purely or mostly subsistence farmers are most vulnerable to natural
factors since they are mostly out of the cash economy. The others are most
at risk, weather excluded, to their management of cashflow. Assuming that
they can sell their labour, their allocation of labour time to their own
farm depends on money they have. Those lifted above poverty line such as
many farmers in Punjab, India do often have enough saved to finance
themselves for most of the crop cycle. Others may seek to borrow if they
are confident of the returns. The only lenders for small farmers are
traders who expect repayment when the crop is sold through them.
Application of inputs too needs cash. Credit may be obtained from
suppliers directly or through traders allowed to channel inputs. This
credit too is repayable when the crop is sold and often ties the sale to
the immediate credit provider.
The two above are commercial risks and if the farmer can finance the two
through loans, he would have to pay at least half his expected farm gate
revenue for them. The farmer would also be tied to selling through the
lender and thus maybe not the best price and to minimise exposure the
farmer has to harvest as soon as possible. The poor farmer often gets a
terrible farm gate price. It is rigged against them due to their poverty.
Social costs are a reality and often a nightmare. There is no cover for
unexpected costs and an illness or accident can lead to long term
indebtedness to money lenders at rapacious rates. The quality of life
often depends on being able to meet the social costs.
Therefore, the farmer is in a debt trap. Lenders are unlikely to finance
anything unusual and it is far and most safest to stick to the crops in
which the farmer has experience and which are the normal ones traded in
the area. Everything is geared to trying to keep going on an established
track. The same crops, the same lenders, the same borrowers. Provided
farmers stick to the formula there is an element of private sector cover
for risks, the farmer can borrow to cover one bad harvest although
repayment may be more difficult.
To help the farmer take on risk by changing what they are doing in the
form of diversification or technology, requires reducing his degree of
dependence on the system. This is not easy to do since the farmer needs
long term assurance, they do not believe do gooders or bureaucrats over
those they have worked with for a long time. Backing their ideas may be
very risky and thus costly. This makes observers sometimes think that
farmers are risk averse or stupid and that what they require is education
however that reaches them. In reality, face to face contact, time and
practical demonstration are required and most of all relief from debt.
As for the wild cards-weather. Cover against that requires truly deep
pockets. Far deeper than those of the farmer. Even with increased income,
the farmer's ability to insure is dubious. The economics of such insurance
is even more dubious. Paying for insurance can amount to trading possible
trouble for guaranteed trouble. The state can and sometimes does insure
the farmer against price movements but that is a costly exercise that few
countries are rich or committed enough to undertake.
Best wishes,
Vinay Chand,
230, Finchley Road,
London NW3 6DJ, UK
Tel: 44-20-7794 5977
Fax: 44-20-7431 5715
<address removed>
Please visit dfid-agriculture-consultation.nri.org.