EVIDENCE June, 2012 from to POLICY a note series on learning what works, from the Human Development Network 71392 Can Small Farmers Protect Themselves Against Bad Weather? Severe weather conditions can undo even the best efforts of To understand what might allow families to better families to break free of poverty. Households that rely on subsis- manage risks, the World Bank supported an evaluation of tence or small-scale farming are especially at the mercy of severe a pilot program in Nicaragua to encourage rural house- weather. Droughts and floods wipe out crops, leaving families holds to diversify beyond small-scale farming. The proj- hungry or without anything to sell to pay for essentials such as ect found that two years after the program ended, house- school fees or medicines. Climate changes have made weather holds that received vocational training or investment even more variable in many countries, exacerbating problems grants to start non-agricultural businesses were better such as droughts, extreme temperatures and flooding. Poli- protected against the negative effects of severe drought cymakers seeking to offset the unexpected have increasingly than families that only received conditional cash trans- used cash transfer programs to help families through difficult fers. These results suggest that helping farmers develop times. But what makes a difference in the long-term? Are other income-generating different businesses can be an small grants or training programs effective methods to help effective and sustainable approach to reducing poverty farm households develop non-agricultural businesses, thereby by protecting them against the financial repercussions of enabling them to better manage weather shocks? severe weather and climate changes. Context Why Weather and Why Nicaragua? Bad weather can destroy farmers’ livelihoods, propelling fami- er conditions. Temperatures have increased, rainfall has lies deeper into poverty and hurting their children’s chances of become increasingly irregular, and the window for the moving out of poverty. Managing the risk of droughts, severe country’s two annual crop cycles has shortened, further winters, or floods and landslides isn’t easy. Climate change is constraining the ability of farmers to rely on subsistence affecting the intensity and frequency of these already severe farming crops to meet their needs. weather conditions, making it that much more difficult for The issue is critical because the majority of Nicara- small farmers. Adoption of new crops, different agricultural gua’s poor—who make up almost half of the country’s practices or weather insurance programs are approaches that 5.8 million people—are concentrated in rural areas. some countries are testing, but these aren’t focused on helping Many are small-scale farmers who don’t have irrigation help families develop alternate, non-farming, income sources. systems for their crops, leaving them especially vulner- In Nicaragua, the second poorest country in Latin able to droughts. This impact evaluation focused on rural America after Haiti, poverty is compounded by weath- communities in northwest Nicaragua, where more than 90 percent of households rely on semi-subsistence ag- Did You Know… 42% of Nicaragua’s population lives in rural areas. riculture. Although families in this area knew the risks 75% of rural families rely on agriculture for their livelihood. of agriculture, including that of losing an entire crop to 2 out of every 3 people residing in rural areas are poor. drought, relatively few had managed to develop outside (National Institute of Statistics, Nicaragua, 2009) sources of income. Case Study Nicaragua The Nicaraguan Government created a one-year pilot ties, with a total of 3002 eligible households, and 50 control program targeting farming families affected by a severe communities. drought in 2004. The program sought to help families Households in the treatment communities were as- cope with their immediate problems by giving them cash signed by lottery to one of three groups. The first group transfers. The larger goal was to give families opportu- qualified for a conditional cash transfer program that nities to expand beyond small-scale farming by offering gave them $145 if they met certain conditions includ- vocational training and investment grants. The longer- ing: taking children for regular growth monitoring term question was whether households would be able to check-ups; sending children aged 7-15 to school; at- diversify their income streams so they could better pro- tending lessons on nutrition and using at least some of tect themselves against future droughts and other severe the transfer to improve the nutritional content of family weather conditions. meals. The amount was increased by $90 if the family had school-age children, with an extra $25 per child for school supplies. The second group qualified for the same cash transfer program and also received a scholarship for vocational training to develop new marketable skills. The third group qualified for the conditional cash trans- fer program and also received a $200 grant to develop a non-agricultural business. Households that received the grant had to provide a start-up plan and received training and technical assistance to develop the plan. Take-up was close to 100 percent for all the groups. The program lasted one year, and baseline data were collected in April-May 2005, right before the pro- gram was launched. There was a follow-up survey nine months into the program in July-August 2006. A sec- Illustration from a children’s book presenting the experience of pilot beneficiaries ond follow-up survey was carried out between August 2008 and May 2009, which allowed researchers to look The program was implemented in six municipalities at the state of households two years after the program with very high rural poverty rates. Communities in the mu- had ended. The results discussed here are based on this nicipalities were grouped in blocks based on crops, micro- later survey. climates and infrastructure. Out of the 44 blocks selected Program Participants: The program targeted the main caregivers in the for the pilot, half of the communities in each block were households, who almost always are women. These women had on average three randomly assigned to treatment groups and the other half years of education. More than 90 percent of households were small farmers. About half worked with livestock and migrated during harvest time for work. to the control group. There were 56 treatment communi- This policy note is based on World Bank Working Paper (6053) “Transfers, Diversification and Household Risk Strategies,� by Karen Macours, Patrick Pre- mand and Renos Vakis. The BASIS research program, a World Bank Research Support Budget grant, the World Bank’s Poverty, Equity and Gender Unit for Latin America and the Caribbean, as well as the Environmentally and Socially Sustainable Development (ESSD), the Bank-Netherlands Partnership Program (BNPP) and the Spanish Impact Evaluation Fund (SIEF) provided support for the impact evaluation of the ‘Atención a Crisis’ Pilots. More information on this impact evaluation is available at www.worldbank.org/atencionacrisisevaluation. The Findings increased incomes of the two groups. During droughts, households that qualified for either vocational training or investment grants had a higher income when com- pared with the control group. In addition to being fully protected against the effects of drought, households that received grants to start small businesses also had higher consumption and incomes than the control groups during “average� weather conditions two years after the end of the program. This wasn’t the case for households that qualified for vocational training. During periods of average weather, consumption by house- holds eligible for business grants was 8 percent higher than consumption in households that received nothing. The rise in consumption during these periods was matched by an in- Illustration from a children’s book presenting the experience of pilot beneficiaries come boost of 4 to 5 percent over the control group. How- Two years after the program ended, families ever, there was no similar increase for households that got eligible for either investment grants or voca- vocational training. tional training were better protected against weather “shocks� than families that qualified Families who received only conditional cash only for conditional cash transfers or didn’t transfers didn’t do as well after the end of receive anything. the program. The program was designed both to help families cope Households that qualified only for the conditional cash with immediate difficulties, as well as help them over transfer did consume more food and other goods during the long-term by giving them seed money to build a the year the program was in effect. But two years after the non-agricultural business or training to start a small project ended, these households weren’t able to maintain business (like sewing) or get a non-farming job. Over- these higher consumption levels compared with the con- all, families that received either vocational training or trol group. Nonetheless, when broken down to look only investment grants did develop alternate income-gener- at consumption of food, these households did better than ating activities, reducing their dependency on crops. As the control group, both in the quantity and the quality of a result, these households were fully protected from the food consumed. The more nutritious food may be because effects of droughts. They were able to maintain their of the effect of the conditional cash transfer program, normal levels of consumption, instead of having to which emphasized behavioral changes with respect to nu- cut down on food and other expenses because of lower trition, as well as the spillover of having more local food for income from crops. The ability to maintain—or even sale thanks to the investment grant that sparked creation of boost consumption in some cases—was likely driven by new businesses and stores. One reason why the investment grant resulted making the $200 investment grant critical to getting in relatively higher income and consumption is households started. that households that qualified for the grants were 13 percentage points more likely to be They weren’t just running a business, but they involved in non-agricultural self-employment. were turning a good profit. Two years after the program ended, families that quali- Average annual profits—measured two years after house- fied for the grant were more likely than those who re- holds had qualified for the grant—were about $30 higher ceived vocational training or only cash transfers to be than the control group. They also had an annual $10 re- running their own small businesses, such as having a turn on livestock, for an average annual return rate of bakery, making cheese or running a corner store. Such 15 to 20 percent on the initial $200 investment. House- businesses usually have small start-up costs—buying an holds running businesses said they expected profits to oven for baking or goods to stock a store, for example— keep growing. Conclusion Helping small agricultural households manage the risks qualified for training didn’t have a similar rise in average that come from climatic changes and bad weather isn’t easy. income, but their income was less variable during times Cash transfers can help families cope in the short-term, of weather shocks. but in this case they did not offer a long term solution. This impact evaluation provides evidence that in addi- The challenge is to help households successfully develop tion to providing short-term support in times of weather other income-generating activities to carry them through shocks that can cut incomes, social protection programs bad weather and smooth out the “shocks� to consumption that help families create new economic opportunities can that occur when crops fail. have a long-term impact. They can protect households As this evaluation showed, vocational training and in- against the negative effects of droughts and other weath- vestment grants can be effective in helping households er-related problems over the longer-term and provide op- manage the negative effect of severe droughts. Two years portunities for higher earnings. What this shows us is that after the program ended, families that received invest- reducing poverty, strengthening resilience and building ment grants not only better managed during bad weath- productive opportunities can go hand in hand, a key mes- er, but their average income rose overall. Families that sage of the new World Bank Social Protection strategy. The Human Development Network, part of the World Bank Group, supports and disseminates research evaluating the impact of development projects to help alleviate poverty. The goal is to collect and build empirical evidence that can help governments and development organizations design and implement the most appropriate and effective policies for better educational, health and job opportunities for people in developing countries. For more informa- tion about who we are and what we do, go to: http://www.worldbank.org/hdchiefeconomist This Evidence to Policy note series is produced with the generous support of the Spanish Impact Evaluation Fund (SIEF) THE WORLD BANK, HUMAN DEVELOPMENT NETWORK 1818 H STREET, NW WASHINGTON, DC 20433 Produced by Office of the Chief Economist, Human Development Network, Communications/Aliza Marcus