Resilience+: How & Why Risk Management Innovations Reduce Poverty and Spur Agricultural Growth
A growing body of research shows that resilience in itself may only be part of a of greater opportunity when the risk of weather-related disasters is what holds people back.
Introduction
In the field of international development, the idea of resilience has become a rallying point, particularly within the United States Agency for International Development (USAID). In basic terms, resilience is the ability to withstand shocks and stressors without lasting consequences. However, a growing body of research shows that resilience in itself may only be part of a of greater opportunity when the risk of weather-related disasters is what holds people back.
Field research that develops and tests better risk-management tools for rural families in developing countries is finding that when people know they can withstand a shock, they invest more in agricultural and other economic activities. In other words, done well, resilience liberates families to prudentially focus on building a better livelihood for themselves and their children. We call this phenomenon Resilience+.
The Challenge of Risk
For the 800 million people who go to bed hungry every night and the many million more at risk of falling into this depth of poverty, there is the chance that a single drought, flood of other disaster will wipe out the means they have to feed themselves.
The way that families copes with these disasters has lasting consequences. In a bad year, families may suddenly have to choose who eats and who goes without food entirely. They often can’t afford to keep their children in school. New research shows that an income shock can compromise psychological wellbeing, undercutting resilience. When these circumstances compromise their children’s development, a single shock can also leave its mark across generations.
These risks are serious, and absent innovative risk-management tools, families may manage these risks poorly and at very high cost. Rather than investing in new technologies and opportunities that offer high expected returns, families may save their scarce resources in food stocks or cash under the mattress, that at best generate a zero return. While these strategies are wise for those who lack better risk-management tools, they undercut what a family can achieve in good years. In this way, risk itself can keep families poor.
Innovative Risk Management Generates Resilience+
We coined the term Resilience+ to describe the key driver of the research program for the USAID-funded Feed the Future Innovation Lab for Markets, Risk & Resilience. While the term Resilience+ is novel, the idea has been bouncing around for some time. Economists, including me, have for some time used terms like the “risk-reduction dividend” and the “ex-ante effect of risk reduction” to describe how innovative tools like index insurance can spur productive investment in agriculture. This phenomenon is becoming well documented from field trials in developing countries around the world, many of them funded by USAID.
In Mali, a project that developed and tested index insurance for cotton farmers generated significant additional investments. Farmer groups in Mali who purchased insurance increased their cotton planting by between 25-40 percent. The resulting increase in cotton planted would at harvest increase average income by about US $300, a cost/benefit ratio of 6.25.
In Bangladesh, BRAC tested an indexed contingent loan for trusted microfinance borrowers designed to convey all the benefits of insurance but without the up-front cost. Families who were told they would have access to the emergency loan planted about 25 percent more rice than households who were not offered the loan. Families who did not suffer any flood losses produced about 33 percent more from their crops.
Figure 1
This figure represents the impacts of an intervention in Mozambique and Tanzania that paired drought-tolerant maize seeds with index insurance providing seed replacements after severe yield losses. In a sequence of years that range from normal to severe drought, the impact of the intervention was significant and show the effects of Resilience+. Yield gains are relative to control-group yields for the type of year shown.
Most recently, a project in Mozambique and Tanzania bundled CIMMYT drought-tolerant maize seeds with index insurance for a seed-replacement guarantee. Farmers who purchased the insured seeds had 12 percent higher yields in normal years. In the year after severe drought and seed replacements, these farmers nearly doubled their investments in improved seeds and realized yields double those of their neighbors who lacked access to the guaranteed seeds and who also struggled to return to their pre-drought level of productivity.
Risk Management and Resilience+ at Scale
An approach to development focused on risk itself could shift how nations and the broader development community address disaster recovery. Research from the National Academies of Science found that the sharp increase in economic damages from natural disasters have been caused by more frequent extreme disasters like Cyclones Idai and Kenneth that ravaged Mozambique in 2019, tragedies that left the international aid community scrambling to provide emergency aid.
Humanitarian aid is critical in these kinds of disasters, but it is by no means certain that sufficient aid will arrive when it is needed. A better model than persistent and growing budgets for humanitarian aid would be to scale Resilience+ so families have the opportunity to increase their incomes in good years while having reliable tools to manage their own losses in a disaster. Scaling this approach would extend the reach of social protection budgets by keeping families at the edge from falling into poverty while providing a ladder up for families who are already poor.
In research I conducted with Kansas State University economist Sarah Janzen, we used advanced economic modeling to predict how well different social protection programs can address poverty in the face of climate change. We found that a resilience-focused approach to social protection that includes insurance is the only sustainable way to manage poverty in the long-term. In particular, we found that the only way to reduce poverty rates in the long-term is to also target households who are at risk of poverty. We are now testing these ideas in a large-scale pilot in northern Kenya.
Resilience and Resilience+ in Development Policy
Nearly two years ago, USAID reorganized to focus on supporting a journey to self-reliance for host countries. This included a new Bureau for Resilience and Food Security to strengthen support for building resilient communities and countries. Elevating resilience has become central to USAID development efforts. While resilience to shocks and stressors is critical, the bigger opportunity is when individual families can get themselves onto the path to higher incomes.
With Resilience+, families benefit in two ways. First, a reliable tool to manage risk provides a buffer against losses. Second, when a family no longer needs to save every penny to prepare for a disaster, they instead make productive investments that improve their assets and income far above where they began. This virtuous circle of investment and gains can quickly become self-reinforcing. That is the potential of Resilience+ and the reason we pursue risk management innovations to reduce poverty and spur agricultural growth.
Field Notes
The Chicago Council on Global Affairs is pleased to launch a new blog series, "Breaking Ground," to explore how food systems innovation and agricultural research and development can empower farmers and feed the world. A special subsection of this series, "Field Notes," features voices from Feed the Future Innovation Labs and CGIAR centers.