Professional Documents
Culture Documents
S.Rengasamy
Madurai Institute of Social Sciences
S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
Content
Part I:Tools & Techniques for Livelihood Analysis & Intervention
The need & importance of tools in livelihood promotion 4
Box Why investigate livelihoods 4
Box DFID –Methods of livelihood analysis 5
Box Various participatory methods & its uses 5
Participatory methods & livelihood analysis 6
Importance of participatory methodologies 6
Box Classification of stages in community work / livelihood promotion 7
Box Meaning of instrument, tools …. 7
Meaning of a tool 7
Box Levels of livelihood profiles 7
Box Tools suggested by IMM in its SLED approach 8
Box Livelihood analysis. Strength & weaknesses of various research methods 8
Tools & techniques in designing livelihood promotion ISLP Model 9
Box Stages in livelihood analysis 9
Dia Stages Steps Tools 9
Step 1. Getting to know the people 10
Box Uses of livelihood information 10
Box Livelihood intervention Points for consideration 10
Step 1.Understanding the diversified livelihood portfolio in the area 10
Box Importance seasonal diagram 10
Getting to know the livelihood profile of the poor people 11
Box Checklist to understand the livelihood profile 11
Step 2. Assessing the factor condition 11
Box Assets description 11
Tab Additional information useful to understand factor condition 12
Talking to key informants 13
Box Suggested key informants 13
Step 3. Understanding the local demand conditions 13
Box Extractive & empowering methods 14
Step 3.1.Identifying enterprises in the area 14
At the village 14
At the market 14
Box Social metabolism 14
Box Looking at the market place 15
Step 3.2. Mapping all that go out and come in 15
Dia Functions of Trade 15
Tab What to look in to the local market - Local markets –What comes in Local markets –What goes 16
out
Box Market development & poverty reduction 17
Stage II. Selecting livelihood activities suitable for the area 18
Step 1. Triangulation 18
Tab 1.Activity Analysis 2.Finding the suitability of activity 18
Step 2. Understanding the demand conditions better 19
Box Why look at the demand condition: A lesson 20
What do we look for in the market 20
Size of the market, Growing market, Dynamism, Transparency, Low barriers, System etc… 20
Stage III. Getting to know the selected activity Step 1. Deciding an intervention 21
3 E Exercise (Exercise for Exploring External Environment) 21
1. Identify key informants 2. Develop questionnaire /check list for assessment 3.Scoring by key 22
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For example taking a survey to understand a social condition. If survey is a tool, then
designing an interview schedule, interviewing the respondents and making observation
during survey are all can be considered as techniques. The process not only helps us to
understand a social phenomenon, but it also helps us to relate with the respondents, provides
clarity about the reality and that clarity improves our efficiency.
There are lot of tools and techniques available to design a livelihood programme. The first
step in designing any livelihood intervention is to understand the livelihood pattern of the
people with whom we have decided to work.
Why investigate livelihoods?
The SL approach offers an opportunity to improve poverty reduction efforts by taking
an all round view of the circumstances of the poor, as they themselves view them,
rather than jumping to early conclusions and immediately proceeding to conduct
isolated, in-depth analysis of particular attributes.
• What appears to be the mainstay of household income – e.g. a cash crop such as
chili or cotton? or a particular type of paid employment – may make a much smaller
contribution to the family livelihood than is expected from initial impressions.
• Asset constraints vary from place to place, group to group and across income levels;
poorer groups typically have more limited access to assets and are more constrained
in their choice of livelihood strategies than richer groups.
• Different social groups within a community typically experience differing risk factors
in their livelihoods; these need to be understood if vulnerability is to be reduced.
• The capability of individuals and groups to exercise choices may be constrained by
social and governance factors that are not immediately obvious.
SL analysis provides a holistic framework for understanding the need for, and likely
focus and objectives of, subsequent development activity. Such activity may itself be
sectoral, though its objectives are most likely to be framed in terms of overall poverty
reduction
In the past development workers used socio economic surveys or baseline surveys to
understand communities and people. There are lot of similarities in socio economic surveys
of the past and our present attempt to understand the livelihood profile of the people. Though
fixed line telephones and cell phones do the same function one can understand the differences
also. Like that understanding people’s livelihood cannot be fully actualized if we solely
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
depend on survey methodology only. We need to use variety of tools and techniques that are
painstakingly developed by the development workers over the period of time.
DFID Suggested Methods for Livelihood Analysis
Environmental checklists
Gender analysis
Governance assessment
Institutional appraisal
Macro-economic analysis
Market analysis
Participatory poverty assessment techniques
Risk assessment
Social analysis
Stakeholder analysis
Strategic conflict assessment (SCA)
Strategic environmental assessment (SEA)
Secondary data
Key informants
Individual and household case studies
Participatory Methods
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It is the experience of the livelihood promoters throughout the world that using participatory
methodologies is the best means to understand the livelihood profile of the people.
Practically any tool or methodology that has been proved to be effective, used in the right
way and bearing in mind the principles that development workers have agreed upon, can be
useful in putting the Sustainable Livelihoods Approach into action. A key feature (in line
with being people-centered) is that the development workers should seek to use tools that
not only help them to work effectively but also can be put in the hands of the people who are
the subjects of the development process so that they can take a direct role in making their
own decisions about their futures.
The key point regarding the tools that are used as part of the Sustainable Livelihoods
Approach is the way in which they are used and the attitude of those who deploy them. Even
the best of tools, no matter how effective, efficient, participatory and empowering it is
supposed to be, will contribute little to positive development outcomes if it used in the wrong
way.
Importance of Participatory Methodologies
For example, the various participatory field tools that are commonly used during “PRA” can
be very effective if used properly – as a means of empowering local people to do their own
analysis and planning. But very often they are used by development workers as a means of
extracting information and merely confirming their own preconceptions and prejudices. Used
in this way they can be very damaging. On the other hand, “old-fashioned” tools like formal,
questionnaire surveys, if carefully planned tested and implemented, leaving time for
interaction with local people can be extremely powerful tools both for learning about
livelihoods and for empowering local people.
Because the Sustainable Livelihoods Approach encourages adaptability and needs to be
“reinvented” every time it is applied, new tools are constantly be added to the list of those
that can be used. Development workers who are being encouraged to adopt the Sustainable
Livelihoods Approach should also be encouraged to think of new tools, or adapt tools that
they are already using so that they reflect the principles of the Sustainable Livelihoods
Approach and help to implement it more effectively.
There are many tools and techniques that livelihood promoters can use to assist in moving the
communities forward. Some of the tools are examined here and an attempt has been made to
classify it so that livelihood promoters can find a tool or technique appropriate for their
objectives
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Varieties of tools are used to understand the factor conditions. Natural and physical resources
can be best understood by using resource maps. Social resources can be best studied by using
venn diagrams and human resources with social maps.
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In addition to these secondary materials, participatory tools can also be used for validating
the information and sift those relevant in our context. Participatory Tools are useful for us to
understand the perspective of the community; differences among different groups within the
community and on the resources and livelihood opportunities they see. Without this, one
may likely to design initiatives that simply do not cater to their needs or interests. Designed
well, participatory tools can also initiate a sense of understanding and ownership among the
community one wish to help.
Talking to Key Informants:
After doing a preliminary observation to understand the diversified livelihood pattern as well
as the factor conditions of the area, one will be able to frame relevant questions that will fill
the gaps in our information. Also, the background information gives us a complete
knowledge and feel of the place and puts us in a better position to seek information. This
understanding will be further sharpened by talking with the key informants
Suggested Key informants who can provide valuable information in a very short time.
Market traders or authorities, Bankers, Heads of villages, caste and other groups, members of
SHG, water user associations, women’s groups, officials from promotional and regulatory bodies,
NGOs, Researchers, Teachers
Marketing and Research Team (MART), New Delhi, has developed a methodology, 3M
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One needs to look at one such market center in details to understand some of the important
features of the local economy.
Looking at a Market Place
1. Walk around the local market to get a general idea about its size and types of products and
services sold. Fill up the table (What to look into the market) given below. Enumerate every
enterprise.
a. This gives us a complete list of activities being pursued in the area
b. It also gives us a relative size of each of these activities
2. Organise products and services into categories for interviewing sellers.
3. Collect information from the market owner/contractor (in some cases it could be the
Panchayat/traders association itself) and for counting the number of stalls by product and
service.
4. Others should start to approach sellers and buyers.
5. Select a minimum of one seller for one product category.
6. Conduct in-depth interview with the seller during his free time
7. Sellers often avoid giving the correct sales figures and invariably report low sales. To counter
this, at some point in the interview, quote an absurdly high sales figure to the seller and, to
refute this, the seller will often react by revealing a realistic sales figure.
8. Pick buyers from three different economic strata (i.e. upper, middle, and lower) on the basis
of their spending capacity. Interview buyers Observe how much they spend.
9. Remember to target an equal number of men and women.
10. Start interviews in a non-threatening way by talking about general topics.
Questions regarding their name, age, land holding and income-level should be left to the end of
the interview, by which time they will have opened up.
Therefore, one can see the Local Economy is a consumer (of utensils) as well as a producer
(of vegetables). As a consumer, the economy creates opportunities (of buying utensils from
outside and selling those to local people). As a producer, it generates some employment
opportunities (working in the vegetable fields). We illustrate this with the following diagram.
Functions of Trade
Generates Supply shortfall
surplus
Local economy is a producer Local Economy is a Consumer
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Both of these (consumption & production) create livelihood opportunities. Therefore, one
way of looking for livelihood opportunities is to start looking at the local markets and
understand what opportunities it is creating. These opportunities are activities that essentially
fill the gap between the producers and consumers in a local market.
While surveying the local markets, observe the products and raw materials that are produced
in plenty locally, for instance milk. A part of the milk may be consumed locally, but a large
surplus may remain unconsumed. This surplus gives rise to an intervention opportunity
where it can be value added and exported out. Similarly, some other products, which are not
produced locally, are imported from outside, this gap or deficit is also an opportunity that
provides intervention ideas.
The best sources for this information are manufacturers, traders, retailers, local brokers,
warehouses, government officials and of course the market itself. This will open up
opportunities not only for trading in the products but also forward and backward processing
of available raw materials.
Stage II: Selecting Livelihood Activities Suitable for the Area
Livelihood profile of the people, understanding the factor conditions of the area and
observing the market give a fair understanding of what activities may be appropriate for the
people. In this stage one need to select from amongst these activities, those in which some
interventions can be made.
Step 1: Triangulation: Putting the information on people, the factor and demand conditions
together
Triangulation is a form of cross-checking the information data collected using several methods
by several researchers several places and at several points of time.
Step 2: Understanding the Demand Condition of the short listed activities better.
Step 1: Triangulation
Triangulation of the data is nothing but evaluating all the data so far collected by us on
people’s diversified livelihood portfolio, internal context of the organization, factor
conditions, local demand condition, enterprises existing in the area, products and services that
go out and come in for arriving at a list of an appropriate set of livelihood activities.
Otherwise triangulation means making the information shorter and more precise by ignoring
information that is not reliable. Triangulation means evaluating / overlaying information on
suitability of activity
The following table is an example to illustrate how the information collected can be
triangulated
Activity Suitability Employment Favorable Favorable Competence Total
for the poor generation demand factor of the
in the area ability of the conditions conditions organization
activity
A b. c d e f g
• First, list out all possible livelihood opportunities observed by us in the Stage-I of our
study (Understanding people’s diversified livelihood portfolio) in Column 1 of this table.
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• Next evaluate each livelihood activity on a scale of 1-5 (where 1 is highly unfavorable and
5 is highly favorable) on the parameters of:
o Its ability to generate employment in the area
o Its demand conditions: the nature of the market
o Its factor conditions: availability of resources required for its production
o Competence of the implementing agency to take up intervention in this area
o Its suitability for the poor in the area.
For example large number of people can be employed in the dairy activity, hence highly favorable
(5). Vegetables can employ lesser number of people than dairy but relatively more number of
people can be employed in vegetable cultivation than in vegetable vending, hence 4 and 3
respectively. And so on …..
• Remember that the score has to be given purely on the basis of how we generally feel
about the idea, based on whatever understanding of the area we have developed. No
mathematical or economic tools are to be applied.
• After scoring each of the livelihood ideas on these five parameters, total up the score by
adding the numbers in the last column. Then shortlist those scoring high and eliminate the
others
Now we have a list of a few activities, which have favorable demand in the market, have the
necessary resources (factor conditions) to produce them locally and are suitable for the poor
in the area. Given these positive indicators, one can conclude to some extent that, these
activities can be managed by the implementing agency.
Step 2: Understanding Demand Conditions Better
Economic opportunities in the present-day world can be found in the market. Market means
demand; First start with local demand conditions and slowly move to regional, national and
global demand for these selected activities.
While looking at the market and market trends, it is always good to scan the global or
national markets and assess the characteristics of the market.
For example, the market for fruits and vegetables is growing the world over, but not the
markets for cereals. Therefore, even if the local markets for cereals are larger than fruits and
vegetables, it may be easier to work with the later, than with cereals, if other conditions in our
area permit.
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However, identifying future trend of a product or a service is a complex task. But it needs to
be done. Variety of factors influences these trends:
i. New technologies
Why Look at Demand Condition: a Lesson
ii. Change in people’s lifestyle Way back in 1985, when PRADAN started its first
iii. Change in demography livelihood project in Kesla, Madhya Pradesh, they
iv. Change in political balance observed the local tribals collect mushrooms that
v. Or a mix of all of them grew naturally and use them as a part of their
diet. Taking a cue from them, they did a project,
What do we look for in the market? which apparently looked to be a huge success.
While scanning the markets, one should In time, Knor Soups, the famous packaged food
look for: giant, became the biggest buyer of mushrooms
• Size of the market - Big Size: Large from Kesla. Also, Kesla became the largest
markets can support large number of supplier of oyster mushrooms to Hyatt Regency
livelihoods. For example, millions of chain of hotels, the second largest buyer in the
households depend on wheat production, country. The total turnover of the mushroom
business reached Rs 4 crores per annum.
while only a few thousand people can Therefore, on the face of it, it was an excellent
produce psyllium (isabgol) that the whole livelihood intervention story. But, when some of
world can consume, or a hundred the initiators of the intervention went back to
thousand people can produce all the have a look at it after some time, they
bamboo baskets that we need. discovered some not so complementary details.
Intervention where there is a fairly large They realized that after all the effort and
fanfare, only 220 families were involved in the
demand makes good business sense
cultivation.
• Growing Market: A growing market So, what went wrong?
throws up new potential for more people The thing that went wrong was, at the outset
to join in at different parts. It offers better the interventionists looked only at the factor
opportunities for supporting larger conditions of the region, like, suitable climatic
number of livelihoods. An existing large condition, naturally growing mushrooms,
demand, which has no future growth or people’s familiarity with mushroom and so on.
This focus limited their vision and led them to
that which is likely to dwindle, cannot be overlook other opportunities, which could have
called a growing market; therefore it had bigger potential in terms of livelihood. If
does not offer a very good prospect they had studied the demand conditions first
• Dynamism: Markets which are dynamic; instead, they would have realized that the total
absorb changing technologies; constantly market size of mushrooms in India was only
witness entry and exit of players; offer about Rs 7 crore. Had they paid attention to
scope for a wide range of activities, are that detail, possibly they would not have taken it
up in the first place as an area of intervention.
dynamic markets and can support many Therefore, though both factor and demand
livelihoods conditions are equally important in the study of
• Transparency: Transparent markets are the intervention area, it makes better sense to
usually fair, giving all players a level start with demand conditions first because it
playing field. throws up larger possibilities for intervention,
• Low Barriers: Markets with low exit and gives a better picture of the larger reality.
and entry barriers are an ideal choice.
Usually these markets become very competitive and are efficient.
• Systems: Look for markets which have well developed systems in place
• Support: A well developed chain of related and support industry is usually helpful
Analyzing Market Trend
We need to analyze the market trends carefully. We need to keep our eyes and ears open so
that we can quickly pick up signals of change. We need to consciously keep ourselves open
to such signals.
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In a simple manner, we could plot the market size (either in terms of total production or in
terms of total value) of some of the commodities/ products that are/ can be produced in the
area, on a graph.
Stage III: Getting to know the selected activity:
Deciding on intervention
Step 1: Exercise for Exploring External Environment (3-E)
Step 2: Overlaying Organizational Mission and Competency
Step 3: Sub-sector Analysis
In the previous Stage of Identification Process, we short-listed a few potential livelihood
activities in our area. We may have gathered some information about these livelihood
opportunities at the local level by now.
But now the question is, can we take up all of these activities? Do we have the resources?
Remember, it is better to take up one or two activities and do them well, rather than spreading
our limited resources too thin by taking up too many activities.
Even within the selected activities, do we know what exactly to do? For example, if dairy
looks like a potential activity in our area to be taken up, what exactly do we do in dairy? Do
we work on providing veterinary services to producers? Or work on creating alternative
marketing channels? Or undertake advocacy to create an enabling policy? Which is the most
crucial bottleneck? Is it pro-poor? Does it have any health or other environmental hazard?
In this section, we will learn how to chose one-or-two activities to be taken up in our area and
identify the exact intervention to be made in the selected activity. This can be done in two
ways:
• Through an exercise to explore the elements of the external environment
• Overlaying the Organizational Context by examining the mission and assessing
competencies of the organization
• By doing a detailed sub-sector analysis, if required.
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o For example: If your question was, “Is the raw material available?” The dairy farmer may
respond about the availability of fodder, while the dairy plant manager may respond about
availability of liquid milk. To avoid such a mix up, formulate the question precisely: “Is
adequate green fodder available?” or “Is adequate liquid milk available?’ depending upon
what you want information on.
Step .3: Scoring by Key Informants
• Ask different key informants to assess each of these parameters on a scale of 1-5, where 1
is highly unfavorable and 5 is highly favorable, individually
o Only the respondent should give the score and we should not prompt him in any way. If
necessary we can use some PRA methods to help them score, but evaluation should come
only from them.
o It is necessary to go to at least three Key Informants. If we have the time and the resources,
we can definitely seek views of more.
o Score the responses of the Key Informants in the columns and find out the average score on each
of the 25 parameters.
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o Factors showing high scores, such as number of buyers, access to physical resources, are
favorable.
o Factors with low scores, such as availability of credit, needs attention.
o Factors where there are differences of opinion between the key informants (shown by high
variance), such as reliability of input supplier in the above case, need to be explored further.
Possibly this represents a communication gap or break in information flow.
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Similar analysis is also applicable for not only the human resources of the organization, but
also on financial resources, infrastructure and so on. In these cases also we need to ask:
• Do we have to resource (which in turn will make the organization capable) within the
organization?
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• Is there some other organization we can collaborate with who can bring in the resource and
so on …..
For example, in the dairy intervention in the above case, if credit is a major bottleneck
identified, we could choose from the following:
• Making credit available through our organization’s micro-finance activities
• Making credit available by collaborating with one of the micro-finance agencies working
in the area
• Making credit available by promoting a new people-owned micro-finance agency in the
area
• Making finances available by linking the producers with banks in the area.
The first step is to generate all these ideas. We could use any of the brainstorming processes
for generating such a list.
Step 2.2: Assess Organization’s Competence
Having generated the list of possible interventions, we need to check for ourselves, if the
organization has the competence and the mandate to take up that intervention.
The following Table-6 to facilitate this analysis.
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people share broadly the same by different hazards (drought, market failure,
patterns of livelihood floods, etc.)
Map
household livelihood options (food, • Predict whether people will be able to meet their
cash, and expenditure patterns) basic survival requirements and/or protect their
for different wealth groups in the livelihoods in the short, medium and longer term
livelihood zone, highlighting • Provide essential information for guiding policy and
market linkages, and constraints program decisions in areas such as social
on/opportunities for economic protection, agricultural policy, service/needs
growth. provision, development planning, market program
design, etc.
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Principle
Component (triangulatio Theme
n; cross-
tool
checking)
Area mapping
services; water and sanitation h.h. facilities; education;
infrastructure, roads and transport interviews; health
Livelihood context
infrastructure secondary
data
environment environment
interviews; gender
FGD
Broader political context in Kosovo; Venn Physical isolation;
Political parties at community level; diagram; participation; attitude
Political
Secondary
Key informant
generating activities)
Livelihood strategies
Household interviews
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Household interviews
shocks & stresses coping strategy of household activity distribution of poverty
Vulnerability to
Livelihood
services; assistance to or from physical isolation; gender;
households’ ability to recover from stresses and shocks)
Social
profile
Household
extended family networks; distribution of poverty within
interview
membership in community communities; participation
groups; nature of interactions
with other households
Housing; agricultural Household economy; shelter;
Livelihood
Physical
Household
implements; vehicles; distribution of poverty within
profile
interview
machinery; shops; household communities; water and
level water and sanitation sanitation; food security and
Household Assets
facilities agriculture
Education level; ability to work; Education; health; gender;
Livelihood
Household
Human
Household
profile
Natural
interview
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Christaller stated that centrality “is equal to the relative importance of the place in regard
to a region belonging to it”. He suggested that the best method of determining the
importance of a place as a centre is, not by the size of the population, but by the number of
central functions performed by it. (More number of telephone connections is an indicator to
measure the centrality of a place).
Professor Edward Ullman suggested Other indicators of a central place
some, such as “the average number of - business turnovers of the shops
customers required to support certain - number of central functions such as whole sale
specialized functions in various and retail stores
regions,” and, “the excess of these - professional services located in a settlement
functions over the normal requirement
of the settlement (urban) population.’ Another suggestion is the number of automobiles
entering a town excluding those from the suburbs.
Leading propulsive industry and innovative firms are some of the concepts that the
livelihood promoters are expected to be familiar with. These industries /firms
generate certain advantages and economies. Our effort will be made easy if we are
able to integrate our activities with it. Advantages of such industry/ firms
Ø highly advanced level of technology and managerial expertise
Ø high income elasticity of demand for its products
Ø marked local multiplier effects and
Ø strong inter-industry linkages with other sectors
Quality seedlings
Cane Cultivation
Labour
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Some activities create strong backward linkages and some create strong forward linkages.
Some linkages may trickle down to the area where we are planning to make intervention.
Livelihood promoters should manipulate these linkages for the benefit of the target group
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Sub-sector Analysis
"Once upon a time, we knew the origins of things: what piece of earth the rice on our
dinner plate came from, which well our water was dipped from, who cobbled our foot
wears, and whose cow provided the milk and leather. In many parts of the world, that
information is still readily available. But in the present day society, even as technology
makes certain kinds of information more accessible than ever, other connections are
irrevocably lost."
In spite of their resourcefulness and savvy, small firms often lack political influence as well
as the vantage point from which to understand the overall competitive system in which they
operate. Field agencies can help by serving as advocates, monitoring and influencing change
for the benefit of MSEs. But to do so, field agencies need ways of identifying niches where
MSEs have a competitive advantage so that these agencies can assist those MSEs with the
greatest potential while avoiding investment in areas where they cannot effectively compete.
Subsector analysis offers a tool that can facilitate small-firm moves to promising technologies
and market niches.
Normally, a subsector is delineated by a particular final product and includes all firms
engaged in raw material supply, production and distribution of that product. In some cases,
however, the defining characteristic is a key raw material, with the subsector describing
alternative transformations and distribution systems emanating from it. The hides and skins,
cotton, and citrus subsectors are examples of this second type. They are common in the
The 3-E Exercise helps us identify some of the
literature on agricultural economics marketing,
ruling bottlenecks that need to be overcome to where they are known as commodity subsectors.
support livelihoods of many people in the area. Many of the analytical tools used in subsector
Step. 1: Identify Key Informants analysis come from these early subsector studies
Step. 2: Develop Questionnaire/check list for on agricultural commodities.
Assessment
Step .3: Scoring by Key Informants Promoting individual enterprises to enhance the
Step.4: Aggregate Scores
livelihood among the poor people in an isolated
Step .5: Compare Scores of Different Activities
Step .6: Identifying Bottlenecks and sporadic way may not be the most effective
Step .7: Identifying Interventions way to enhance their livelihoods.
An enterprise is not an isolated structure. It is
organically connected horizontally and vertically with other enterprises and activities. Our
effort may go waste if there are fault lines in the relationship. Enterprises can be established
easily but to sustain it and upscale it, one need to understand the large picture. There are
several tools and techniques are used to understand this picture. 3E exercise is one such a
tool. Sub sector analysis or Value chain analysis is an another important tool that helps us to
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
understand more about the economic system, the whole value addition chain and various
players in it. It helps us
to determine the most cost-effective intervention to achieve the livelihood outcomes that we
seek in our area.
Sub sector Model
End Consumer G
L
0
Large Scale Small Scale B
Trader
Multi outlet Retailer A
L
E
C
Specialized Buyers / Trans National O
Buyers Import Company N
O
M
y
Local Traders or
Markets Export National
N
A
Large Scale T
Small Scale Small Scale & or Multi I
Producer Producer Plant O Meta Level
Macro Level
N Meso Level
A Micro Level
L
Raw Preliminary S
Traders E
Material Producers
C
T
O
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
What is a Subsector?
• "The vertical set of activities in the production and distribution of a closely related set of
commodities." Shaffer, 1968.
• A sub-sector is a network of farms and/or firms that supply raw materials, transform them,
and distribute finished goods to a particular consumer market or markets.
• Any group of commodities, which share a common procurement, processing and
distribution channel, can be clubbed into a sub-sector.
• There is more to a sub-sector than just the core manufacturing process such as rice-milling.
The rice transportation system is as much a part of the paddy sub-sector as rice-milling or
trading is.
• A sub-sector is not within a geographical confine. If the groundnut for manufacture of the
Chiki (Kadalai Mittai - sweetmeat) sub-sector in Lonavala comes from Saurastra, then the
groundnut market in Rajkot (Saurastra) is very much a part of the Chiki sub-sector, that
needs to be studied.
• "An interdependent array of organizations, resources, laws, and institutions involved in
producing, processing and distributing an agricultural commodity." Marion et al., 1986.
• Thus , one can view the subsector as: Value Chain / Sub Sector Analysis can
• A set of activities and a related set of rules help to…
governing those activities. • Reveal links between producers, exporters
• A conceptual way view of a problem. and global markets
• Vertical view of industrial organization. • Identify constraints all along the chain to
competing in the marketplace
Nothing highly complicated about the
• Clarify the relationships in the chain from
approach. Just a vertical way of looking at. buyers to producers
Explanation: • Highlight the distribution of benefits
– range of activities required to bring a product among buyers, exporters and producers
or service to the final consumer
– includes producers, processors, input suppliers, exporters, retailers, etc.
– includes both vertical and horizontal linkages
– can be defined by a particular finished product or service
• e.g. wood furniture, green beans for export, etc.
** the same definition can be applied to Value Chains
What is sub-sector analysis?
Elements of Subsector Analysis Sub-sector analysis is a process of
1) Understanding Product Markets and Market Trends getting to understand different stages in
2) Relationships between Participants
– describes functions, participants, and relationships
the value addition chain in a sub-sector
among participants and understanding who does the value
3) Identification of Constraints and Opportunities addition, using what technology, at what
– including: technology, market access, organization, terms and with whose help.
policy, finance, input supply, etc. There are FOUR steps involved in
4) Subsector mapping undertaking sub-sector analysis.
– graphic presentation of inter-relationships; 1. Preparing a preliminary sub-sector
– can help to identify participants to interview
map,
2. Refining your understanding of the sub-sector,
3. Analyzing sub-sector dynamics and leverage points
4. Choosing your intervention point.
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
By using subsector analysis one can put the potential livelihood opportunities identified to a
rigorous test. Subsector analysis clarify whether the activities identified are likely to grow and
significantly benefit a large number of poor people, or are they going to remain a stagnant
activity bringing only marginal benefits to the target group?
Step 1: Preparing a preliminary sub-sector map
There are three action points that are required to prepare preliminary sub-sector map. These
are:
a. getting to know the sub-sector
b.interviewing key informants
c. drawing a preliminary sub-sector map
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
The above questions can be applied to potential livelihood opportunities in services as well as
in manufacturing.
The answers for the checklist mentioned above can be collected by talking to people who are
involved in the business. They could be farmers or producers, traders who deal in the
commodity, product or service, bankers who finance the activity, a government officer
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
responsible for supporting or regulating the activity, or even a professor in the local college.
Books, articles, websites can be of great help to clarify our self an\bout the activities we are
interested in.
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
The term Value Chain refers to the fact that value is added to preliminary products through
the combination with other resources (for example tools, manpower, knowledge and skills,
other raw materials or preliminary products).As the product passes through several stages of the
value chain, the value of the product increases. A value chain can be very short, like in the case of
milk, or very long and very complex in the case of passenger cars or houses.
For example wood furniture: Every wooden table starts as a tree; it is cut down in the forest and
processed to boards in sawmills. Traders then would sell these boards to furniture producers or
carpenters, who would use their skills to make a table from the boards. Some furniture producers
would sell the table to a local market, whereas others would sell it to traders or export agents.
Large retailers,
Every single enterprise has its own value chain. You could, however, think of a value chain
as consisting of levels with several enterprises at each level. For example the Central Java
(Indonesia) wood furniture industry: here you would find several small furniture producers selling
their products either to local markets, or to traders that would export them to large retailers. You
could even think of a whole national sector as including several levels of a global value chain. In
Central Java you would not only find furniture producers, but also raw material suppliers and
export agents. It is therefore important to distinguish between value chains that feed into
local markets (an end there) and global value chains.
The key informants for analyzing a sub-sector in greater depth may include:
• Smaller and larger producers
• Market traders or authorities
• Bankers
• Officials from promotional and regulatory bodies
• NGOs specializing in the sub-sector
• Researchers
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
3. What technology do you use, what alternatives exist, and why do you use this one?
4. What are the main regulations/ laws you have to follow?
5. What are your main sources of funds for working capital and fixed assets?
6. Which are the main agencies/ actors who help you? How?
7. What problems do you face, if any?
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
The following diagram illustrates sub-sector mapping conventions. Review these. The
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
conventions or format is important and ignoring it often produces unclear sub-sector maps
that may confuse the participants and others.
These action points can be undertaken in an iterative manner, i.e. meeting again with key
informants, such as producers, traders bankers, regulatory, promotional and other officials, as
well as drawing on secondary date. With the help of the key informants one can cross check
the accuracy of the information collected in the earlier stages.
Unofficial
Transporters
Cooperatives
Merchants Regional Forest Elected Regional
Patrons Service Council
Migrant
WoodCutters
Local Forest Local Rural
Forest Villages Service Council
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
A: 1 Regulation
a) Identify the main laws and rules (including taxes) that apply to different stages in the
sub-sector.
b) Identify the main agencies responsible for enforcing the above.
c) Check the actual application of the law vs. the rules as laid down.
d) Ask key informants about what are the most bothersome aspects of regulation.
A: 2 Promotion
a) Identify the main promotional policies of the government relevant to the sub-sector.
b) Identify the main agencies responsible for implementing those policies.
c) Check actual implementation against policies on paper.
d) Ask key informants about how useful or not these policies are, and what are their most
helpful aspects.
A: 3 Credit
a) Identify the credit available to the sub-sector: what for how much?
b) Identify the main sources of credit (banks – commercial, regional rural banks –money-
lenders, etc)
c) Which parts of the sub-sector are most constrained by the lack of appropriate credit?
A: 4. Other institutional factors
a) Are there any producer organizations?
b) Are there any other institutions that affect the sub-sector?
c) Is there a political economy that significantly influences the sub-sector?
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
It is also important to view upgrading as a continuous process and to consider this in any
upgrading
1. Product Upgrading: Developing new products/services or introducing a new quality. New
products usually have a higher value than their predecessor models. Examples: Increasing the
quality of timber wood for furniture, sourcing from another supplier, or adopting the design of
clothing to the preferences of the final customer.
2. Process Upgrading: Improving the efficiency of internal processes, such that these are
significantly better than those of competitors. Examples: Cutting the cost of inventories, lowering
scrap, improving delivery time, producing more in less time to less cost.
3. Function Upgrading: Moving up the value chain towards carrying out higher level and greater
value adding activities. Examples: Developing own capabilities for manufacturing chocolate instead
of only exporting the raw material; building up own design capabilities instead of only assembling
products according to given designs and plans.
4. Market Upgrading: Covering new markets on which to sell a product or service, whether this
market has to be newly created or is already covered by competitors.
5. Supply Upgrading: Improving the quality/quantity of supply material and products or
changing the supplier. This is very related to process upgrading. However, supply could be a
distinct focus of a sector-upgrading project. Example: ensuring that timber for wood furniture is
sourced from sustainable and environment-friendly wood processing areas.
6. Inter-chain Upgrading: moving to a new and more profitable value chain, where higher
rents can be captured. Example: Taiwanese firms moved from the manufacture of transistor radios
to calculators, to TVs, to computer monitors and now to Wireless Application Protocol Phones
(WAP).
7. Intra-chain Upgrading: Increasing cooperation and the flow of information between partners
along the value chain. This is done to achieve collective gains through quality improvements,
increased system efficiency and the development of differentiated products. This would also imply
a change in the value chain governance: From market-based to increasingly regulated
relationships that are based on trust and mutual (formal) agreements.
What are the important processes missed so far within the sub-sector?
Is there any new channel that was not aware of earlier?
Is there any additional functions that need to be performed for the commodity, product or
service to reach its ultimate markets?
Is there any functions identified in the preliminary map have turned out to be no more than
side shows for the main channels within the sub-sector?
With all this additional information the sub-sector map may be refined. A major part of
refining the map is to add ‘overlays’(super imposing).
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
Small Large
Farmers Farmers
Private Cooperative
Millers Millers
Human
Consumption
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
We need to identify the overlays that are of interest to us and then quantify them. These may
include:
• Number of enterprises at each level
• Employment and livelihoods generated at each level
• Gender division of employment
• Volume of product
• Sales value
• Price margins at each level
• Income to different layers
• Returns to labor
• Inventory holdings
• Environmental impacts
In the process of quantifying this range of overlays, using information from key informants
and secondary data, will significantly deepen our understanding of the sub-sector.
In analyzing sub-sector dynamics the following questions will arise and which need to be
answered:
a) Which channels enjoy the most secure prospects for growth?
b) Do these channels face any emerging threats?
c) What role can micro and small enterprises play in these channels?
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
d) How can you enhance their ability to participate in the growing niches?
These questions can be answered by understanding how the sub-sector is changing and why.
The following driving forces and constraints are important in affecting changes:
Key demand
Estimate the demand and trends over the last few years, locally, nationally and even globally.
Population growth and changes in the larger economic environment (prices, wages,
monsoons, booms, recessions and so on) can cause consumption patterns to change rapidly.
Technological change
New machinery or know-how can greatly change production costs, making small firms more
competitive or driving them out of business. What impact will such changes have on poor
producers, on women producers, on the environment?
Profitability of different niches
Individual niches within the production system yield differing returns, providing incentives to
change to the more profitable technologies, supply relationships, and level of specialization.
Risk
Changes in demand, inputs, technology, labor and environmental conditions, and profitability
bring both opportunities and risks. The micro-entrepreneur and the collective enterprise alike
must balance rewards and risks in choosing which channels to operate in.
Barriers to entry
Regulations (such as licensing and zoning), banking practices, lack of information, and
collusion can restrict growth opportunities for micro and small enterprises.
Large firm behavior
Changes in the level or range of activities of a few large firms may dramatically affect the
opportunities open to micro and small enterprises.
Input supply
Poor quality raw materials, unreliable supply sources and environmental damage can severely
restrict the growth potential of enterprises.
Institutional Support
Changes in regulation, promotional and credit policies can have a major impact on functions
within the sub-sector, including raw material supplies, technologies and marketing. Are
changes happening or expected? What impact will they have on the functions and channels
represented on your map?
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S.Rengasamy- Tools & Techniques for Analyzing Livelihoods & Making Effective Intervention
The above process will result in a fair idea about some of the interventions that you could
take up for promoting or supporting many livelihoods. Every intervention requires some
basic competencies and resources. Examine whether the organization has these.
From this analysis you have to make a choice of the intervention strategy that your
organization can take up for promoting or supporting a large number of livelihoods.
The material for this class notes are mainly taken from
ISLP’s “A Resource Book for Livelihood Promotion”
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