Financial Inclusion and Livelihood Dynamics: Evidence from Northeast Rural Bangladesh

The study focuses on rural livelihoods in the northeast region of Bangladesh highlighting two important aspects: household strategies and financial intervention. It uses participatory methods and quantitative evidence to understand the livelihood dynamics and the extent of financial inclusion in livelihood securities. In the broader context of vulnerability, the study focuses particularly on vulnerability to risk related shocks and the strategic uses of livelihood assets in combating such risks. The livelihood strategies include income-generating activities, risk coping strategies and the role of institutions in confronting vulnerability. Households develop coping and adaptation strategies to manage risks using various resources available. Strengthening the capacity often needs resilience building with self-efforts and external interventions in order to nullify the impacts of shocks and hazards.
Given the vulnerability context, the study investigates how rural people deal with risks to achieve livelihood securities. Findings show that rural people handle minor risks by self-insurance mechanism including cash on hand and household savings. They manage intermediate risks through community or market-based arrangements including borrowing from moneylender or MFIs. For major risks such as flood and cyclone, they often urge for government or donor support. Household’s coping capacity depends on the appropriateness of risk management tools and strength of the households (resilient, weak or fragile). Adaptation and resilience to risks largely depend on household’s resource base and external interventions. Financial inclusion is one of the major external interventions in rural livelihoods.
Rural people consider financial intermediation as avital instrument among available livelihood interventions. However, actual role of financial instruments is underutilized, as financial inclusion is incomplete in rural areas. This research identifies some financial inclusion gaps in the northeast rural Bangladesh. To minimise inclusion gaps, the study recommends raising the scale and outreach of banking and financial services through cost-effective means such as agent banking or mobile financial services (MFS). There are potential barriers to those technology-led financial services. For sustainable livelihood security, rural people need these obstacles eliminated.