Access to assets by the poor
Abdul Bayes
Access to institutions could also be counted as an asset like land, livestock or non-land fixed assets. For example, access to financial institutions can address the problem of the shortage of working or fixed capital; access to political organisation can reduce transaction costs or promote interests through political links etc. We call them social capital as they help producing output.
Let us now pick up the issue of access of the rural households to political organisations. We observe that 2/3 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, needless to mention, the rural rich are much ahead of the rural poor. It, thus, appears that disparity of this kind also contributes to disparity in other branches of livelihood strategy.
We also observe that, about 40 per cent of rural households have access to NGOs (non-governmental organisations) now, as compared to about 24 per cent a 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. That means, roughly four-fifths of poor households now have embraced the umbrella of NGOs that provide access to credit and other services. This might have played a role for the accumulation of other assets like rickshaw vans, livestock or pumps. Thus, access to financial institutions influence livelihoods by enabling the accumulation of other assets. This also points to another development of the coverage of NGO services and their targeting. About one-half of the relatively large and medium land owning groups (owning 1.0 ha and above) has gained access to NGOs at present as compared to one-fifths in earlier periods. This observation is quite surprising as the NGO-bell was not supposed to ring for the rich. That 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 asset unless the access helps households with credit for pursuing economic activities. In this case particularly, we notice another significant development in recent times. 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: 44 per cent of them now borrow from institutional sources compared to only about 5.0 per cent in 1988. This means that a respectable proportion of rural households have access to institutional sources (mainly NGO) even without any collateral. This enabled them to have access to other assets also. Although large land owning households had little opportunity in this case, the medium households increased their access by six times.
However, a quite opposite syndrome could be observed in the case of non-institutional sources of credit. Only one-tenth of rural households now borrow from non-institutional sources compared to about one-thirds two decades ago. This means that access to highly usurious forms of credit has been replaced by relatively cheap sources of credit. 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 2008 compared to one-thirds in 1988. 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 types of assets and to whom the assets matter? We shall now submit some of the interesting and insightful observations below.
We observe that endowment of owned land has declined for all households, obviously due to sub-division and fragmentation of holding at 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 up on account of other assets. At the same time, increase in average schooling years, reduction in household size and increase in non-agricultural workers increased the overall human capital base of rural households. We also observe that 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, in 1988, a functionally landless household had US$ 161 worth of agricultural and non-agricultural assets; by 2008, it stood at US$ 372 - indicating that even the poorest households were able to accumulate assets.
We now turn to the changes in endowment of the most disadvantaged group - the functionally landless households. The following points are highlighted:
* The functionally landless households have marginally accumulated natural assets through accessing land in the tenancy market.
* These households tremendously gained on account of accumulation of human capital - the average year of schooling has increased to 3.1 years in 2008 from 1.7 years of schooling in 1988.
* These households again increased their physical capital by about 53 per cent over time. In the case of agricultural capital accumulation, it was 106 per cent and for non-agricultural capital about 29 per cent.
* The functionally landless households also more than doubled their loan from the institutional sources, mostly from NGOs.
* By and large, functionally landless households accumulated assets over time to earn their livelihood.
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 glaring. For example, more than two decades back, the physical capital of the functionally landless households was $ 161 as against US$ 763 for large and medium households. The gap has grown to 1: 4 ratios in recent time.
The snapshot from the observations presented so far points to a positive development in respect of non-land assets. Recent empirical works emphasise the fact that transfer of non-land assets to the poor is relatively more effective in reducing poverty (even hunger) than land assets. On the face of it, this observation carries a lot more policy-related weight than distribution of land in a land-scarce country such as Bangladesh.
Abdul Bayes is Professor of Economics at Jahangirnagar University. abdulbayes@yahoo.com
Access to institutions could also be counted as an asset like land, livestock or non-land fixed assets. For example, access to financial institutions can address the problem of the shortage of working or fixed capital; access to political organisation can reduce transaction costs or promote interests through political links etc. We call them social capital as they help producing output.
Let us now pick up the issue of access of the rural households to political organisations. We observe that 2/3 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, needless to mention, the rural rich are much ahead of the rural poor. It, thus, appears that disparity of this kind also contributes to disparity in other branches of livelihood strategy.
We also observe that, about 40 per cent of rural households have access to NGOs (non-governmental organisations) now, as compared to about 24 per cent a 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. That means, roughly four-fifths of poor households now have embraced the umbrella of NGOs that provide access to credit and other services. This might have played a role for the accumulation of other assets like rickshaw vans, livestock or pumps. Thus, access to financial institutions influence livelihoods by enabling the accumulation of other assets. This also points to another development of the coverage of NGO services and their targeting. About one-half of the relatively large and medium land owning groups (owning 1.0 ha and above) has gained access to NGOs at present as compared to one-fifths in earlier periods. This observation is quite surprising as the NGO-bell was not supposed to ring for the rich. That 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 asset unless the access helps households with credit for pursuing economic activities. In this case particularly, we notice another significant development in recent times. 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: 44 per cent of them now borrow from institutional sources compared to only about 5.0 per cent in 1988. This means that a respectable proportion of rural households have access to institutional sources (mainly NGO) even without any collateral. This enabled them to have access to other assets also. Although large land owning households had little opportunity in this case, the medium households increased their access by six times.
However, a quite opposite syndrome could be observed in the case of non-institutional sources of credit. Only one-tenth of rural households now borrow from non-institutional sources compared to about one-thirds two decades ago. This means that access to highly usurious forms of credit has been replaced by relatively cheap sources of credit. 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 2008 compared to one-thirds in 1988. 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 types of assets and to whom the assets matter? We shall now submit some of the interesting and insightful observations below.
We observe that endowment of owned land has declined for all households, obviously due to sub-division and fragmentation of holding at 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 up on account of other assets. At the same time, increase in average schooling years, reduction in household size and increase in non-agricultural workers increased the overall human capital base of rural households. We also observe that 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, in 1988, a functionally landless household had US$ 161 worth of agricultural and non-agricultural assets; by 2008, it stood at US$ 372 - indicating that even the poorest households were able to accumulate assets.
We now turn to the changes in endowment of the most disadvantaged group - the functionally landless households. The following points are highlighted:
* The functionally landless households have marginally accumulated natural assets through accessing land in the tenancy market.
* These households tremendously gained on account of accumulation of human capital - the average year of schooling has increased to 3.1 years in 2008 from 1.7 years of schooling in 1988.
* These households again increased their physical capital by about 53 per cent over time. In the case of agricultural capital accumulation, it was 106 per cent and for non-agricultural capital about 29 per cent.
* The functionally landless households also more than doubled their loan from the institutional sources, mostly from NGOs.
* By and large, functionally landless households accumulated assets over time to earn their livelihood.
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 glaring. For example, more than two decades back, the physical capital of the functionally landless households was $ 161 as against US$ 763 for large and medium households. The gap has grown to 1: 4 ratios in recent time.
The snapshot from the observations presented so far points to a positive development in respect of non-land assets. Recent empirical works emphasise the fact that transfer of non-land assets to the poor is relatively more effective in reducing poverty (even hunger) than land assets. On the face of it, this observation carries a lot more policy-related weight than distribution of land in a land-scarce country such as Bangladesh.
Abdul Bayes is Professor of Economics at Jahangirnagar University. abdulbayes@yahoo.com
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