Marginal Cost Of Capital Vs Weighted Average Cost Of Capital Alternative Income Options for Farm-Household Members Improve the Rural Economy of Bangladesh

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Alternative Income Options for Farm-Household Members Improve the Rural Economy of Bangladesh

With the advancement of technology and agriculture inputs, production in agriculture has increased by many folds. For meeting the rising demand of food supply, the traditional crop varieties have been replaced by the high yielding varieties. Green revolution took place in the country thanks to improved seed varieties, use of chemical fertilizers, expansion of irrigation facilities etc. It is undeniable that this revolution came with the unfortunate and unexpected cost of traditional crop varieties, natural harmony and ecological balance. Production costs for crops have chaotically leaped, breaking the backbone of the marginal and small farmers. The successive regimes can be happy with the increased production of crops, but let’s not forget that the population has almost doubled in the last 3 decades, and prices of essentials have tripled. Population growth and prices of essentials together have far exceeded agricultural production.

People in huge number have migrated from villages to towns for alternative income options. Migration has a definite connection with agricultural production and inflation. It has long been argued that our land has lost fertility due to indiscriminate intervention, wrong cultivation practices, and inadequate and inappropriate state management policy. The farmers and their traditional practices can be questioned but it’s true that they are always left with what they have, and with little or no help, and with unbearable increase in, and scarcity of agriculture inputs. The reality was found during our observation at the field level (January – March 2011), for example, at Kushtia district. The peasants claim, there was a time 7/8 years back when they used to get 20 maunds (local weight measurement unit; 40 kgs make 1 maund) of rice per bigha (local area measurement unit; roughly 1 bigha makes 0.33 acre), but now they get 7/8 maunds on the average. It’s hard, if not impossible, for the small and marginal land holders to depend on land outputs (crops) solely for their family expenses any more.

Now the question arises here – if the agriculture production, i.e., its return is far less than family expenditure, how do the farmhouses survive?

Without much explanation of peasants’ hardship, helplessness, and livelihood choices, we see the internal migration of occupations of farmhouse members to non-farm activities and factory or industry wage laborers. The farmhouses have chosen cattle rearing on commercial basis, shop-keeping etc., and the farmhouse members have chosen wage labors in mills, workshops, factories, and industries. This phenomenon has cut dependency of the farmhouses on income from agriculture crops, and has relaxed burden on their possession of small landholdings. The farmhouse members staying very much in the houses can meet their own expenses, and from time to time, rather invest in agriculture production. It is noted that the inadequate capital of our farmhouses constrains farm management and crop diversification, which eventually and regularly leads to poor farm production.

Here are 4 case studies from the same village. In the first case study (household-1), the farmer suffers due to lack of investment capital, with no off-farm income earners in the family. In the second and third case studies (household-2,3), the farmhouses are doing well thanks to the engagement of the household members in neighboring industries. According to the fourth case study (household-4) even the landless farmer with increased labor wages and non-farm activity is improving his lifestyle.

In 2010, Mr. Nuruddin (head of household-1) of village Kathulia village of Kushtia district produced maize, jute, paddy (of varieties Gazi, BR-33), til (sesame) and papaya. He invested a total of BDT (Tk.) 50600 (USD 1 = BDT 70 approximately), and got a net return of Tk. 30000. He sold out paddy straws, jute stems, a goat, bamboos and jack fruits and earned Tk. 18200. So, his total income during the year stood at Tk. 48200, while his family expenditure for the same year was estimated at Tk. 56500.

Mr. Nuruddin, an old man of 80, has got his four daughters married away from village. Round the year the relatives visit them, which increase the family expenditures. Moreover, he has to give little financial help to them from time to time, and send some farm and homestead products to the daughters’ houses over the last few years. So, they run family with constraints with food shortage almost every year. His only son is a public university student, but helps him in farming from time to time. Nuruddin’s wife grows different leafy vegetables on homestead round the year for home consumptions.

For financial constraints due to daughters’ marriage, relatives’ visit etc., he could not make bigger investment to grow profitable crops, and can’t take good care of his crops. So, he usually gets lower harvest, and can’t buy cattle. He took a bank loan of Tk. 25000 in 2004, but spent all for family purposes, and could not repay the loan in time. In 2008, the loan amount stood at Tk. 37000 with interest, which he could not repay. So, with the advice of a bank field officer, he got another loan of Tk. 39000, from which he paid back his previous due loan. At the end of 2010 the second due loan stood at around Tk. 43000 again. He does not know how to pay back this amount. At the end of 2010, he gave out 2 bighas of land on kot (local land leasing system) for Tk. 100000. He says, “Besides outstanding bank loans, every year I have a deficit of Tk. 4000-5000. I have also small loans from NGOs, which I pay back with hardship, but outstanding bank loans are big tension for me”.

Nuruddin’s son added, “Farmers get bank loans and finish them quickly to meet food and other persisting family needs without thinking much that they have to repay it in time, and that’s the way the loans come in bigger amount in some years with added interests, for which farmers sell out lands at last in many cases.”

Rm. Arshed Ali (head of household-2) produced rice of different varieties including Gazi, IRRI-10 and 28. He got a harvest of 90 maunds (3600 kgs) worth Tk. 77100. He spent Tk. 29250 for production. His net return was Tk. 47850. He also produced eggplants of 30 maunds (1200 kgs) worth Tk. 15600. He spent Tk. 7000 for this production and got a net return of Tk. 8600. He invested Tk. 2000 to produce 10 maunds (400 kgs) of cabbage worth Tk. 5000 with a net return of Tk. 3000. He sold paddy straws at Tk. 12000. From all the crops of his cultivated land he made a net return of Tk. 71450 in 2010.

In 2010, he reared cattle and made a net return of Tk. 50000 with an investment of Tk. 350000, in which Tk. 30000 is estimated as unpaid household labor.

Arshed’s one son aged 30 with high school level education is a factory laborer. Currently, he earns a total of Tk. 60000 in a year. The family earns a total of Tk. 181450 annually from both farm produces, cattle and non-farm earning, while the family expenditure is estimated at Tk. 180000.

In 2009, Arshed leased in a fish farm, and but could not make profit from it, and that year he had a herbal medicine shop in the village market. From this business he made of profit of around 30000. He also works in the village as a mediator in various arbitration and litigation, from which he has an income, which could not be estimated. However, from these added to this income from cattle rearing, he made a brick house in 2009-2010.

He said, “With traditional crop production with small area of land, we cannot run our family. Since I have to maintain a family status, and some guests also come often, so my family expenditure is also high compared to others. That’s why I think of earning from different sources.”

Mr. Abdur Rahim (head of household-3) produced rice of different varieties including Gazi, IRRI-10, 11, 12, 9. He got a harvest of 78 maunds (3120 kgs) worth Tk. 54200. He spent Tk. 31477 for production. His net return was Tk. 22723. He also produced jute of 8 maunds (320 kgs) worth Tk. 12000. He spent Tk. 4000 for this production and got a net return of Tk. 8000. He produced onion (2 maunds = 80 kgs) worth Tk. 2000 and garlic (1.5 maunds = 60 kgs) worth Tk. 6000. For production of both onion and garlic he spent Tk. 2000, and from these he made a net return of Tk. 6000. He sold paddy straws and jute stems at Tk. 20000. From all the crops of his cultivated land he made a net return of Tk. 56723 in 2010.

In 2010, he reared cattle and made a net return of Tk. 47000 with an investment of Tk. 20000.

Rahim’s two sons, one aged 32 with no formal education, and the other aged 30 with high school level education, are factory laborers. Currently, they earn a total of Tk. 156000 in a year. The family earns a total of Tk. 259723 from both farm produces, cattle and non-farm earning, while the family expenditure is estimated at Tk. 199700. This year (2011) he takes another 15 kathas (local area measurement unit; 1 katha makes roughly 1.6 decimals) of land on kot at Tk. 70000.

Around 15 years back, Rahim parted from parents, and started his small family on his own. That time he had 3 bighas of land. He bought another 3 bighas of land in the last 10 years. He bought land pieces of 10/12 kathas each at a time at Tk. around 20000-30000 per bighas. 2 years back, he constructed brick house with a cost of around Tk. 300000.

He said, “Income from land is falling now. Once we got around 20 maunds of rice per bigha. Last year we produced 8-10 maunds of rice per bigha. Family income mainly comes from cattle and goats. With this income, I do this that, buy and increase things. Money for house construction also came from cattle rearing. Besides, the elder son works in company for last 2 years, and the younger one works for 4/5 years. They add to the income. They help run family. “

Akram Hossain (head of household-4) owns no land at all, but he keeps land for farming every year. Over years he gives labor to agriculture farms and runs his family with labor wages. He rears cattle and goat every year, and thus makes some profit out of it. In 2010, he earned around Tk. 54000 from wage labors at Tk. 150 per day and at Tk. 4500 on the average per month. In 2010, he kept 4 bighas of land on kot. From the production of rice and wheat, he made a net income of Tk. 22260 and Tk. 4900 respectively. He also earned Tk. 7200 from sale of paddy straws. From cattle rearing during the year, he got a net return of Tk. 15000. He also gave out one and half bighas of land for share cropping, from where he got his share of crop worth Tk. 6000. From both farm productions, cattle rearing and labor wages, he earned a total of Tk. 109360. His family expenditure is calculated at Tk. 71000 for year 2010.

When asked about his earning and farm production, he said, “The rice I get from cultivation remains mainly for family consumption over a year. I sell out other crops. My main source of income is farm labor, and cattle and goat rearing. I can bear the education expenses of my son of class seven, and also can save some money for next year investment for cattle.”

The other farmers talking about Akram commented that Akram does not have to sell out crops since he earns from labor wages to meet family expenses. They also said, people like him in the village are doing well these days. They are at stable status.

Conclusion:

Side by side with the big industries, expansion of small scale industries at the semi-urban areas adjacent to rural areas with proper attention to environmental concerns and safety measures in all districts, possibly at all upazilas and union levels (local administrative units), can create greater employment of the farmhouse members. Local people come up with their own innovative ideas and enterprises, which recruit rural youth. In many cases, the big business people and interest groups are found acting and propagating against small industries. Local public officials (line ministries) can resolve such crises if any, and encourage the small entrepreneurs at urban outskirts adjacent to rural areas, with incentives if necessary. If industries particularly related to food processing, rural transportation, or household necessaries grow in the vicinity of rural areas with proper caution for environment and hazardous labor, and without wasting cultivable land, can rather save agriculture households from losing lands, help sustaining agricultural production and meeting other expenditures including those for education. The poor, marginal and small farmhouse members are found to have invested share of their income from alternative off-farm activities (for example, from cattle rearing) and industries in their agriculture farming, which marks a better management of their agriculture farming and land. This indicates an improved and encouraging rural economy.

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