A key aim of the food system is to boost the well-being of people and the households to which they belong. This requires a household-centric view of diversification and resilience. Given the distinguished function of earnings in making certain family well-being, diversification of earnings sources is crucial. Three vital sources of earnings diversification are threat administration, security nets and labour market diversification.
Diversification throughout states of nature
With excessive climate occasions anticipated to grow to be extra frequent sooner or later, new types of threat administration might be wanted. Traditional strategies of community-based threat sharing are not viable when complete communities face widespread dangers from drought, flooding and warmth stress. Weather index insurance coverage has been developed particularly for such circumstances10. Households enrol at the start of the season and payouts for all farmers within the disaster-affected area are made when an index, for instance rainfall within the area, drops beneath a pre-determined set off degree. This permits households to diversify their incomes throughout completely different ‘states of nature’, paying out cash when the climate is regular and receiving cash when drought or flooding disasters strike. This type of diversification has nice potential to stabilize rural agricultural family incomes.
Since its inception, climate index insurance coverage has confronted challenges in reaching the poorest households — as they usually confront extreme credit score constraints. However, latest technological improvements similar to distant sensing and e-banking are enabling index insurance coverage to thrive throughout the growing world. India and China, the place 80% of all farms have some type of insurance coverage, have led the best way11. In Africa, the place 70% of the programmes are non-public sector led — albeit typically in partnership with the general public sector — this market penetration continues to be very small. One of probably the most profitable programmes is the Agriculture and Climate Risk Enterprise (ACRE) programme that has reached greater than 1.7 million farmers in East Africa. ACRE works with native establishments similar to cooperatives and agricultural finance suppliers to succeed in particular person farmers11. ACRE climate index insurance coverage has allowed three-quarters of individuals to entry credit score that might in any other case haven’t been out there to them as a result of threat of catastrophic losses. While promising, reaching its full potential will even require schooling about the advantages of insurance coverage in addition to improved historic climate info that’s nonetheless scarce in a lot of the area11.
Social security nets
While climate index insurance coverage offers an vital supply of earnings diversification for agricultural producers, it doesn’t straight profit non-farm households and fails to defend internet patrons of food from food value spikes within the wake of maximum climate occasions. For these households, different social security nets can play an vital function. While widespread all through a lot of the world, social safety programmes have solely just lately emerged on the scene in Africa the place they’re quickly increasing12. This development has been additional accelerated within the context of the coronavirus illness 2019 (COVID-19) pandemic.
While social help and social insurance coverage could be considered as sources of earnings diversification in their very own proper, latest analysis means that such programmes may have vital impacts on households’ livelihood methods. By offering an assured supply of earnings, social safety can scale back the chance related to investments in new actions, together with elevated participation in business agricultural markets and elevated farm productiveness, in addition to elevated engagement in non-farm actions12. In a latest examine of the Harmonized Social Cash Transfer programme focusing on ultra-poor, labour-constrained households in distant, rural Zimbabwe, Pace et al. discover important impacts on earnings diversification over the medium run (4 years) (manuscript in preparation). Specifically, they establish a shift from survival-led diversification, pushed by seasonality, climatic uncertainty, land constraints and restricted market entry, to opportunity-led diversification, together with higher-paying non-farm actions, with attendant will increase in food and non-food consumption.
Rural–city migration and earnings diversification
While rural off-farm work can present vital earnings diversification alternatives, many rural households additionally select to ship a number of members of the family to work in city areas. Rural–city migration has been a long-standing technique of diversifying and elevating family earnings, with remittances from migrants to their communities of origin serving to to make sure food safety, scale back poverty, help kids’s schooling, ease credit score constraints in farming, pay for farm inputs and repay money owed13. Furthermore, when an city catastrophe arises, such because the East Asian monetary disaster of 1997, the agricultural family connection can present an vital security internet.
The significance of migrants’ remittances to rural family well-being has been underscored in the course of the COVID-19 pandemic. Border closures and lockdown restrictions have resulted in a big lack of jobs and financial actions all through a lot of the growing world. Consequently, these remittances, an important supply of earnings for the agricultural villagers, have been largely misplaced14. Thus, not solely has the pandemic worsened poverty and inequality, it’s also prone to depart long-lasting scars on labour markets, reversing progress on poverty and earnings inequality in lots of economies and lowering resilience.