Risk, Deprivation and Vulnerability Facing the Rural Poor of Bangladesh

This paper analyzes the nexus among risk, deprivation and vulnerability that confront the rural poor in their daily life. It examines the nature of shocks, the consequent economic burden, and the coping mechanisms. It explains how shocks affect deprivation and vulnerability of households to poverty. The prominent shocks are health, death, crop, property and livestock, typically of the idiosyncratic in nature, except possibly that of crop. However, the effects of such shocks are likely to be more adverse for households that have difficulty maintaining their consumption level above the poverty threshold. Capability deprivation is measured here by the food adequacy level of the household during the preceding 12 months. We use an ordered-probit model to estimate the effect of various shocks on food deprivation. The results show that the poor significantly depend on investable surplus and liquidation of asset and property (i.e., self-insurance) in order to overcome the burden of shocks and the burden of shocks significantly affects the food adequacy level. In light of the evidence on the possible impact of Grameen Kalyan health intervention, it is argued that well-designed microinsurance products may be more effective and less costly than the usual mix of self-insurance, ad-hoc relief and rehabilitation measures to cope with shocks so that risks of future poverty, namely vulnerability, can be minimized.