Prof. Dr Natalija Bogdanov,

Faculty of Agriculture University of Belgrade

Prof. Dr Mina Petrovic,

Belgrade University, Faculty of Philosophy

Financial Poverty and Material Deprivation

in Rural Serbia

Content Research background Research methodology Financial poverty in rural areas of Serbia Characteristics of Family Farms

Physical capital of family farmsThe position of family farms on the market of goods, financial

capital and informationAcess to the governmental support

Material deprivation and cumulative poverty Conclusion

Research background Rural areas of Serbia accounts for 85% of the territory, 41% DP,

40% of the total population.

Rural economy - high dependency on the agriculture and natural resources, insufficient diversification of the economic structure.

The most recent research indicates that poverty in Serbia is:

more significantly widespread in rural than in urban areas (9.6% vs. 4.9%);

strongly linked to the performance of labour force and rural labour market – 50% of all the employed in agriculture lives in poor households;

more prevalent in southern and hilly/mountainous regions in comparison to northern plain regions

Research background Main characteristic of poverty in Serbia is high poverty rate of rural areas.

Rural areas responded to the economic crisis promptly and strongly the growth of overall poverty recorded in 2009 was a result of dynamic growth of

rural poverty itself.

Poverty indicators by settlement types

  2006 2007 2008 2009Index 2009/2008

Absolute poverty line  

% poor in the RS 8.8 8.3 6.1 6.9 113.1

• urban area 9.5 10.1 5.0 4.9 98.0

• other area 20.6 17.6 7.5 9.6 128.0

Relative poverty line  

% poor in the RS 14.4 13.4 13.2 13.6 103.0

• urban area 9.5 10.1 10.9 9.1 83.5

• other area 20.6 17.6 16.1 19.5 121.1

Research Methodology Research methodology designed for the survey Social Exclusion in Rural

Areas in Serbia, conducted by SeCONS

Special care was given to overcoming methodological restrictions due to the discrepancy between the national statistics and international standards

definition of the rural area based on statistical indicators does not exist, lack of typologies of rural households and family farms enabling

analysis of poverty parameters

The research was conducted through survey on a national representative sample of rural households,

Rural areas defined in accordance with OECD standards

The sample did not include municipalities with a population density over 150 persons/km2, 50% or more population living in urban settlements and have an administrative centre with over 20,000 inhabitants.

With such approach, the image of poverty in rural Serbia is new and different from official statistical results, which view the rural as a residual category of the urban.

Research Methodology In order to take account of the heterogeneity of rural areas,

municipalities were classified into four strata: Vojvodina – Highly productive agriculture and integrated economy;Central Serbia - Small urban economies with labour intensive

agriculture;South-Eastern Serbia - Natural resources oriented economies Western Serbia - High tourism capacities and poorly developed

agriculture

Financial poverty was measured in accordance to the EU methodologyPoverty line was defined on the basis of the official statistical data -

60% of the median of total household income per equivalent consumption unit (9096 RSD, HBS 2009).

Using the outlined methodology, financial poverty among farm holdings in Serbia at the end of 2009 was identified in 38.7% households

The methodology applied to measure material deprivation is compatible with the EU SILC method, which identifies four dimensions of deprivation: economic (inability to meet certain needs: nutrition, clothing, payment of

utility bills, etc.); owning of consumer durables; housing (infrastructural facilities in the housing unit and quality of space); neighbourhood (infrastructural facilities, noise, pollution level, safety, etc.).

Financial Poverty in Rural Areas of Serbia

The prevalence of poverty in Serbia identified among:

all farm types in the hilly and mountainous areas of the south-eastern stratum – as a consequence of low human potential and extensive agricultural production;

farms of all three strata of Central Serbia – as a result of low level of farm commercialization;

the largest Vojvodina farms (nearly 50%) – as a consequence of unfavourable economic position ofagriculture in 2009.

The lowest poverty rates were recorded among mixed holdings, whith external income – pensions, salaries and wages from other sectors, transfers from abroad, etc..

Financial Poverty in Rural Areas of Serbia

Factors crucial to the distribution of households in relation to the poverty line were human capital and income structure, as well as a range of factors related to accessibility of goods, financial and information markets to rural population.

Human capital and the labour market

Low education level of rural population is highly correlated with poverty. Persons with the lowest education levels are the most affected by financial poverty (44% are poor, while poverty affects 26% of the best educated).

Poor knowledge and skills of the rural population - 97% have not attended additional trainings and courses, 54% responds that they do not have particular knowledge and skills.

Labour force quality represents one of the limitation factors of the rural area economic development - investors avoid areas lacking skilled and educated labour force. More educated population migrates from rural areas without an attractive economic environment and jobs adequate for their specific knowledge and preferences.

Financial Poverty in Rural Areas of Serbia

Diversification of Activities and Income of Rural Households

Poverty occurs more frequently in the households of persons working in agriculture than in the households of persons employed in other sectors.

Differences in living standards are determined by the possibility of off-farm employment, which indicates that the performance of human capital and competitiveness of labour force in the labour market have the greatest impact on the economic position of family farms.

Respondents by activity and poverty status% Poor % Non-poor

Employed in agriculture 50.1 49.9

Employed in other, non-agricultural sectors 24.4 75.6

Unemployed 54.3 45.7

Inactive 35.3 64.7

Characteristics of Family Farms

Physical capital of family farms (land, livestock, mechanisation, equipment etc.) did not cause poverty to the same extent as the quality of their resources.

  Serbia VojvodinaCentral Serbia

Western Serbia

South-Eastern Serbia

% family farms in the total number of rural households

82.08 64.83 87.20 89.94 88.66

% family farms below the defined poverty line – total

38.70 39.36 38.73 33.22 42.90

• non-agricultural 33.67 33.83 23.27 29.07 42.92

• mixed 30.54 38.89 37.90 18.10 29.41

• agricultural 53.44 47.37 61.61 51.92 51.22

•Small farms (< 1 ha) 40.00 38.55 31.88 32.20 52.81

•Middle farms (1.01–5.00 ha)34.62 29.59 37.97 28.38 39.39

•Big farms (> 5 ha) 43.76 49.50 43.17 42.05 40.21

Distribution of family farms by type and size in relation to the poverty line

Characteristics of Family Farms The position of family farms on the market of goods - semi -

subsistence farms prevailing in agr. structure, over 60% family farms does not have marketable surplus. inspite of the more favourable market position, as a result of market

unpredictability in 2009 (low prices, unstable exchange rate and irregular payments), large commercial farms were noted to have significant losses.

Direct selling, lower investments and shorter capital turnover enabled small farms a more favorable position in comparison to larger commercial producers.

Only 24% of family farms were active in the financial market in the past years, used bank loans or other financial sources form development funds, donor financial assistance and the like. The most common reason for borrowing was intensification of

agricultural production and improving living conditions (building and refurbishing housing structures).

Less than 5% used loans to develop new business (services, trade, processing, etc.).

Characteristics of Family Farms

Information transfer system in rural areas is not efficient 88% of the unemployed had not heard of any active labour market

measures, less than 3% had participated in a NES programme, and a mere 3.4% of the unemployed had attended education programmes organised for the unemployed.

Access to state support varies strongly by farm type and size; the biggest agricultural farms are favoured in state financial schemes. At the regional level, the highest proportion of the support was used by

farms from Vojvodina

Farm size

Milk premiums

Premiums for industrial crops

Input subsidies

Subsidies for breeding animals

Reimbursement for new orch&vineyards

Credits for small equipment

Credits for mechanisation

Land market

Support for non-commercial farms

Small farms 4.8 3.4 3.0 5.9 0.0 4.8 3.3 0.0 0.0

Middle farms 28.9 20.7 32.2 20.6 66.7 28.6 16.7 0.0 76.9

Big farms 66.3 75.9 64.8 73.5 33.3 66.7 80.0 100.0 23.1

Breakdown of support realised from the agrarian budget

Material deprivation and cumulative poverty Financial poverty and material deprivation are almost equally spread across

Serbian rural population One in five of rural inhabitants is faced with deprivation in the settlement

The prevalence of deprivation in the settlement, indicates greater differences. The situation is the best in Vojvodina, where only 5.8% of the population

faces this form of deprivation, and the worst in Western Serbia, where as many as 40.2% of the population are deprived in the settlement

Financial poverty

Material deprivation indexIndex of deprivation in the

settlement

No Yes None Lower Higher Yes No

Vojvodina 61.7 38.3 65 26.1 8.9 94.2 5.8

Central Serbia 60.4 39.6 65 28.3 6.7 83.5 16.5

Western Serbia 66.6 33.4 68.1 22.1 9.8 59.8 40.2

South-Eastern Serbia 58.8 41.2 62.1 22.4 15.4 80.1 19.9

SERBIA 61.6 38.4 65 25 10 79.9 20.1

Rural population by financial poverty indication, material deprivation index and index of deprivation in the

settlement

Conclusion Performances of the agricultural sector that caused poverty were

as regards Vojvodina, the impact of the global economic crisis on the agricultural market was crucial

in South-Eastern Serbia - unfavourable indicators of human and physical capital of family farms, as well as low agricultural productivity.

Differences in living standards of family farms mostly depend on the possibility to generate additional off-farm income and social payments (pensions)

To overcome poverty and material deprivation of rural population, a complex system of incentive measures is necessary

In the structure of national budget support to agriculture, in recent years there have been measures aimed at reducing rural poverty, but …

….those measures had modest effects, since support to agriculture was unstable in terms of both volume and financial scheems.

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