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Managing risks: what poor households in Yogyakarta do to smooth their consumption?
Catur Sugiyanto, Sri Yani Kusumastuti, Duddy Donna, Tiar Mutiara Shantiuli
Faculty of Economics and Business, UGM, INDONESIA
UC-IRVINE
IMTFI’s First Annual Conference for Funded ResearchersNovember 4-6, 2009
Outline
Problem Methodology Initial Findings
Problem Households engage in agriculture in poor countries often
must cope not only with severe poverty, but also with extremely variable incomes. Accumulated wealth can create a buffer for the most vulnerable.
However, a high proportion of the poor in the world has no or extremely low levels of marketable wealth or limited access to financial institution (insurance or credits) to facilitate their income and consumption smoothing activities, Case (1995), Dercon (1996), Zeller et.al (1997), Robinson (2002), CEPPS and Bank Indonesia (2004), (Roog, 2006), among others
The ability of households to smooth consumption over time thus reflects a key dimension of well being, for example Morduch (1995), Kinsey et.al. (1998), Wik (1999), Zeller (2000), Skoufias, (2003), Notten & Crombrugghede, (2006), Laczo (2007).
Although the underlying smoothing mechanisms are similar, the ways in which household smooth consumption are highly contextual, i.e. depend on the particular institutional, social and economic context they live in. So, diversity in asset choice is important in order to allow households to manage risk in any one period (Aryeetey, 2004). Demographic characteristics will exhibit a significant correlation with their choice between financial and other assets.
Specifically, we will
1. describe what practice commonly observed in the poor household to protect against risks;
2. what type of assets held; and
3. analyse factors determine the type of assets held.
Literature Strategy choices
Ex ante Ex Post
Assets choices What types of assets?
Liquid and safe store of value Farm and non-farm assets
What institution? Limited financial markets
Demographic Characteristics Ages: farm (old) non farm (younger) Education: farm-non formal (lower) non farm-formal (higher) Female and non-female headed household: farm and off-farm assets
Types of job Farm and non farm activities
Methodology
Central in this framework is a typology of consumption smoothing strategies which is based on what actions households may take to smooth consumption.
Then, we relate these smoothing strategies to possible institutional smoothing partners and the assets that may be required to follow a particular smoothing strategy
We also investigate whether the observed patterns differ by type of: activities, and areas/regions
Sample: A non-probability with a
purposive sampling because the population is difficult to identify.
We select 125 house holds, representing 25 household in each five
regions and 5 types of jobs
Guided questionaires
UCI
Yogyakarta
Indonesia
Farmer
Fishermen
Uncontracted Worker
Contracted worker
Producers
Street Vendor
125 households
JobYogyakarta
BantulKulon Progo
Gunungkidul
Sleman Total
Farmers 0 4 4 5 5 18
Fishermen 0 5 5 4 14
Contractedworker
6 4 4 4 5 23
Uncontracted worker
6 4 4 4 5 23
Producers 6 4 4 4 5 23
Street Vendor 7 4 4 4 5 24
Total 25 25 25 25 25 125
Income and Consumption fluctuation
Producer Farmer Street vendor
Fishermen Contracted worker
Uncontracted worker
Income Max 773,636 956,677 733,478 1,125,000 886,429 782,381
Min 467,273 559,444 436,522 439,286 562,857 435,476
Range 306,363 397,233 296,956 346,905 323,572 346,905
Consumption Max 823,333 1042,35 655,455 1,032,143 798,571 782,273
Min 520,714 554,118 420,455 417,857 536,19 460,682
Range 302,619 488,235 235 321,591 262,381 321,591
(Rp)
Sources of income fluctuation
Sources Total Percent
Season 67 53.6
Disaster 10 8
Contract ended 19 15.2
Project ended 19 15.2
Low demand 50 40
Other 39 31.2More than one alternatives chosen
Season Disaster: earthquake Contract ended Project ended Low demand: non holidays Other: cooking oil and fuel price increase,
avian flu
Source of Income fluctuation for different types of jobs
Source Producers Farmers Street Vendor Fishermen Contracted
WorkerUncontracted
Worker
Season 21.62 64 29.55 93.33 12.90 22.92
Disaster 2.70 8 9.09 0.00 0.00 4.17
Contract ended 0.00 8 2.27 0.00 32.26 10.42
Project Ended 2.70 0 2.27 0.00 22.58 20.83
Low Demand 40.54 4 22.73 6.67 16.13 35.42
Other 32.43 16 34.09 0.00 16.13 6.25
Source of Income Fluctuation, by Region
Source Bantul Gunung Kidul
Kulon Progo Sleman Yogyakarta
Season 48 72 76 44 28
Disaster 0 0 32 8 0
Ended Contract 20 16 4 20 16
Ended Project 12 0 8 24 32
Low Demand 32 44 36 48 40
Other 24 16 20 44 52
Ex ante strategy: saving
Type of saving Total Percent (%)Money: in house 71 56.8Money: Formal financial institution 36 28.8Money: Informal financial institution 36 28.8Assets 55 44
Saving money In house: in the wallet, under the mattress, Formal financial institution: bank, licensed
cooperative Informal financial institution: non licensed
cooperative, arisan (rotated saving) Assets: gold (jewelry), livestock (duck, goat,
chicken), motor cycle, inventory, electronic appliances
Saving Preference by Types of Jobs (%)
Producers Farmers Street Trader Fishermen Contracted
WorkerUncontracted
Worker
In house 11.2 8 9.6 3.2 12 12
formal financial
institution6.4 1.6 6.4 6.4 2.4 5.6
informal financial
institution4.8 3.2 7.2 0 5.6 6.4
assets 7.2 9.6 7.2 4 8.8 7.2
Saving Preferences by region (%)
Bantul Gunung Kidul
Kulon Progo Sleman Yogyakarta
In house 28 44 68 52 92
formal financial institution 60 24 24 20 16
informal financial institution 24 4 28 48 40
assets 36 60 32 80 12
Ex post: what they do when their income decrease?
Total Percent(%)
Looking for additional job 49 39.2Reschedule working load 36 28.8Borrowing money 79 63.2Transfer from relatives/family members 34 27.2Selling assets 55 44Obtaining poor food subsidy 60 48
May choose more than one options
Looking for additional job: un-contracted worker in the city (temporary migrant)
Reschedule work load: decreasing the work load Borrowing money
formal financial institution (bank, licensed cooperative), non formal financial institution (neighbors, relatives, non
licensed cooperative, moneylenders) Transfer from relatives/family member Selling assets: gold (jewelry), livestock (duck, goat,
chicken), motor cycle, inventory, electronic appliances
Obtain poor food subsidy (rice for the poor) or food from neighbors
What people do when their income decrease?
Producers Farmers Street Trader Fishermen Contracted
WorkerUncontracted
Worker
Finding another job 4.8 5.6 2.4 8.8 6.4 11.2
Reschedule working load
7.2 1.6 4.8 4.8 1.6 8.8
Borrowing money 12.8 8 14.4 5.6 12 8.8
Transfer from relatives/family members
5.6 7.2 4 2.4 2.4 4.8
Selling assets 5.6 10.4 7.2 2.4 8.8 9.6
Obtaining poor food subsidy
8 6.4 11.2 2.4 10.4 9.6
What people do when their income decrease?
Bantul Gunungkidul
Kulon Progo Sleman Yogyakarta
Finding another job 36 44 56 28 32
Reschedule working load 24 0 44 36 40
Borrowing money 56 72 56 68 64
Transfer from relatives/ family members 48 28 16 32 12
Selling assets 24 56 48 72 20
Obtaining poor food subsidy 68 4 52 40 76
Source of Consumption fluctuation
Total Percent (%)
New School Year 63 50.4Family member illness 82 65.6Moslem Eid Celebration 91 72.8Contribution to neighbours (baby born, funeral, wedding, social contributions)
87 69.6
Other 13 10.4
Source of Consumption fluctuation for different jobs (%)
Producers Farmers Street Trader Fishermen Contracted
WorkerUncontracted
WorkerNew School Year 9.6 5.6 8.8 4.8 9.6 11.2
Family member illness
12 9.6 16 3.2 12 12
Moslem Eid Celebration 12.8 7.2 13.6 8.8 14.4 15.2
Contribution to Neighbors 13.6 8 13.6 7.2 14.4 12
Other 0.8 0.8 3.2 2.4 0 2.4
Source of Consumption
fluctuation for different regions (%)
Bantul Gunung kidul
Kulon Progo Sleman Yogyakarta
New School Year 60 28 60 56 48
Family member illness 20 96 52 76 84
Moslem Eid Celebration 36 88 84 72 84
Contribution to Neighbors 60 36 76 88 88
Other 20 12 4 0 16
Demographic Profile
Head holders Job status Total
Male jobless 1
have a job 39family member has a job 38
Female jobless 2have a job 19family member has a job 26
Total 125
Surplus of Income
Gender
Saving money
Assetsin house Formal financial
InstitutionNon Formal Financial
Institution
Male 55.13 28.21 25.64 51.28
Female 59.57 29.79 34.04 31.91
Lack of Income
Gender Male Female
Looking for additional job 51.28 19.15
Reschedule working load 35.90 17.02
Borrowing money 57.69 72.34
Transfer from relatives/family members 26.92 27.66
Selling assets 50.00 34.04Obtaining poor food subsidy and othersubdidies 43.59 55.32
Thank you
Terima kasih