The majority of the world’s poor people live in rural areas. Most are farmers but many households pursue a variety of other activities to generate income. Attempts to create non-agricultural opportunities in the poorest areas have not had much success. The only prospect of finding non-farm jobs is in towns and cities.

Research from the Overseas Development Institute, UK, discusses the implications of rural-urban livelihood diversification for poverty reduction policies. In sub-Saharan Africa, the reliance on non-farm income sources ranges between 30 percent and 50 percent. In south Asia, it can be as high as 60 percent. Diversification patterns are highly varaiable, however, making generalisations difficult and not helpful for designing appropriate policies.

Livelihood diversification has traditionally been a response to the many risks faced by rural households. These risks range from the seasonal and annual fluctuations in rain-fed agriculture, to risks created by new policies and market configurations. In recent years, urbanisation has become an important determinant of diversification in areas where there is good access to infrastructure, markets, informal sector jobs and market information. The challenge is to ensure that these expanding markets and job opportunities are accessible to poor people.

• Opportunities for finding non-agricultural work are not consistent. Gender, ethnicity, class and education all determine a person’s access to these opportunities.
• Poorer people are the least likely to be able to take advantage of the existing possibilities for diversified income. The assets and resources needed to diversify are often monopolised by the wealthier sections of society.
• Jobs in the informal sector, (such as security guards, domestic servants, porters, construction workers and rikshaw pullers) can offer opportunities for escaping poverty. However, while there are fewer entry barriers to these, and opportunities for moving between jobs.  Even if wages are much lower than formal sector jobs these are higher than earnings in rain-fed agriculture.

Access to non-farm income outside the village can reduce the vulnerability of poor households by reducing seasonal changes in income and improving the resilience to shocks. This is not reflected in policies, however, which continue to treat rural people as mainly agriculture-dependent and inactive, and aim to keep people in rural areas by discouraging migration..

• People’s own efforts at diversification, which often involve spatial mobility in the quest for occupational mobility, need greater recognition. More policies should support mobility by investing in infrastructure. Cheap transport services and communication technologies should be a funding priority.
• Migrants can be supported through more flexible schooling, food provision and health systems.
• Policy makers need to identify locations where it makes sense to support mobility and those where it makes sense to create jobs.
• Government and donor policies should be reviewed to ensure that they do not negatively affect informal economies. Policies should support poor people in the livelihood strategies they already pursue in the informal sector.
• Governments need to move away from poverty reduction policies with a single-sector focus, and move towards multi-sector livelihoods approaches. This will mean changing thinking within the public institutions that deal with poverty reduction.

The many factors constraining marginal rural areas have shown little improvements in recent years; this is unlikely to change dramatically in the coming decades. Considering this, the policy emphasis of keeping people in rural areas seems misplaced. On the other hand, well-supported rural-urban links can reduce regional inequalities through transferring some of the benefits of intensive agriculture, construction, and urbanisation to poorer regions. These should become the central focus of effective poverty reduction policies.

Source(s):
‘Livelihood Diversification in Developing Countries’, OECD/DAC Report for the OECD/DAC POVNET Agriculture Task Team Consultation, September 2004

Funded by: Development Assistance Committee of the OECD

id21 Research Highlight: 7 April 2005

Further Information:
Priya Deshingkar
Overseas Development Institute
111 Westminster Bridge Road
London
SE1 7JD
UK

Tel: +44 (0) 207 922 0300
Fax: +44 (0) 207 922 0399
Contact the contributor: p.deshingkar@odi.org.uk

Overseas Development Institute, UK

Other related links:
'Squeezing out poor farmers: understanding the constraints and benefits of urban proximity'

'Promoting rural and regional development and poverty reduction: the role of urban centres'

'Helping the rural poor: the key to halving world poverty'

Mind the gap! Bridging the rural-urban divide

See id21's links page on the rural-urban divide