The role of off-farm income in sustaining households in rural Nepal : a thesis presented in partial fulfilment of the requirements for the degree of Master of Applied Science in Rural Development at Massey University

Stagnant agricultural productivity and low returns in farming have led rural residents to look for opportunities to earn income from off-farm sources. This research examined the role of off-farm income in sustaining households in rural Nepal, and identified factors associated with off-farm employment and income. One Village Development Committee (VDC) from two ecologically distinct districts (Dhankuta in the Hill and Morang in the Terai) of eastern Nepal were selected for the study. A participatory rural appraisal (PRA) workshop (n=6), a household survey (n=150) and key informant interviews (n=6) were conducted to gather data for the study. The average income of the households was Rs 33,963 (approximately US$500) per annum. The most prominent sources of income were agriculture in the Hill households, and off-farm activities in the Terai households. Off-farm income, especially wages, was a major source of household income for the poor households in both agro-ecological zones. Income from business/enterprises in the Terai, and remittances in the Hill, were the primary sources of off-farm income for the non-poor households. They were also the main source of cash income for these rural households. Average expenditure in the rural households was Rs 25,797 (US$380) per annum. Off-farm income contributed nearly half of household expenditure. It contributed especially to the purchase of agricultural inputs and materials. The contribution of off-farm income to a household's expenditure decreased as its area of landholding increased. Both farm and off-farm activities were seasonal and counter-cyclic in rural eastern Nepal. Males and females participated on an equal number of days in cropping activities, but females spent more hours per day in caring for livestock. However, males worked more days off-farm than did females, especially in the Hill. Most of the off-farm activities of females were related to agriculture in both agro-ecological zones. Off-farm employment in the Hill was mainly service-related, whereas that in the Terai comprised a mix of service and trade occupations. Low farm incomes in the Hill and the lack of arable land in the Terai were the primary reasons, respectively, why off-farm employment was sought in the study VDCs. Household landholding, household size, ethnicity and the agro-ecological position of the households were established to be the key determinants of household off-farm income and employment. Characteristics of individuals such as gender, education level and ethnicity affected the type of employment taken up. The more educated, males and those belonging to the Chhetri/Brahmin/Newar ethnic group dominated off-farm employment. Policy intervention measures such as the provision of irrigation and skill-based training are recommended to improve the well being of rural women, disadvantaged people's sub- groups and those located away from major employment centres. Market development and reading are also important elements in increasing off-farm income opportunities, and thus household income. Key words: Nepal, off-farm employment, off-farm income, households' sustainability, labour market, and participatory research