August 2002
by Robin Marsh1
Agricultural Economist
Director of the Center for Sustainable Resource Development
University of California, Berkeley
Part 1 of 3
This paper summarizes the research findings and policy implications of a research project undertaken by the Rural Institutions and Participation Service (SDAR) of FAO entitled "Rural Household Income Strategies for Poverty Alleviation and Interactions with the Local Institutional Environment". The research was undertaken to gain a greater understanding of the linkages between household livelihood strategies, incomes and the local institutional environment, and how these linkages may change over time. Building on three country studies in India, Mozambique and Mexico, the research focused on informal economic institutions associated with household access to land, labour, markets and capital, as well as those providing a social safety net.
The paper argues that local institutions, however "imperfect", are providing essential goods and services to the rural poor and vulnerable groups, particularly in the absence of well-functioning markets, local governments and safety nets. Therefore, great caution should be taken not to destroy these institutions and networks in the name of "development". It also argues that homogeneous and heterogeneous local institutions play different but complementary roles in rural societies. While the former are more inclusive, the latter may be more effective at moving the poor upward and potentially out of poverty. In conclusion, the paper calls for policymakers and practitioners concerned with rural poverty to: 1) allocate additional resources and time to understanding, strengthening, capacity building and partnering with local institutions, and 2) provide a supportive legislative and regulatory framework in which local institutions can thrive and assume greater responsibilities.
There is a considerable body of empirical evidence that shows the need to work collaboratively with local institutions to achieve sustainable improvements in rural poverty reduction and management of natural resources (Narayan et al 2000, Uphoff et al 1999, Selener et al 1997, Baland and Platteau 1996, World Development 1993, Korten 1990, Esman & Uphoff 1984, also research described in Annex 1). Indeed, this viewpoint is quite widely accepted in the development field, and has contributed to an increasing delegation of responsibility for local and regional development to local governments, NGOs, other organized sectors of civil society and, to a lesser extent, to traditional institutions and authorities.
In practice, working with local institutions is quite complex. Just defining local institutions, and distinguishing these from "social capital", for instance, has occupied the minds of many scholars. In an applied context, there is a tendency to oversimplify the "legitimacy" that local institutions enjoy in society, as well as their traditional and emerging roles, and the attributes they bring to any collaborative process or project2. Moving beyond the conviction that working with local institutions is critical for achieving sustainable local development, to successful collaboration and outcomes, is a major challenge.
This paper is aimed at helping development planners, practitioners and policy-makers to meet this challenge by sharing the findings and policy implications of research conducted on local institution - rural household linkages. The findings derive from an FAO research project undertaken by the Rural Institutions and Participation Service (SDAR) entitled "Rural Household Income Strategies for Poverty Alleviation and Interactions with the Local Institutional Environment"3. Following a methodology developed by the project coordinators at FAO, three country studies were undertaken in India, Mozambique and Mexico by local research teams, resulting in a series of final reports4. This paper summarizes the research results and provides empirical examples of how local institutions function in rural society, shedding light on effective ways for development practitioners to engage local institutions in working partnerships. More in-depth information was gathered on six of the more important local institutions identified by the research teams (Annexes 4-9). Finally, to widen the scope of institutions covered in this paper, three additional institutional profiles were commissioned from Dr. Anirudh Krishna, a well-known expert on the topic of civil society and rural development (Annexes 10-12).
The paper argues that local institutions, however "imperfect", are providing essential goods and services to the rural poor and vulnerable groups, particularly in the absence of well-functioning markets, local governments and safety nets. Therefore, great caution should be taken not to destroy these networks and arrangements in the name of "development". It also argues that homogeneous and heterogeneous local institutions play different but complementary roles in rural societies. While the former are more inclusive, the latter may be more effective at moving the poor upward and potentially out of poverty. In conclusion, the paper calls for a strong policy and programming commitment to strengthening and capacity building of (selected) local institutions in key process and substance skills. Doing this effectively - by capitalizing on local strengths, will require a long-term commitment.
The rest of the paper proceeds as follows. Section 2 defines and compares the key terms: local institutions, social capital and sustainable livelihoods. Section 3 briefly reviews the research findings on livelihoods and local institutions from the India, Mozambique and Mexico pilot projects. Section 4 examines the attributes of nine very different local institutions, and their linkages with household livelihoods and rural poverty. Section 5 presents key analytical conclusions from the field research. Section 6 offers policy guidance for working effectively with specific types of local institutions and then concludes. There are 10 annexes: Annex 1 briefly describes complementary research programs; Annex 2 and Annex 3 provide policy guidance from a Mozambique seminar and the Indian field team, and Annexes 4 - 12 are the complete institutional profiles synthesized in Section 4.
The SDAR/FAO research program was undertaken to gain greater understanding of the linkages between household livelihood strategies and the local institutional environment, and how these linkages may change over time. The research focused on economic institutions associated with household access to land, labour, markets and capital, as well as those providing a social safety net.
In this paper, and in the SDAR/FAO research program, local institutions are defined broadly to comprehend the many types of extra-household arrangements that individuals or households engage in to further their mutual goals. Institutions are often referred to as "rules of the game" (North 1995), meaning the social norms and traditions that establish what types of behaviour are "normal" in society. This coincides with the definition proposed by Norman Uphoff in which institutions are "complexes of norms and behaviours that persist over time by serving some collectively valued purpose" (Uphoff, 1997:6). Institutions may be formal or informal: where formal institutions stipulate rules such as constitutions, laws and property rights, while informal institutions are generally agreed upon arrangements or rules of behaviour such as sanctions, taboos, customs, traditions, and codes of conduct (North, 1991). Local organizations5 and associations or groups, such as women's groups, farmer associations, and savings and credit arrangements are at different stages of "institutionali-zation". The SDAR/FAO publication: Guidelines for Understanding Linkages between Household Livelihood Strategies and Local Institutions (forthcoming 2002) will provide a useful framework for categorizing local institutions and organizations by placing them on three continuums: (in) visibility, (ex) inclusivity and purpose (normative vs. practical).
The concept of "social capital" is closely related to local institutions and collective action. The World Bank Social Capital Initiative, drawing on the work of Robert Putnam, James Coleman, and David North, defines social capital as: "the norms [reciprocity, trust], networks and social relations embedded in social structures [local institutions] of society that enable people to coordinate action and achieve desired goals".6 These social relations determine attitudes of sympathy (or antipathy) and obligation, and go far to explain peoples' relative willingness to collaborate in collective action. Local institutions, therefore, reflect some of the "stock" and quality of social capital in a particular context.
Institutions are of concern because of their linkages to household livelihood strategies and outcomes, for instance, in providing access to assets, sources of income, reducing vulnerability, and mitigating adverse consequences of economic policies, civil strife and other external shocks. There is, therefore, a clear connection between this research and the Sustainable Livelihoods Approach developed by UNDP, DFID and others, that has recently gained great recognition and enthusiasm.7 More specifically, we address the part of the Sustainable Livelihoods Framework (Figure 1) that links livelihood assets with policies, institutions, and processes - PIP. The connection can be seen again by comparing Figure 1 with the original SDAR/FAO research design (Figure 2).
The main contribution of this research, therefore, is to further understanding of the attributes of local institutions and linkages of these institutions with the livelihoods of the rural poor. From a policy point of view, this enhanced understanding can lead to a more constructive or enabling policy environment for effective collaboration with local institutions in designing and implementing local development initiatives. Special attention is paid to issues of local legitimacy and democratic representation or inclusion, attributes which can not be taken for granted when working with local institutions.
Field research was carried out in four villages in Gujarat, India, four villages in four different provinces of Mozambique, and three villages in the Sierra Norte of Oaxaca, Mexico. The village selection criteria were the same for each country8. The research methodology and information needs developed by SDAR/FAO were adapted as necessary by the local research teams, and the results of the research were presented in village level reports, final reports and at a Global Technical Consultation held in Rome in May 1999.
Both qualitative and quantitative methods were employed to gather information and insights about village livelihoods, local institutions and their interactions over time (e.g. before and after an economic shock). In brief, each research team conducted a Community Participatory Appraisal in each study village, living within the village for at least one week, followed by detailed household interviews with a random stratified sample of households, institutional profiles with leaders/members of a selected number of local institutions, and a final follow-up opportunity to share the research findings at village meetings or focus groups to validate or change these findings. Lessons learned from the methodology and field experience have been incorporated into the FAO/SDAR Guidelines referred to above.
Detailed household surveys, using stratified random sampling, were carried out in all eleven villages. The data provide a wealth of information on the livelihood strategies and outcomes of poor, middle and relatively richer households, including income sources and levels as well as consumption levels. Information was also gathered on local institutions and linkages with livelihood strategies by means of Community Rural Appraisals (using such techniques as Social Mapping and Venn Diagrams), institutional profiles, and institutional questions incorporated into the household surveys. Considerable effort was made to "uncover" the less formal institutions, arrangements and practices that are often overlooked in field research. Table 1 provides a partial list of the local institutions identified by the three research teams.
Comparing and summing across the three sets of data, we find that agriculture is the predominant activity in the Indian and Mozambique villages, whereas it is in decline in Oaxaca. Farming is primarily for subsistence in all three cases, however, commercial crops are grown by the more wealthy farmers. Scarce land, abundant labour, stagnant land markets, and an increasing use of modern inputs among small farmers - with access to water, characterize the Gujarati villages. Large numbers of villagers are landless and live day-to-day from wage labour. In contrast, Mozambique has relatively abundant land but very minimal use of mechanization, improved seeds and fertilizers. Families make up food deficits with migration remittances, petty commerce, wage labour, sharecropping and the use of common property resources. The Oaxacan indigenous villages are relatively better off in terms of food security and income, but face serious challenges from out-migration, declining agriculture and in managing their common forest resources.
Agriculture occupies over 80% of the villagers surveyed, 37% as farmers and 45% as wage labourers. The average land holding is very small at about 2.7 acres, or slightly more than 1 hectare. Rampura Vadla, in Banaskantha District in northern Gujarat, is a small mainly tribal village that depends on dry land agriculture. Many families go out of the village as migratory labour but return in the rainy season. The large multi-caste village of Malan, in Banaskantha, also depends on dry land farming, supplemented with some well irrigation. Large numbers of people engage in sharecropping. Malavada, in Kheda District in central Gujarat, has adequate irrigation to grow commercial crops, principally rice and wheat, and landless villagers survive from farm wage work. Piparia, also in Kheda, has irrigated farming and recent growth in vegetable production in response to increased urban demand. Two of its caste groups live only on livestock rearing. Both of the Kheda villages have dairy cooperatives.
Poverty in these villages is associated with access to land, irrigation and cattle, which in turn is associated with caste, ethnicity, gender and education. The research team classified the survey households (120 total) by asset ownership, as shown in Table 2 The table presents estimated average aggregate monthly household consumption by district and classification group. Converting to annual figures, household consumption levels range from US$400 for the landless/marginal farmers, US$700 for farmers with irrigated land and livestock, to nearly US$1000 for those engaged in the tertiary sector (the 'service class').
The research team identified 38 different local institutions functioning in the four villages, and through participatory social mapping exercises were able to "locate" the mix of castes, tribes and religions in each village (Figure 3, Malawada). Marketing, educational, labour, savings (bachat mandal), youth and religious groups are common, as well as the village gram panchayat (governing councils), co-operative milk producers' societies and multi-service cooperatives.
Disaggregation by gender showed that most village-based institutions or organizations are male-dominated in membership and leadership, with the exception of the women-only dairy cooperative in Piparia, most savings groups and the "Mahila Mandals" (religious/social groups of women). There is growing plurality of membership by caste, religion and socio-economic standing, particularly in the dairy and multi-service cooperatives, and the village panchayat9. Nevertheless, participation in economic institutions is limited by access to land, cattle and fodder, ability to assume risk, illiteracy, and caste divisions that persist despite legislation to the contrary.
Local agricultural institutions are relatively ineffective in helping the landless (nearly 36% of sample) and marginal farmers (30% of sample) to break out of poverty. Sharecropping is typically practiced at unfavourable terms that do not allow the sharecropper to accumulate and escape day-to-day survival. Land markets are stagnant and land rentals are not common. However, livestock-sharing and money-lending arrangements have allowed many poor families to acquire one or two milk cows, become members of the village dairies, and increase their earning capacity significantly. This is an instance where local institutions - village dairies, provide a means for the poor to take advantage of increased demand for milk resulting from higher incomes among the urban and landed rural population since economic reforms initiated in the early 1990s. Participation by the poor, especially in dry areas, is nevertheless constrained by limited access to fodder to feed the animals.
The government-supported "fair price" shops provide basic foods at subsidized prices under various targeting schemes, and are a vital means for covering food deficits for the poor. There are also many informal arrangements between the poor and better-off households that enable the poor to survive despite very precarious livelihoods and low wage rates10. These arrangements, rooted in mutual dependency and social norms, include giving domestic work to the poor, making loans of cash or food, advancing wages to trusted labourers, providing meals and tea to farm workers, and helping with emergencies. The gram panchayat mobilize government funds and village donations of labour and money for community projects such as road improvement, school construction and installation of latrines for the poor.
In the two communities in the north, Netia and Banga, in Nampula and Tete provinces, respectively, the families depend primarily on subsistence agriculture, sale of agricultural products (cotton, potatoes) and beer brewing for food and income. In the southern villages (Massoane and Djavanhane in Maputo and Gaza provinces, respectively) with less and more irregular rainfall, as well as in close proximity to South Africa, families depend more on remittances, off-farm labour, livestock and common property resources, such as wild fruits and the sale of firewood, as well as subsistence agriculture. Massoane has particularly severe food security problems largely explained by the invasion of elephants in the crop fields.
The level of consumption varies greatly within and between the four villages. The annual consumption per adult equivalent was $108 in Djavanhane, $79 in Banga, $72 in Netia and $45 in Massoane. By consumption quartile, the values ranged from $175 for the richest households to $21 for the poorest. The main sources of income for the poorest households are remittances and working for others (ganho ganho), as well as sale of forest products. The poor also reduce consumption and seek assistance from relatives and through forms of mutual assistance. Table 3 reports the principal responses to the question, "Faced with hunger, what do you do to survive?"
Data on participation in local institutions and their perceived importance to households show that the most important local institution in all four study villages, particularly for women, is the church, followed by traditional authorities and political parties. In terms of informal, traditional institutions, Mozambique rural society is replete with different types of local arrangements between people of relatively lower and higher economic status. There are many different forms of mutual assistance based on social norms of reciprocity. Local institutions have survived a long history of repression and civil strife in Mozambique and are now being revitalized under a more liberalized regime, and in the absence in rural areas of formal economic and social institutions.
Tables 4 and 5 relate household participation in local institutions and arrangements with socio-economic well being, using local classifications of poverty and wealth. In general, there are few barriers for participation in these institutions, and the poor and women are well represented. An exception may be political parties that appeal to the richer families, mainly men. Even the fees required for church membership do not appear to present a significant barrier to participation of the poor because of options for contributing free labour instead of food or cash. Table 5 shows that the poor and average households depend more on informal economic arrangements, than the rich, with the exception of local credit and loans of food which imply some repayment capacity.
In a multivariate analysis, higher levels of consumption were significantly correlated with land area farmed and literacy of the head of household, but not with participation in local institutions. Further exploration of these institutions in the next section, however, will show their importance for social cohesion, food security and village mobilization for collective action.
In the Zapotec villages of the Sierra Norte of Oaxaca, subsistence agriculture has declined in the average family income portfolio. An increasingly dominant role of migration in household livelihoods has left agricultural land abandoned, reduced the demographic pressure on land, and loosened the social norms related to access and use of land. Community forestry enterprises have not been able to stall migration. Agricultural and livestock sharecropping are practiced among a small number of farm families as a means to ensure food security (access to maize & fodder) under conditions of environmental and economic uncertainty.
A detailed analysis of income sources (Chapter 5, Mexico Final Report) shows that migration remittances, primarily from migration to the United States, constitutes a major part of the income strategies of the majority of families in all three communities. Other sources of income are wage work, services, commerce and forestry (logging, sawmill). Maize cultivation is mainly for home consumption and most families need to supplement with purchased corn. Livestock, like agriculture, is declining in importance although cattle raising is still important for a small number of families. Average annual household income was estimated at Mx$57,703 in Ixtlan de Juarez, Mx$47,000 in Macuiltianguis; and Mx$42,000 in Capulalpan (10 pesos/US$).
Field research in Ixtlan, Macuiltianguis and Capulalpan uncovered a rich network of local institutions associated with the main livelihood activities: agriculture, livestock, forestry, migration and commerce. In Table 6 these institutions are categorized by increasing levels of organization from inter-family to extra-community. The team focused on three economic institutions: 1) property rights and land tenure; 2) forestry enterprises; and 3) agricultural and livestock sharecropping arrangements11.
Property rights in the Sierra Norte are being redefined as a result of reduced demographic pressure on the land from out-migration, and the felt need to keep migrants tied to their home communities. Thus, the old rule of losing one's land rights if the land is not cultivated has been loosened so that migrants can keep their land in exchange for paying financial contributions and remaining active in local government. Nevertheless, traditional prohibitions persist against women and "outsiders" owning and inheriting land.
All three communities have established community forestry enterprises to log, process and market wood from their common property resources. In economic terms, the enterprises have not prospered because of inadequate technology and low efficiency, nor have the few decent jobs created been sufficient to reduce out-migration from the region. Nevertheless, these enterprises continue to be a vital part of community life. Profits are invested in highly valued public goods - roads, water, rural electrification, and cultural-religious traditions and fiestas, thus, supporting "the continuity of the traditions and political and civic-religious structures of the indigenous culture."(Mexico Final Report, Chapter 5:70)
Sharecropping arrangements, based on sharing of the harvest in exchange for sharing of labour and other production costs - especially oxen and plough or tractor, minimize monetary costs and distribute and diminish risk. The arrangement terms vary but are typically rooted in custom and social relations. Families with access to land and cattle but insufficient labour (where the opportunity cost of labour is associated with out-migration), team with families lacking land and cattle but with surplus labour. Sharing of cattle enables families who cannot afford to purchase cattle to obtain through these arrangements the offspring of the cattle. "Agricultural and livestock sharecropping is an interfamily institution that deals effectively with market failures in access to animals, tractors, labour and credit." (Ibid. p. 74-77) Yet sharecropping as an institutional practice is now less common because of the diminishing role of agriculture in the local economy.
In order to deepen understanding of a few of the more important local institutions identified in the course of field research, and their role in supporting livelihoods and alleviating poverty, further field research and analysis were carried out on six of these: dairy cooperatives and gram panchayat (India), traditional authorities, forms of mutual assistance, and churches (Mozambique), and migration associations (Mexico). Three additional institutional profiles were commissioned12 to widen the scope of local institutions covered: traditional savings and credit arrangements (Tanzania), watershed development user committees (Rajasthan, India), and ancestral domain claims/community-based natural resource management - CBNRM (Cordillera, Luzon, Philippines).
Table 7 presents a summary of the main attributes of each of these institutions. They represent a wide range: from formal (dairy cooperatives, churches) to informal (mutual assistance, traditional savings & credit), from government-supported (gram panchayat, watershed user committees) to government-repressed (traditional authorities, CBNRM in Philippines), from open access (gram panchayat, churches) to more restricted access (dairy cooperatives, migration associations), and from largely economic goals (savings & credit, user committees) to wide-ranging socio-cultural and community goals (gram panchayat, mutual assistance, traditional authorities, CBNRM). The full institutional profiles are found in Annexes 4 - 12.
Field research in two villages of Gujarat - Piparia and Malan, supports the literature13 claiming that the co-operative movement in India has been very successful at expanding milk production through a well organized decentralized structure of village milk collection. At a national level the poor make up the majority of members, including large numbers of landless rural poor. However, the village case studies provide evidence that obstacles still exist for participation by the most marginalized sectors of society because of barriers of caste, land ownership and illiteracy. Whereas the dairy memberships are multi-caste, and in some cases women-only (Piparia), there is a proportionately larger membership by the land-owning upper castes, and even more so when measured by the members who actually sell milk to the dairy on a regular basis (Annex 4). Furthermore, upper caste members typically run the managing committees.
The dairy co-operatives are open to all villagers who own at least one milk cow, which include large numbers of landless and marginal farmers. The particular advantage to village-based dairies is the collection of milk twice daily, so that the poor can supplement meagre incomes with a regular source of cash. Furthermore, the co-operative typically pays more than private traders, offers veterinary services at low cost, and professionally manages milk processing and national distribution. Profits are typically spent on community public works such as roads, health centres, sanitation, village schools and childcare centres, and thus constitute a means to redistribute wealth from the richer members to the community at large.
The main barrier to participation in a village co-operative is having the means to buy, feed and otherwise maintain cattle. Cattle-sharing arrangements are a common means for the poorest castes to own cattle, and are limited by the willingness of better-off households to engage in such arrangements and by goodwill in determining "fair" share terms. Bank credit is not an option for the very poor because of their day-to-day existence, lack of collateral and reluctance to take on risk. Access to fodder is another barrier for the landless - obtained as part of wages, part of harvest share, or from village common lands. Availability of fodder is severely restricted in dry areas. Finally, caste discrimination still influences access to land and livelihood opportunities, and high rates of illiteracy keep the poor from fully exercising their rights and participation in dairy cooperative meetings and management committees.
The panchayat raj in India are a well-known example of decentralized governance through village, block and district assemblies, where participation by the poor and women have been mandated by law, and management committees are elected rather than nominated. It took the force of a constitutional amendment in 1995 to begin to overcome elitism, corruption and discrimination against women, and to ensure that decentralized development planning would involve widespread participation from village levels upwards.
Case studies on the gram panchayats in Malawada and Malan villages show a number of successes that would recommend an expanded role in local development for at these villages. Both panchayats raise significant revenues from local services and tax collection to -spend, together with State provided funds, on community development projects - primarily social infrastructure such as roads, schools, sanitation and water provision. Another important function is to determine through local knowledge of their communities, the households and individuals that qualify for anti-poverty government schemes (e.g. housing, employment, ration cards).
There seems to be great potential for the panchayat institution to play an important role in local economic activities as well, for instance in planning and monitoring of rural and agricultural development programs, small enterprise and micro-finance initiatives, and market cooperatives. In Gujarat, where most gram panchayats are still dominated by the traditional powers in the villages, their leadership cannot be expected to lead to pro-poor policies and programs. In the case of West Bengal, including the poor in development planning is a key objective: "Panchayat Raj institutions have been involved with almost all of the developmental activities of the state at the village. block and district levels. . ...the role of the panchayat is generally to identify the right beneficiaries, make people aware of the opportunities available to them, and ensure that the benefits actually reach their proper destination." V. Rawal, reporting on research in West Bengal (Annex 5).
In India, and around the world, democratic institutions of local governance, sanctioned by national law, are being devolved increasingly greater responsibilities for local socio-economic planning and development. These processes of decentralization hold great promise for more effective targeting of the poor, particularly as local institutions become more democratic and inclusive, and build capacities and experience in raising and managing resources.
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