Inadequately understood and often over-simplified, the livelihoods issue demands a holistic approach that addresses the many factors at play.

What do we mean by ‘livelihoods’? It’s a term that is used frequently–and loosely– today. It is used interchangeably with skilling, employability and job creation. And because of this over-simplification, we have been unable to find sustainable ways of using livelihoods to move people out of poverty. It is therefore worth understanding what ‘livelihoods’ really means and what it takes for practitioners to get it right.


Livelihoods refers to the means of making a living, or simply a way of life, which includes all aspects of a person’s life.

It consists of economic activities embedded in a society that is governed by social, political as well as cultural processes. If you do not address all of them and, instead, just focus on the economics of living, change will not happen. Conceptually this theory of livelihoods being a result of interdependencies between economics, politics, society and culture was great. But to put it into practice, we needed to understand the optimal unit of action–at what level should the interventions happen?

In 1991, Robert Chambers and Gordon Conway published a paper called ‘Sustainable Rural Livelihoods,’ which integrated learnings from the Brundtland Commission report while also arguing that livelihoods decisions are taken at a family level based on their aspirations and access to resources.

This was contrary to prevailing (and current) thinking in economics , which treats the individual as a self-interested economic agent. The hypothesis is that s/he maximises their own benefit. However, it is not so. It is the family that takes the decision, which sometimes may be suboptimal compared to normal economic choices.

Therefore, any institution trying to improve the well-being of people must approach it through the lens of livelihoods, and make appropriate interventions in areas that pose the biggest hurdle.

Photo Courtesy: Renuka Motihar

The problem lies in practice

But all this is still theory. The challenge lies in putting it into practice, especially when these actions are so interlinked with each other

The political effect
When I used to work at BASIX, we had chosen microfinance as a useful instrument for supporting livelihoods because we figured that no matter which livelihood one picked, one needed money for it.

When BASIX was small, as was the case with the microfinance sector at the time, we did well and nobody paid attention to us. But when we started growing , we began hitting the wrong chords.

Local political leaders explained it to me as follows: A large majority of the vote bank in India is controlled through small money-lending. While the big leaders might not be money lenders, they need the small leaders at the taluka and village cluster level who influence and control their vote banks through money lending. These small leaders, who also lend in cases of need, ask people to attend rallies of the big leaders–and people attend because they need to please the money lender.

In this scenario, providing microfinance as an alternative financing mechanism is like hitting this system below the belt. The system has already created a model that involves keeping the bank manager happy–bank loan losses have been written off, while waivers have been provided by politicians to keep their vote bank intact.

Suddenly, you are creating a disruption in this well-oiled system. Politicians, across party dislike microfinance; they articulate this dislike by saying that it is bad, it is illegal, it uses coercive means to recover dues, and so on.

The cultural effect
Social norms also have an impact on livelihoods–a lesson we learnt from our experience at PRADAN with leather workers in Barabanki.

The task of collecting the dead animals and de-skinning them was undertaken by a section of the poorest people in the community. We thought that if these people were also trained to tan the leather, they would be able to fetch a better price for their work. However, this intervention was strongly resisted by another community. As their members were from a religious group, it was easy to blame the community of tanners.

Then, as we started looking at the situation through the livelihood lens, we realised that tanning was only done by the members of that community, as the prevailing social norms forbade others to do such ‘impure’ work . The livelihood of this community depended on this activity. Therefore, this intervention by young PRADAN professionals was inadvertently taking away part of their livelihood support, thereby creating communal tension in the region.

The technology and market effect 
In the late 1980s, when New Zealand was threatening to dump milk in India at cheap rates, Dr Verghese Kurien, founder of NDDB and Amul, took a flight to Delhi to meet the agriculture minister. He told the minister that this dumping had to be stopped because if milk at that price landed up at Chennai port, Indian farmers would not be able to sell their milk.

New Zealand was willing to sell their milk at half the production cost in India because technology allowed them to produce far more than local demand. The low prices, though, would have adversely affected Indian farmers. But because Dr Kurien had access to the political powers that be, the problem was averted. Not every farmer has such access.

While technology caused the problem in New Zealand, it was the globalisation of markets that impacted Indian dairy farmers.
Livelihoods is therefore more complex than meets the eye. Unknown and unforeseen factors affect it and it cannot be handled without adequate political, technological and market support.

Photo Courtesy: Renuka Motihar

How do you address this?

Given how interlinked the factors influencing livelihoods are, it follows that interventions must be at multiple levels– a practitioner often finds this difficult to comprehend or handle. Practitioners need to have a sense of the implications of politics, market and technology. While it may seem like asking for a lot, change cannot happen without that.

Large industrialists can afford to put up a full division of people to monitor oil prices every day and another division to look at export policies. But civil society practitioners don’t have such resources. We therefore need professionals or groups of them who can deal with this level of complexity.

But here’s the problem with this approach: Our education system doesn’t produce many professionals with the ability to handle such complexity, ranging from technology, management and economics, to social and political sciences. And when it does, these individuals are lapped up by other systems because the incentives are better aligned there. This means that we cannot attract these people to a sector that needs them more.

We need to take measures to address gaps in the education system and rethink the existing political systems that impact livelihoods. But this requires structural, systemic and long-term investment and support.

Who will do it?

The problem is that no one is willing to make this investment. Because it’s not really in anyone’s direct interest to do so.

The average industrialist’s interest in this area is nominal. Not all industrialists are self-centred, but this doesn’t just fit into their mandate. If you have a good idea they might give you a cheque but no more.

The politician doesn’t benefit either. As demonstrated by the microfinance example, they have other ways of mobilising support. The expectation that ‘people’s incomes will go up and they will vote for me’ is too far away in the horizon for them to care about or invest in now.

Then there are the people themselves. They aren’t interested either. Because they have just the bare minimum to survive – subsidised food, free education and healthcare. They don’t have the energy or the ability to demand accountability from the government.

In the absence of any support for the long term from most constituents, is there any hope?

Photo Courtesy: Renuka Motihar

Hope comes in many forms

There might actually be less arduous routes to addressing the issue at hand.

Since it is almost impossible to equip people with all the knowledge and skills required in the livelihoods space, it is critical to understand what complementary skills are required and who has them. Having done this, we need to involve them in the relevant part of the intervention and build a collaborative relationship. That’s what we tried at BASIX.

But collaborations are difficult to sustain. They require a willingness to listen to your collaborators and treat them as equals. Unfortunately, today this isn’t the case and there is a clear hierarchy: ”I am giving the money, so you must collaborate with me”.

We must identify and invest in development thinkers. We’ve had the Verghese Kuriens, Bunker Roys, Pannalal Dasguptas and Vijay Mahajans, who nurtured several young people to serve the larger public cause. But they were more the exception than the rule. Today, there are few such professionals . We need to locate and support them over the long term.

Donor agencies such as Ford Foundation used to play this role earlier, as did Tata Trusts. They encouraged many young social entrepreneurs and gave them money to take risks and innovate. Several of these individuals and their organisations then went on to tackle hard developmental challenges.

Today new-age philanthropists can play this role. Unlike corporates, for whom CSR is a side activity, philanthropists–who set up foundations and think about long-term impact—might find it a meaningful model to identify and support good professionals with great ideas

Last but not the least, is the establishment of development-centric institutes that create development professionals who can think holistically. While we need the specialists in specific areas–politics, markets, technology—what we need more are people who can think of all these together and act on it. Setting up a wing within existing institutions won’t help; we require full-fledged institutions that focus solely on this. Azim Premji University is one such example.

Though modern economics projects human beings as self-interest maximising economic creatures, I’d like to believe that at the core we are a caring species. Though our formal training teaches us to look away, as a society we want the less privileged to have better lives. And for this to happen, we must start looking at their world through a livelihoods lens.

We want IDR to be as much yours as it is ours. Tell us what you want to read.
Dr Sankar Datta

Dr Sankar Datta

Dr Sankar Datta, a development explorer still looking for a better way to serve the people, has been engaged in promoting livelihoods of the poor by linking them to various value chains and supporting them through microfinance for more than three decades. His experience combines practice (spearhead team leader at MPOILFED, programme director at PRADAN, and managing director at IGS, a BASIX Group Company) and academics (faculty at IIM-Ahmedabad, IRMA, Azim Premji University). Sankar was instrumental in setting up the Institute of Livelihood Research and Training, and was its founding dean. He has also been a part of various policy fora including the task force for drafting the 12th Five Year Plan, Planning Commission; Livelihood Advisory Group; ACCESS; among others.


  1. Abayomi Orungbamade Reply

    Beautiful, well researched write up. But I have something to say about Microfinance being a tool for livelihood success as much as it is an opporuniity for business as correctly stated. The environmet in which the livelihood oportunity is propagated is essential in terms of the cultural,religuous, ethnic acceptability. It is also important to note that philanthropy may not be exactly available as hoped for in a lot of cases, leaving options to government to provide intervention funds that are soft , whereby individuals access funds at single digits, and this has also been observed to be a motivator for business success in environments whereby character issues are a serious consideration as against doling out freebies that attracts all , including those not willing to set up enterprises for sustainable livelihoods. This may not be the case where religion plays a role , for instance Islamic banking principles on interests on credits , which limits micro finance interventions and access, necessitating a need for non-interest based loans. I feel micro finance can be seen as a tool as much as it is seen as a business opportunity considering the immense scarcity of funds available to start-ups.

  2. There is a lot of commonsense in this article, especially for what I would call the external actors in the development equation. I would prefer, however, for more to be said by and on behalf of the most important people – the poor people for whom all our efforts are supposedly made. Sometimes those actors have other reasons for acting, and this affects outcomes, but we will that for now. Dr Datta says the [poor] people ” don’t have the energy or the ability to demand accountability”. He says from government, but quite frankly it should be from all actors from each other. Here I disagree with this element. I have found time and time again when poor people form self-help groups, that are properly-organised, they are perfectly capable of coming up with their own ideas to to identify problems and priorities; opportunities and solutions, and how to make best use of money. The problem is that usually the experts think that they are incapable, and/or the risk of impropriety is too high for them to be left to their own devices without their expert supervision.

  3. Thanks Sir for a very illuminating article.
    The practical question is not whether microfinance should continue, but how it can play to its strengths without damaging its social conscience. Before pundits and politicians reduce the questions and solutions posed by the occasional crisis down to sound bites and slogans, we must realise just how positive the effects of microfinance can be, for both financial inclusion and livelihood promotion, if handled correctly.
    Microfinance is actually a tool in a broader development toolbox, but in certain conditions, it happens to be the most powerful tool. It has all to do with how we are using it and how we are defining the outcomes. It needs to shape a more responsible capitalism. It is certainly not an easy choice by any means, but a right choice for wise investors and society alike. Similarly, politicians should be wary of the bad consequences of their narrow populism. We have the means of taming wrong tendencies – laws for punishing them, norms for shaming them, and cure for healing them. Let us not in our imperfect understanding or prejudice throw the baby out with the bathwater.

  4. Satyanarayana Reply

    For right or wrong reasons I was part of BASIX for long years. 1. For all micro finance practitioners (MFPs) micro finance (MF) is a business opportunity and not livelihood solution or poverty alleviation tool. At basix there was livelihood triangle. ttake the example of Basix Krishi Samriddhi (BKS) its mandate was just piggy ride on MF customers and collect fees for AgBds (Agriculture Business Development Services). Propagate it internationally and get grant/soft loan support. That’s what has happened – Acumen gave a 10 Crore grant/soft loan. Similar is the so called milk route etc propagated . Provide MF loans to locals (who incidentally supply milk to lacal milk units/mini bulk milk cooling units etc. Then say it is supply chain intervention and propagate it to multi national donors/funders etc. Same is ILRT. When MF failed and MF crisis came in UNCDF was a blessing for basix. International connections helped huge monies flowed in. Except micro finance (poor need money – give it as crop loan or economic/income generating activity loan/Milch animal loan/women Loan – call it by any name it goes to meet their need – interest rate is not a deterring factor – as long as multiple loan competition does not happen mf business goes on /went on. Any way ever-greening option is always there to MFIs. Thus MF is gr8 business opportunity to all MFPs/MFIs. Definition part apart livelihood is a term that denotes the level and urgency of need to keep life going for the individual or individual family. This means it livelihood is subsistence level of mitigating hunger. There is lot to talk about basix experimentation and its application at international funding agencies level propaganda upto weather index and further. Great experiments like Vaue Chain – Livelihood Finance – Weather Index – Climate Resilience / Climate Change related micro Insurance so on and so forth including institutional development. Government uses the term Financial inclusion they lap it up. Govt uses SHG and they lap it up to the extent of owning it up. Onece there were training for some Least Developed Countries . There was class on Indian Cooperatives. It was pathetic. The Trainer the top class of basix-ilrt was talking all factually wrong history and evolution of coops in India. Thank God Tranees were small time field workers and fortunately did not know any theory of cooperatives. AS some top /Senior Management position person (who incidentally is heading the Division) what is international training means – INTERNATIONAL TRAINING MEANS TRAINEES KO BASIX TRIAD PILADO (GIVE THE DRINK OF BASIX TRIAD TO TRAINEES). ANOTHER TOP MAN SAYS NO PERSON LOOKS AT YOUR REPORTS OR PROGRESS REPORTS IN INTERNATIONAL PROJECTS – NOT EVEN TIME SHEETS ARE LOOKED AT BY PROJECT EVALUATION TEAM – THEY ARE ONLY FOR ACCOUNTS/FINANCE DEPARTMENTS FOR RELEASING THE MONEY /GRANT AS PER PROJECT TERMS – NOTHING MORE NOTHING LESS. TO CONCLUDE: There was one course called TRIPLOMA. For any academic and professional course its syllabus and subjects are the life (Yes teaching methods – ANDROGOGY /PEDAGOGY the term often used by ILRT – are as much and more important but with out right and scientific syllabus which is basic foundation there is no sense of teaching methods). One top faculty lifted subjects and topics and content from CAIIB and that was triploma curse. Then where is the experimentation (forget about scientific experimentation) in BASIX? Then how can any article or feature can be based on BASIX experiences? IT is all elite club of IIT/IIM / Foreign educated just like lutyens journalism this is social entrepreneurs cozy cocktails club.

  5. Well crafted article on rural livelihoods. You are right in suggesting that its a complex issue and therefore solutions are also going to be complex and long term. However, the story of livelihoods is not complete without talking about “the role of Institutions OF Poor”-most of the livelihoods work in India and several other countries revolves around them. While the article talks about Institutions FOR Poor but completely misses out on other kind of institutions i.e. community institutions, which work on social, political, psychological, cultural as well as economic aspects of livelihoods. On the livelihoods related work challenge is how to build an incentive system or rather value propositions for all stakeholders i.e. Politicians as well as market players. Several rural livelihoods projects in India are live example of this.

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