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

1. 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

2. 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<<<

4. 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 !

5. 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

6. 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

7. 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

8. 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)

9. 2. Market policies and stock holding
…market openness helps the poor in general
and in crises

10. Market openness helps in natural disasters
Example: Bangladesh- Rice prices in the 1998 floods

11. 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

12. 3. Credit…
 The biggest Bank serving the poor is…?
Family and friends

13. 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)

14. 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)

15. 4. Social protection programs
 … address chronic and transitory risks
 Direct nutrition action is needed …
 with fostering behavioral change.

16. 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

17. 5. What Insurances?
 Production ?
 People ?

18. 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

19. 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)

20. 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

21. 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

22. 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)