Weathering the Pandemic in Rural Nepal without Mortgaging the Future
The COVID-19 pandemic was especially difficult for rural families in developing countries who were already struggling. While lockdowns were not always as enforced as they were in urban areas, market shutdowns made it harder for everyone to buy and sell food.
Economists Sarah Janzen and Nicholas Magnan have been conducting USAID-supported research in Nepal since 2014 when they partnered with Heifer International to measure the impacts of a livelihood-building program for women.
Two years after the final data collection was complete, the COVID-19 pandemic shutdowns began. With contact information from the original study’s participants, Janzen and Magnan launched a new project with support from USAID to learn about the pandemic’s impacts. They would also measure whether the livelihood-building program increased resilience.
“Our results show that development programs can play an important role in strengthening rural families in developing countries in advance of a shock, increasing their long-term resilience,” said Janzen.
From Earthquake to Pandemic in Nepal
In 2014, Janzen, an economist at the University of Illinois, and Magnan, an economist at the University of Georgia, began testing the impacts of a livelihood-building program for rural women in Nepal. The program was implemented by Heifer International and modeled after their flagship livestock-transfer-and-training program. It included support for women to form self-help groups as well as a transfer of goats, trainings, and encouragement to save.
Just a year after the impact evaluation began, the Gorkha earthquake caused a humanitarian disaster. Heifer International joined the response with interest-free loans. The research team ended the study in two districts because the damage was so severe.
"Providing emergency relief was more important than sticking to the original research design," said Janzen.
Three years later, the impact evaluation found significant benefits for women who took part in the livelihood-building program. The program improved livestock practices, leading to larger and healthier herds. The program also nearly doubled revenue and income from goat production within a year after the program ended.
At the start of the pandemic, Janzen and Magnan wondered whether these benefits would sustain and maybe even make women more resilient than their neighbors.
Reconnecting to Test for Resilience
In 2020, Janzen and Magnan launched a new MRR Innovation Lab project that conducted a phone survey with 1,247 participants of the original impact evaluation. By leveraging the randomization in the original study, they would be able to attribute any differences in outcomes to the program itself.
The results of the new survey were reported in a June 2022 MRR Innovation Lab Evidence Insight with University of Illinois graduate student Kierstin Ekstrom as lead author with Janzen and Magnan. The survey found that during the four-month national lockdown, incomes and prices for farmers’ production dropped while food prices spiked. In spite of these shocks, less than 2 percent of all surveyed households reported changes in food consumption.
The reason was credit. About 26 percent of all households surveyed took out a loan during the lockdown, and 61 percent used those funds to buy food. Average debt across all survey respondents rose from $500 in October 2019 to $870 by March 2021, a 70-percent increase.
But women who took part in the livelihood-building program borrowed substantially less. A year into the pandemic, their debt was $418 lower compared to non-participants. Participants were also 9 percentage points less likely to use a loan to cope, which would save them from expensive debt. These loans carried an average annual interest rate of 18 percent. During the lockdown, participants were also 3 percentage points more likely to sell a goat, nearly a two-fold increase.
“Going into the pandemic, women who took part in the livelihood-building program had lower debt and higher savings, better equipping them to cope,” said Magnan.
Strengthening Rural Households in Advance of a Shock
Rural communities in Nepal continue to face a tremendous amount of disaster risk. Nepal ranks 4th in terms of climate risk according to the Global Climate Risk Index and is in the top 20 of all multi-hazard nations worldwide. At the same time, 64 percent of households in Nepal work in agriculture. Agriculture in developing countries is particularly vulnerable to environmental disasters.
Beyond Nepal, the potential to strengthen rural households in advance of a shock could apply to any nation at risk of disasters or economic shocks. Since the start of the pandemic, international crises have expanded to include the war in Ukraine and increasing drought in the Horn of Africa. While humanitarian responses are critical in these circumstances, these results from Nepal show that development programming can play a role in promoting resilience.
“One common response to shocks is to provide cash, food aid or other forms of assistance, all of which protect against the worst possible outcomes,” said Janzen. “However, government resources could improve resilience in advance of a shock.”