SEATTLE — According to the World Bank, “Eighty percent of the most impoverished populations in the world live in rural areas and depend on non-farm activities.” Separate from farming activities, non-farm activities provide essential income to poor households whose expenditures exceed income from agriculture production or whose members cannot reasonably engage in farming activities.
Rural non-farm economies (RNFE) are made up of communities that generate income primarily from rural non-farm (RNF) activities.
In developing countries, “Rural non-farm activities account for 35 to 50 percent of rural income.” The income from these activities primarily influences the living conditions in rural communities where income is reinvested in the economy. In poor, rural communities, the additional income from non-farm activities is primarily reinvested into the agricultural economy.
On average, “total food purchases represent about 70 percent of the expenditures” for the poorest 20 percent of the population in developing countries. The additional 35-50 percent of RNF income increases access to more expensive or difficult-to-locate foods and improves food security in rural households. Where the benefactors of RNF income spend their cash on agriculture, farmers earn additional liquidity to purchase local goods and services. In this way, each economy, both farm and non-farm funds the other.
Following economic principles, as demand increases, supply must do so correspondingly. As the spending ability of food consumers increases, the demand for food prompts an increase in supply and farm sector competitiveness.
To increase supply, farmers must implement additional mechanisms that increase profitability and productivity. For other farmers to maintain market share, comparable mechanisms must be implemented, drawing demand for production machinery and raw materials. This not only affects the health of the market and the quality of products but also creates demand for new production equipment and raw materials.
There are many mechanisms by which non-farm activities affect poverty.
According to Rural Development Research, “It is quite possible, for example, for the poor to benefit more indirectly via linkages between the non-farm and the farm sector, than directly via employment in non-farm activities.”
Where farm sector competitiveness increases demand for production machinery and raw materials, the RNF economy provides the goods and services. This new demand produces an indirect link between the farm and non-farm economy where RNF income is derived from repairs on equipment and sales of machines and raw materials.
The World Bank recognizes the connection between rural non-farm economies and poverty. They have “invested about $46.5 billion between 2004 – 2014 to support rural non-farm activities.” Even with the dedicated funding from the World Bank, rural non-farm economies still suffer from characteristic fatalities that prevent the World Bank’s efforts from realizing sustainable success. Constraints on infrastructure and entrepreneurship limit rural non-farm workers opportunities to start companies and obtain customers.
Rural communities in developing nations characteristically suffer from inadequate infrastructure and economic instability.
Lack of sufficient roads to these rural communities limits the opportunity for tourists and customers to reach these areas and contribute to the economy. Deficiencies in energy infrastructure, such as lighting, limit the income opportunities in these communities to daylight hours.
It has always been difficult to rise out of poverty; even with all of the World Bank’s efforts, a reduction in the poverty rate in these areas cannot be confirmed. This then increases the failure rate of start-up businesses in rural communities. While entrepreneurship and self-employment are necessary for non-farm business, the opportunities are limited and hindered by a lack of necessary funding and resources.
The percentage of income derived from RNF activities is increasing and so are the populations dependent on RNF incomes. RNF income is increasingly important for food security, poverty alleviation and farm sector competitiveness and productivity. In fact, some of the most recognizable income gains for the landless and very poor are from non-farm activities. Although barriers to the widespread success of RNF economies exist, RNF income still offers the greatest prospect for escaping poverty.
– Eliza Gresh