Living in the flood plain: Can financial inclusion, productive assets and coping mechanism help reduce food insecurity?

Abstract

Frequency of extreme events and natural disasters such as floods are increasing globally and affect food security of people living in affected areas. Using household survey data from extremely flood prone districts of Bihar, India, we examine the effect of financial inclusion, household productive assets, and coping strategies to reduce food insecurity in Koshi river basin. Controlling for a host of covariates and using alternative measures of food insecurity, we find that financial inclusion, mostly having a saving account in a bank, helps reducing the probability of food shortage by 21–31% (4.5–6.6 percentage points from the sample mean of 21%), and number of days households worried about food shortage reduces by 29–35% (0.62 days less from the sample mean of 1.77 days in a month), but access to credit, which has been one of the key focus of financial inclusion, is not effective to address the issue. These results are robust to alternative specification of the main model and different measures of food insecurity. Our results provide implementable policy recommendation that providing support to rural farmers for having a saving account and ownership of productive assets including livestock would be the short-term measures while incentivizing poor households for sending their children to school would be a long-term strategy as education is one of the important determinants of food security via earning.