Access to land is the most important source of livelihood in rural areas. Like land, livestock or non-land fixed assets, access to institutions could also be counted as an asset. For example, access to financial institutions can address the problem of the shortage of working or fixed capital. It helps produce output.
Let's first pick up the issue of access of rural households to political organisations which has come to be known as 'social capital'. Only three out of 100 households are associated with political parties but when disaggregated, roughly one-thirds of the richer segments of households are found to have access to any political party. This compares with 6-7 per cent for the poor households. If access to political parties is assumed to contribute to capital accumulation, the rural rich are much ahead of the rural poor. Needless to mention perhaps that disparity of this kind also contributes to disparity in other branches of livelihood strategy.
On the other hand, about 40-50 per cent of rural households had access to NGOs (non-governmental organisation), as compared to about 24 per cent one decade back. But the average hides the disaggregated dynamics. Especially, very poor households (owning land up to 0.40 ha) could significantly increase their participation during that comparable period. For example, roughly four-fifths of poor households are under the umbrella of NGOs that provide access to credit and other services. This might have played a role for accumulation of other assets like rickshaw vans, livestock or pumps. Thus, access to financial institutions influences livelihoods by enabling accumulation of other assets.
This also points to another development of coverage of NGO services and their targeting. About one-half of the relatively large and medium land owning groups (owning 1 ha and above) gained access to NGOs as compared to one-fifths just one decade back. This observation is quite surprising as the NGO-bell was not supposed to ring for the rich. This means, although on paper the functionally landless households are the targets of the NGOs, in practice, a sizeable portion of the better-off households also appear to benefit from NGO activities.
But it should also be borne in mind that mere membership of NGOs might not help creation of assets unless the access helps households with credit for pursuing economic activities. In this case particularly, the share of households borrowing from institutional sources of credit increased more than three times over the last two decades. The most dramatic improvement was observed in the case of the functionally landless households with 44 per cent of them borrowing from institutional sources compared to only about 5.0 per cent in the 1980s. This means that a respectable proportion of rural households have access to institutional sources (mainly NGOs) even without any collateral. This enabled them to have access to other assets also. However, although large land-owning households had little opportunity in this case, the medium households increased their access by 6 times.
A quite opposite syndrome could be observed in case of non-institutional sources of credit. Only one-tenths of rural households borrow from non-institutional sources compared to about one-thirds in earlier times. This means that access to highly usurious forms of credit has been replaced by relatively cheaper sources. That had positive impacts on all groups, especially on the poor. For example, only one-fourths of the marginal landowning groups borrowed from non-institutional sources in recent years compared to one-thirds in 1980s. The diminished role of non-institutional sources of credit and the rise of institutional sources should be construed as positive development in rural areas. The landless households mostly benefited from this development through availing credit and creating assets for livelihood.
In the light of the discussions above, the question that could be raised is: have rural people been able to accumulate assets over time? And if so, what are the types of assets and to whom the assets matter? For all households, the endowment of owned land has declined, obviously due to sub-division and fragmentation of holdings because of inheritance among large and medium land owners. But endowment of other components of natural capital, such as irrigated land, land under tenancy, and cultivated land for small farmers increased over time. This implies that despite a downward trend in land endowment, rural households were better-off on account of other assets.
On the other hand, increase in average schooling years, reduction in household size and increase in non-agricultural workers increased the overall human capital base of rural households. Likewise, physical capital accumulation has increased substantially over time and access to micro-credit provided by NGOs has helped households with accumulation of financial capital. For example, a functionally landless household had US$ 161 worth of agricultural and non-agricultural assets in 1988 and of US$372-450 in recent years indicating that even the poorest households were able to accumulate assets.
The ownership of land is an important determinant of human capital formation. The large and medium landowning households have also increased the average schooling years from 6.5 years to 7.5 years over the last two decades. The already high educational status might have pushed them faster towards accumulation of other assets. Possibly, the disparity in the access to education is at the root of income disparities in rural areas. If we consider the case of physical capital, the disparity issue becomes more visible.
Information suggests that more land and relatively more access to physical and financial capital by the rich went to widen income disparity in rural areas over time. In this gloomy state of events, the government and the NGOs have the responsibility of increasing the access of the poor to various capital-augmenting facilities. And for that to happen, the poor segment shouldn't be left to the 'invisible hands' nor to the mercy of the market. Visible but selected interventions by the government like agricultural subsidies, special assistance for secondary and tertiary education, special credit arrangements etc. could minimise the disparity, if not remove it.
The writer is a Professor of Economics at Jahangirnagar University.
 abdulbayes@yahoo.com
Increasing access of rural households to institutions, capital
Abdul Bayes | Published: May 12, 2015 00:00:00 | Updated: November 30, 2024 06:01:00
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