Diversify Livelihood Risks

Livelihood diversification can improve resilience if efforts to increase income streams and assets diversify potential risks.

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bangladeshi woman with fish

Livelihood diversification has long been recognized as a risk management strategy and source of resilience. However, it is complex; its association with positive or negative changes is not always clear. Diversification of activities may be less important than diversification of risk. Context is important in shaping the risk environment and range of livelihood opportunities open to people.

Approach

Diversifying livelihood risks can be achieved through several approaches. Stepping up within, stepping partially out, or moving entirely out of agriculture/livestock are possible strategies. Each of these methods diversify livelihood risks in different ways.

By stepping up within agriculture/livestock, agricultural diversification buffers risk. It increases agricultural trade and income — improving ability to build savings and/or buy insurance. By stepping partially out of agriculture/livestock, engaging in livelihoods with different risk profiles becomes possible. This complements agriculture-based livelihoods through activities related to agriculture/livestock or migration to urban labor markets. Finally, by moving out of agriculture/livestock entirely, movement into livelihoods with different risk profiles can be achieved.

Evidence

In Kenya’s Northern drylands, pastoralists gained greater control over natural resources by commercializing their activities. They were able to “step up” by amassing larger herds. This allowed them to privatize key rangeland resources and capitalize on growing demands for meat. As a result, they became better suited to withstand and recover from drought and shocks.

“Stepping up” or “moving out” may not be an effective strategy for all farmers though. Poorer individuals with smaller herds are less able to capture private land and market opportunities. Consequently, they often struggle to withstand recurrent shocks.

Evidence on "stepping partially out" through migration suggests removing capital constraints to migration can positively impact seasonal hunger and well-being. An experimental study in Bangladesh found that households given cash or credit travel subsidies were more likely to migrate. The migrants saved and carried back about half of what they earned. Their families consumed more calories per person per day, raised per capita expenditures, increased protein consumption, and spent more on child education. The same amount of food in the form of food aid would cost five times as much. However, changes in the demand for migrant labor and the long-term social costs of splitting up families for extended periods will influence the ultimate effect of migration on resilience.

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