In my previous column, I had pointed out that all districts in Bangladesh have not experienced the same degree of poverty reduction and that one of the factors explaining this is the uneven growth of rural non-farm activities across regions.
Non-farm activity was once a minor appendage to farming in rural Bangladesh. But now, such activities are an important source of income for rural people.
Consider the following chart which shows how its importance has increased over time.
During 1995-2000, farm employment accounted for around 60% of rural employment.
The proportion then started to decline steadily. By 2016, non-farm employment had caught up, accounting for just under 50% of rural employment.
It may be noted here that many rural households are simultaneously engaged in farm and non-farm activity, with the latter supplementing farm income.
The figures on rural employment presented above reflect that.
Another way to present the data is to look at the proportion of rural households whose primary source of income is farming vs. those whose primary source of income is non-farm activity.
In 2010, almost half (47%) of all rural households were primarily engaged in agriculture.By 2016, this proportion had fallen to one-fourth (27%).
In other words, for three out of four rural households in Bangladesh, the primary source of income is now the non-farm sector - a striking indicator of the changing face of Bangladeshi villages.
How did all of this come about?
Bangladeshi villagers had been involved for long in non-farm activities, such as handloom weaving, rice husking, and making pots and pans, and simple agricultural implements. People were involved in trade and in services too.
Then, a series of things happened which gave a boost to rural non-farm activities.
First came irrigation, which spread in the 1970s.
And, as it did, a whole new set of activities emerged in rural Bangladesh, i.e., the repair and maintenance of irrigation equipment. Further boost came in the 1980s.
As I mentioned in an earlier column (The Power Tiller Race), other types of agricultural machinery gradually became popular around this time with the trend accelerating in the subsequent decades.
These machines also needed repair and maintenance.
And since many farmers could not afford the machines, a rental market quickly evolved, and a new rural non-farm business emerged, i.e., that of owning and leasing agricultural machinery.
The main demand for the goods and services provided by the rural non-farm sector came initially from agriculture.
As mentioned above, some of these goods and services, such as repair, maintenance and leasing of agricultural machinery were needed in agriculture.
Other goods and services were not needed as inputs in agriculture but were purchased using income generated in agriculture.
Then something else happened that further stimulated non-farm activities.
Money started flowing into the villages of Bangladesh in the form of remittances by migrant workers and earnings of rural women who had found employment in the fast-growing garment industry.
Increased spending on infrastructure and other forms of construction, whether induced by the above-mentioned flow of funds or through public investment programs, also served to expand rural non-farm activity.
As I mentioned in my last column, part of the credit for the substantial reduction of poverty in rural Bangladesh(at least till Covid hit us) goes to the rural non-farm sector.
Rural non-farm activities have now emerged as a major driver of rural poverty reduction.
During 2005-2010, 69% of rural poverty reduction was among households primarily engaged in agriculture.
The scenario changed considerably by 2010-2016, when this number had come down to only 41%.
The bulk of the poverty reduction in Bangladesh during this period was among households whose primary sector of employment was industry or services.
Households with higher shares of non-farm income were less likely to remain in or fall into poverty.
Given the importance of the rural non-farm sector, how can we ensure its further growth? That would be the subject of a future column.
The author is an economist, previously with an international development agency