Rural Income Generation and Diversification - A Case Study ... - Doria

of infrastructure development, the level of education and access to credit facilities as
contributors to the growth of the RNF sector.
According to Reardon (1997), agro-climatic zone-related factors, the infrastructure and
distance from the markets have an impact on earnings from the non-farm sector because
increasing population density lowers transaction costs and raises demand for non-farm
products. On the other hand, it has been found that competition is tougher between urban
products and locally manufactured products near urban areas, which could lead to the
displacement of labour-intensive rural manufacturing activities, such as basket making, beer
brewing, weaving and pottery (Haggblade et al. 2002).
On the household level, Reardon (1997) considered land area, family size and structure,
education, and access to capital and labour the most significant determinants of
diversification. There is evidence that the initial endowment of resources that creates
differences in the capacity to diversify and enter the non-farm labour market may continue to
affect household and gender differentiation over time, and could thus lead to unequal
distributional results. Winters et al. (2006) noted, however, that assets may depreciate or
accummulate over time and are not fixed, thus the household’s diversification capacity and
need may vary over time.
Social capital in the form of networks, memberships, and family and gender relations is also
recognised as a determinant of diversification according to Ellis (2000) and Davis (2003).
These networks may, for example, improve access to market information. The capacity and
potential for diversification also appear to differ between men and women. Women, who are
usually responsible for day-to-day household chores, often combine income-generating
activities with these tasks. Beer brewing, oil pressing, small trading activities, pottery
making and selling food are typical income-earning activities undertaken by women in Sub-
Saharan Africa and normally require only a little start-up capital. Women often have limited
access to education, which combined with their household responsibilities means that they
are more involved in informal rather than formal employment (Haggblade et al. 2002). The
critical issue in terms of diversification may not be gender as such, “but rather who lacks the
assets and mobility to undertake poverty-alleviating, non-refuge rural nonfarm activities”
(ibid.).
4.3 Risk management and coping strategies
The role of risk in income-diversification decisions has been explored by many researchers.
Bardhan and Udry (1999) discussed ex post and ex ante risk management mechanisms. The
former consists of insurance, savings and credit transaction, for example. If a risk-averse
household is unable to smooth out its consumption through these mechanisms, which is often
the case due to lack of formal insurance and credit facilities, it can allocate resources for
securing more stable income through ex ante measures such as on-farm or non-farm
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