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SFB 564: F2.2 - Risk management of farm households in Northern Vietnam
Project
Project code: DFG SFB 564
Contract period: 01.07.2003
- 30.06.2006
Purpose of research: Basic research
Sub-project F2 ‘Rural financial services and sustainable rural development in Northern Vietnam’ assessed in the 1st phase (July 2000 – June 2003) of the Uplands Program (SFB 564) the conditions of effective financial market functioning in rural Vietnam serving rural economic development with particular emphasis on sustainable agricultural production systems. The sub-project F2-1 analysed the factors that determine access to financial services, particularly credit and savings services, by farm households. The main results of the 1st phase of F2 were threefold. First, the so-called Conjoint Analysis showed that poor rural households are capable and willing to save. Second, the study of the secondary and primary data (118 households in Bac Kan province and 142 households in Son La province) indicated that the two state-owned rural development banks, the Vietnam Bank for the Poor (VBP) and the Vietnam Bank for Agriculture and Rural Development (VBARD) together have already an enormous outreach as it concerns the supply of microcredit. The two banks reach 58% of all rural households in Vietnam. Nevertheless, the microcredit is heavily restricted to specific uses, among the uses being the purchase of livestock, one of the most popular presently. Third, participatory workshops with the farm households revealed that the debtors perceive their livelihood as severely threatened by the risk of failing debt-financed investments and other individual risks. As a consequence to the manifold risks that a rural household is exposed to, the households have adopted risk coping strategies to smooth consumption, nevertheless, adaptive strategies to stabilize income are lacking. This can result in coping strategies focusing on the exploitation of natural resources and human capital resulting in unsustainable livelihoods. Based on these results, the consequent conclusion is that more research is needed regarding the third corner-stone of rural finance in developing countries, which is microinsurance. Acquiring microinsurance counts to the adaptive strategies of vulnerable households.
In phase 2 (July 2003 – June 2006) of the Uplands Program, sub-project F2 will therefore concentrate its research on livelihood clusters of vulnerable rural households, and their adaptive and coping strategies regarding risks. While adaptive strategies are ex-ante strategies and aim at secure income even in times of crises, coping strategies are a reaction to acute risks and are employed ex-post. Informal social networks and semi-formal microinsurance schemes count to the former strategies and either keep vulnerability levels constant or even reduce them. The latter strategies try to smooth consumption, nevertheless, often at the expense of the future livelihood, thereby increasing vulnerability.
In this context, it can be stated thus, that the research issue of the sub-project F2 in its 2nd phase links up closely with D2-1 “Efficient livestock”, F1.1 “Resource tenure”, and F2.1 “Rural finance” since primary data of these sub-projects from the first phase will be employed to kick-off the field work of F2.2 in the second phase. Furthermore, due to the nature or the research issues of sub-project F2.2 “Rural finance”, it will closely cooperate with A1.2 “Participatory research”, D2.2 “Efficient livestock”, and F3.2 “Local organizations”. Moreover, the research of F2.2 will also make an input into the multi-agent analysis of G1.1 “Farming systems” in Vietnam in the future.
Methodologically, this research applies qualitative and quantitative survey instruments. Particularly, the snowball sampling procedure in combination with the development of a composite vulnerability index using principal component analysis (PCA) are innovative approaches to bring light to the relationship between vulnerability and risk management strategies. The causal relation of vulnerability, livelihood assets and particularly risk management strategies in the area of microinsurance will be explored using a three-stage least square (3SLS) model. An Adaptive Conjoint Analysis (ACA) will be used to assess the demand structure for semi-formal microinsurance.
Research on livelihood, vulnerability and strategies to stabilize or even reduce vulnerability such as microinsurance is crucial for a better understanding of the reasoning behind the exploitation of livelihood assets such as natural resources or physical assets in the form of livestock despite its negative medium and long-term effects on the livelihood.
Section overview
Subjects
- Agroeconomics
Collaborative Project
Funding programme
Excutive institution
Institute of Agricultural Sciences in the Tropics (Hans-Ruthenberg-Institute) (490)
