More rural families earning money from non-farm work

5 June 2007, Rome – A growing proportion of rural family income is coming from non-farm activities such as commerce, service provision and immigrant remittances. However earnings
from agriculture continue to be a fundamental source of livelihood for 90 percent of rural households, particularly the poor, according to a report released today by the UN Food and Agriculture
Organization (FAO) during a seminar on rural incomes.

The report, Rural Income Generating Activities: A Cross Country Comparison, is part of a larger project on Rural Income Generating Activities (RIGA) overseen by FAO’s Agricultural
Sector in Economic Development Service (ESAE). It is based on a recently developed cross-country database of rural household surveys, which includes information on multiple categories of rural
household income and access to wealth generating assets.

Kostas Stamoulis, ESAE Chief, said “Non-farm rural activities, even when more remunerative than agricultural work, are not accessible to the poorest of households because they often lack
the education, capital and credit needed to participate in these areas. This systematic study of the sources of rural household income will fill some of the gaps that exist in our understanding
of who has access to what type of income and such information could be very helpful to policy-makers looking for ways to reduce poverty.”

Improved data resulted from institutional cooperation

The new reports were made possible by a multi-agency project that saw FAO, the World Bank and the American University (Washington, DC) working together on the RIGA project.

The RIGA project combines information on the sources of rural household income using 23 datasets from 15 countries. These sources include agriculture and livestock, non-agricultural wage and
self-employment, and public and private transfers. The project is designed to help development analysts and practitioners understand rural household behaviour so they can map pathways out of

“The project’s aim is to contribute to better-informed policies and programmes for poverty reduction,” said Mr Stamoulis.

No longer measuring apples and oranges

According to Benjamin Davis, an FAO economist and principal investigator in the project, “The FAO report marks the first time that we are able to base statements about non-farm and farm
sources of income on data that have been collected and compiled in such a way that we can measure the same thing in different countries. Until now, we have been basing our analyses on
country-specific case studies and data collection methods, and it was like trying to compare apples to oranges, so this is a really big breakthrough for the analysis of rural

Overall, the study paints a clear picture of multiple activities across rural areas and diversification across rural households. This is true across countries in all four continents, though
less so in the African countries in the study. For most countries the largest share of income stems from off-farm activities, and the largest share of households have diversified sources of
income. Diversification, not specialization, is the norm.

The poor are handicapped in their effort to escape poverty, the report says. While incentives to diversify may be there, their capacities to enter more lucrative income activities is limited.
In Guatemala for example, the poorest households derive only 18 percent of their income from non-agricultural wages and self-employment. For the rich that share exceeds 50 percent. Education
may make the difference. Average education of poor household heads is 1.3 years, compared to almost 4 for rich households.

A related study, which analyzed more than 40 agricultural censuses and 120 demographic censuses in an attempt to provide a global long-term perspective on farming and demographic trends, was
also presented at the seminar.

According to Gustavo Anríquez, an FAO economist, “this global view of rural demographics allows us to observe that although at a global level nine out of ten farms are small, there
are important regional differences. Small farms are less common in Latin America, and parts of sub-Saharan Africa.”

“A global perspective clearly shows us that the feminization of rural areas is present only in sub-Saharan Africa,” he said.

Rural Income Generating Activities: A Cross Country Comparison was written by Benjamin Davis, Katia Covarrubias, Esteban Quinones, Alberto Zezza, Kostas Stamoulis, Genny Bonomi and
Stefania DiGiuseppe of FAO, Paul Winters of American University and Gero Carletto of the World Bank.

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