Social Sciences and Humanities Open (Jan 2024)
Evaluating household's risk management strategies considering heterogeneities in the livelihood diversification: Evidence from farm households of Bangladesh
Abstract
Enterprise risk management has become one of the crucial steps for households in attaining resilience in their livelihood decisions. However, households must prioritize diversifying their enterprises to effectively tackle the risk factors that propagate negative externalities (i.e., poverty) and obtain resilience in livelihood decisions. As such, this paper assesses households' risk management strategies considering the heterogeneities in the diversification levels in rural Bangladesh by harnessing data from 90 participating farm households from September 2016 to March 2017. We also explore the deterministic factors linked to diversification strategies. The findings of the multivariate regression analysis depict that education, occupation choice, asset portfolio, and family size are the significant determinants of a household's livelihood diversification choices. Shannon diversity index and livelihood typologies like ‘Type 66’ and ‘Type 75’ strategies have been used to assess household risk levels and family earning diversities. The overall diversity index (4.3) reveals that the respondents were moderately diversified. Typology studies confirm that the households in Ishwarganj and Haluaghat are more diversified (earning from multiple sources) than in Gouripur. For instance, under the ‘Type 75’ strategy, households in Ishwarganj earn 33% of the total income from crop-non-farm combined, and households in Haluaghat earn only 3% of their income solely from livestock. However, respondents in Gouripur earn most of their income from single sources (24% solely from crops under ‘Type 66’), and therefore, they are the least diversified and are most likely to be affected by risk. Moreover, FGT and Sen index outcomes of poverty show that BDT 4126 and 5776/year, respectively, are required to improve the poor status of the households where the poverty line is BDT 58,947.
