Risk and underdevelopment. Risk management options and their significance for poverty reduction. Report, Project R7614.
In the summer of 2000 the Department for International Development awarded a grant of some £360,000 to a consortium of UK universities – Cambridge, Nottingham, Sheffield and the Open University – for a programme of work in the field of policies for encouraging pro-poor growth. The programme grant had three constituent parts: R7615 Gender and Labour Markets; R7617 Maximising the Poverty Leverage of Aid: and this component on Risks, Incentives and Pro-poor Growth. The other two components, on which separate reports are available, involved substantial fieldwork in Asia and Africa. This component draws on that fieldwork and, to some extent, tries to integrate them. The main theme is whether it is possible to devise institutions and policies which, by protecting against risk, reduce poverty; and whether it is possible to design incentives to the construction of such policies, both at the macro and micro level.
The approach of this book is to focus on four potential strategies for the management of risks (for the avoidance of disasters) which can be used as assets in a pro-poor growth strategy: engagement with labour markets, microinsurance, microfinance and social capital-building. Chapters 3 through 6 examine the processes by which these’ assets’ have been created in relation to our case-study countries (plus Bangladesh). These and other assets can be combined in a ‘portfolio’ and Chapters 7 through 9 show how this portfolio can be deployed, and its implications for poverty reduction, at three levels: the peasant household, the giant NGO institution (BRAC and SEWA) and the LDC government in interaction with donors and international financial institutions. Preceding all of this, we use experimental methods in Chapter 2 to understand the structure of attitudes toward risk and the level of interpersonal trust, which are important building-blocks in understanding the vicious circle of poverty and possibilities for escape from it.