The income diversification strategies of smallholders in the hills of Nepal

Abstract

Motivation: There is an ongoing debate in development economics about whether resources aiming to improve household welfare should be allocated to general development programmes, such as providing education, or to specific income enhancing programmes, such as promoting certain commodities or practices. Purpose: This article contributes to this debate by analysing income levels and income diversification strategies of households that were engaged in growing organic coffee in the hills of Nepal. Engaging in organic coffee production is hypothesized to be an important income enhancing activity for asset-poor subsistence farmers. Approach and Methods: We conducted a structured household survey of 441 coffee growers from Gulmi and Lalitpur districts in Nepal with a focus on the sources of income. The household income diversification was measured using the mean of the household share of each type of income and the share of a given source of income over a given group of households. We modelled the determinants of household income using Ordinary Least Squares and Tobit regressions. Findings: We found that most households derive a higher proportion of income from off-farm sources. The main finding is that education increases household off-farm income by improving access to domestic and international labour markets, and this reduces dependence on farming. Lowincome households have a higher proportion of income from farming. Across all households, non-certified coffee production is financially more attractive to farmers than organic production. Policy Implications: Our findings suggest that investing in general development, especially education, is more effective than a scheme to promote cash crops as it allows asset-poor subsistence farmers to engage in regional and international labour markets.

Factors contributing to farm-level productivity and household income generation in coastal Bangladesh’s rice-based farming systems

“…Our results align with a growing number of studies indicating that off-farm income is key to improving the economic status and food security in smallholder systems [33,77,79]. Many smallholders are unable to invest in agricultural best management practices and technologies due to their poor economic status; hence they are often net buyers of crops [80], further contributing to food insecurity and poverty.…”

“…Even among the poorest farmers in our studied households with less than 0.5 USD per capita per day income in 2005 (Category D), almost 18% broke the poverty line in 2015 by reaching this threshold (93% of annual income from off-farm activities). Similar trends have been observed for smallholders in Nepal [79]. A simulation model study also observed a similar trend for coastal Bangladesh [77].…”

Drivers of Households’ off-the-farm Income Diversification Patterns in Nigeria: Panel Evidence Using General Household Survey Data

“…It is important to note that the Herfindahl–Hirschman Index, the Berry Index, the entropy measure and the SID have been used several times to analyse diversification (Batool et al, 2017). Other measures include the Harfindahl–SID (Djido & Shiferaw, 2018), count index (Minot et al, 2006) and shares of income measurement (Alobo & Bignebat, 2017; Sharma et al, 2015). Evidence from the literature suggests that these indexes can yield similar outcomes as there is no clear distinction between them (Okhale, 2019; Zhao & Barry, 2014).…”

Livelihood Diversification of Rice Farmer Households in Indramayu District, West Java, Indonesia

“…[37,42], agricultural tools and machinery, and access to agricultural technology (communication networks) [41,43]. Financial capital is such as sources of income [42], livestock [40], remittance [73], credit access [60], and sources of capital [74,75].…”