Transcript Document

The Economics of Poverty
1
Overview
•
•
•
•
•
•
Udaipur health surveys
(Banerjee and Duflo) – subsample of households under $1
and $2 a day
Gujarat rural (Cole, Tobacman
and Topalova) – a sample of
SEWA clients and non-clients
Ahmedabad city (Pande and
Field) – clients of SEWA Bank
Karnataka rural (Duflo and
Banerjee) – clients of SKS, a
microfinance institution
Hyderabad slums (Duflo and
Banerjee)
West Bengal (Dulfo, Banerjee
and Shapiro) – a sub-sample of
the poorer households in a
village
2
Expenditure patterns
• The poor do not seem to put
every available penny into
buying more calories
– Only 56% of consumption on
food.
• There is a lot of non-food
consumption and on festivals
– 5% of consumption in on
alcohol/pan/tobacco
– In a year, 99% of the
households spent money on a
wedding/religious festival or a
funeral (14% of total
consumption)
– By cutting down on “temptation
goods” and festivals, they
could theoretically increase
their consumption by 30%
3
Asset ownership
• Land ownership is high
– In Udaipur, 99% of hhs below $1/day own some land apart
from the one their house is built on (this includes wasteland
and unirrigated land)
– 48% of the households in Gujarat own land
– 21% of the sample selected in the West Bengal (Ultra Poor)
study was landless.
• Durable goods ownership is low, so is productive
assets
– In Udaipur, less than 14% of the households own a bicycle;
only about 10% have a chair or a stool.
– Only 4% of households in Gujarat own a bullock cart; 2%
own a tractor and less than 1% own a thresher (32% of the
sample households own a bicycle)
4
Access to credit
• Most households are
indebted
– In the Hyderabad slums,
approx 70% of households
had a outstanding loan at
baseline and over 40% had
more than one outstanding
loan
– In Udaipur, over 66% of
households had at least one
loan
5
Access to credit
• Loan usage and sources
– Multiple purposes and multiple sources
• Most of the loans are from informal sources and not
surprisingly have high interest rates
• Even among MFI clients in AP more than 10% of clients
reported borrowing from more than one MFI
– Most loans are used to finance health expenditure
• In Karnataka, 43% of health events were financed by
loans
• Of the 3,300 loans recorded in Hyderabad slums over
1/5th were used to finance health expenditure
– Other loan uses include wedding expenditure, repaying old
debt and regular consumption
– This is true even in urban areas such as the Hyderabad
slums
• Only 5% of the loans were from commercial banks
6
Do poor people save?
• Savings accounts
– In Udaipur, only about 6% of the extremely poor had a savings
account (12% among the poor)
– In the Hyderabad slums, 34% of the households had a savings
account.
– Participation in informal savings groups – Self-help Groups or the
ROSCA types is low. Savings accounts typically tend to be with
banks
– In Gujarat, 63% of the households had a savings accounts (SEWA
members)
• The poor do find innovative ways to keep money away from
their hands (curb temptation)
– One woman in Hyderabad slums had borrowed Rs 10,000 from an
MFI and then put the money in a fixed deposit account; effectively
earning a negative interest rate!
• Savings instruments
– Life insurance
– Jewelry
7
How do the poor manage risks?
• Many households do have
access to life insurance
(considered savings)
– In Udaipur, 4% of the
extremely poor
– In Hyderabad slums, 10% of
the households
• Many households do have
access to life insurance
(considered savings)
8
Livelihoods of the poor
•
India and its agricultural economy
– 72% of population in rural areas
– 50-60% of the workforce engaged in
agriculture
•
Agriculture as main source of
income??
– Among the poor ($2/day) and
extremely poor ($1/day) in Udaipur
• self-employment in agriculture
reported by 19% of all
households
• only 1% of all households
reported working on somebody’s
land
• 74% of all households report
daily labour
– Households in Gujarat: 72%
• own cultivation: 19%
• agricultural labour: 45%
• non-agricultural labour: 27%
9
Livelihoods of the poor..
• They engage in multiple
occupations
– 94% of the extremely poor
report more than one type of
activity in Udaipur
– In Hyderabad slums, while
31% of the households
owned at least one business,
9% of these households had
more than one business
– In West Bengal: The median
family had 3 working
members and 7 occupations!
10
Livelihoods of the poor..
• The scale of their business is small and there is little
specialization
– In the Hyderabad slums,
• only 10% of businesses had any employees
• 20% of businesses had no assets whatsoever. Typical assets
were tables, scales, pushcarts and tailoring machines
• Only about 1% of the outstanding loans used to acquire
business assets; less than 1% to purchase stock
• average profits was Rs 3,040 per month
– Clients of SEWA Bank in the Ahmedabad city engaged in kirana
(general) shops, tailors, vegetable vendors, bidi rolling, embroidery
etc.
• Even in the case of agriculture, land ownership is small
• Among the poor and the poorest households in West Bengal
land ownership was 5.65 katthas (0.113 acres).
• Gujarat: 6.03 bighas (3 acres approx) spread over 1.64 plots.
Only 48% of all households own land.
11
Livelihoods: what does the data
suggest?
• Agriculture is a high risk activity
– 60% of land holdings in India are rain-fed
– 90% of crop losses can be explained by weather
– And the poor lack access to insurance for various reasons
• Profitability comes at a cost
– Requires investment in high-quality seeds, fertilizers, training etc.
– But, they lack access to credit and savings (the later could be
compounded by commitment issues)
• Are the poor diversifying risk by engaging in more than one
activity?
• Do they engage in multiple activities to simply use up the slack
time they have?
• Are they mitigating risks by investing in agriculture only for
sustenance and no more, no less?
12
Livelihoods of the poor..
• India migration statistics (Census 2001)
– How many people live in a place different from their place of birth:
30% of the total population
– Population that migrated from one part of the state to another: 84%
of the total migrant population
– Most migrants moved because of marriage (43%) with 14.7%
moving because of work/employment and 1.2% for business
• Temporary migration data from Udaipur
– 60% of the poorest households: someone lived outside for part of
the year for work
– Not for a long time – only 10% of migration exceeds 3 months
– It is usually the head of the household who migrates
– They do not travel far: 28% stay within the district. Only 42% go
outside the state
• The extremely poor rarely migrate permanently for work
– This stands at 4% in Pakistan (LSMS 1991)
13
Livelihoods of the poor..
• Migration is a complicated issue
– When do they migrate and for how long?
– Where do people migrate to?
– Which occupations do they choose?
• Issues
– Lack of access to credit, savings and remittances
• Transportation cost to destination and initial cost of
boarding
• Support consumption in the family they are leaving
behind
• Easier to come back if something goes wrong
– They frequently lack specialized skills and identity cards.
Easier to be a daily wage laborer or be the apprentice for
someone you know (social networks) .
14
Their health and well-being
• The poor suffer frequent health
events
– In Udaipur, 72% of the poor
report at least one symptom of
disease; 46% report an illness
that required a visit to the
doctor in the past month
– Again, 55% of the poor adults
were anemic
– In Hyderabad slums, during the
baseline: 17% of households
reported the main purpose of
an outstanding loan to be
“health expenses”
– In Karnataka, a survey of rural
microfinance clients: 51% of
households experienced one
major illness; an average of 2.4
events
15
Their health and well-being
• Health shocks: single
most important factor for
households falling into
poverty
– 107 villages of 3 states in
India: 60% of all descents
in Rajasthan, 74% in AP,
88% in Gujarat (Krishna
2005)
– Over 40% of those in India
hospitalized borrow money
or sell assets to cover
expenditure (World Bank
2001)
16
Their health and well-being
• Public facilities are inadequate, health insurance
rates are low and average spending on health is high
– 80% of all healthcare spending in India is private, nearly all
of this out-of-pocket. Less than 2% of households in India
have access to health insurance
– The rural mf clients in Karnataka tend to visit private facilities
and spend an average of Rs 1,867 i.e. 40% of their average
monthly expenditure on health events
– In the Hyderabad slums: almost none of the households had
health insurance
– Again, among the Karnataka clients only 0.5% of all
households had a health insurance policy. Only 13% had
ever been offered insurance or were aware of this being
available in the village
17