This paper summarizes the research findings and policy implications of a research project undertaken by the Rural Institutions and Participation Service (SDAR) of FAO entitled "Rural Household Income Strategies for Poverty Alleviation and Interactions with the Local Institutional Environment". The research was undertaken to gain a greater understanding of the linkages between household livelihood strategies, incomes and the local institutional environment, and how these linkages may change over time. Building on three country studies in India, Mozambique and Mexico, the research focused on informal economic institutions associated with household access to land, labour, markets and capital, as well as those providing a social safety net.
The paper argues that local institutions, however "imperfect", are providing essential goods and services to the rural poor and vulnerable groups, particularly in the absence of well-functioning markets, local governments and safety nets. Therefore, great caution should be taken not to destroy these institutions and networks in the name of "development". It also argues that homogeneous and heterogeneous local institutions play different but complementary roles in rural societies. While the former are more inclusive, the latter may be more effective at moving the poor upward and potentially out of poverty. In conclusion, the paper calls for policy-makers and practitioners concerned with rural poverty to: 1) allocate additional resources and time to understanding, strengthening, capacity building and partnering with local institutions, and 2) provide a supportive legislative and regulatory framework in which local institutions can thrive and assume greater responsibilities.
