Abstract
Urban expansion creates potential for increased incomes among previously rural smallholders from sources other than traditional agriculture. Harnessing this potential, however, requires investments into agricultural upgrading or non-farm activities. The article addresses the question concerning to what extent these investments are realised in the peri-urban space of Bengaluru. Its answers are based on a review of the literature and extensive field surveys in two differentially developed districts assessing the smallholders’ economic situation in 2019 and as a recall in 2009. Our findings are that only a few smallholders were able to realise the peri-urban opportunities. Household income increased in real terms only by a little, especially from farming. Instead of a traditional farm to non-farm production linkage, surpluses from the non-farm sector were seen to meet the working capital needs of the farm sector. While physical access to formal financial institutions has significantly improved, formal borrowing is dominated by small-sized loans from registered self-help groups or traditional priority sector loans. Only a few households took up non-farm activities as many others failed to obtain sufficient credit and lacked knowledge about remunerative non-farm projects. Overall, rising outlays for education and health services leave little resources for any productive investments.
Highlights
As urban regions grow over time, various erstwhile rural areas at the periphery begin establishing linkages with the urban economy and society and a process of transition takes place
When we looked at loans taken from Self Help Groups (SHG), we found that 51 percent of such loans in Devanahalli and 87 percent in Magadi were being put to non-income-generating uses
We set out to answer a question about the factors that influence the realization of the new peri-urban opportunities for smallholders
Summary
As urban regions grow over time, various erstwhile rural areas at the periphery begin establishing linkages with the urban economy and society and a process of transition takes place These linkages create potential for development and increased incomes among previously rural residents from sources other than traditional agriculture. Significant increases in real estate prices have been mentioned, which presumably grant residents in these areas more valuable collateral for obtaining loans. This is bolstered by a greater perception of creditworthiness by banks among these populations owing to their proximity to markets and financial institutions [5]. From the demand side of loans, better communication technology is expected to reduce the transaction
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