The Interrelated Impacts of Credit Access, Market Access and Forest Proximity on Livelihood Strategies in Cambodia

Livelihood diversification strategies for households in developing countries are influenced by access to financial credit, to markets and to forests. Understanding their interrelated impacts has important implications for development policy, including for market access, credit provision, and forest conservation. Using a two-round panel survey of 2,417 households in 64 villages in four Provinces in Cambodia and geospatial analysis, we analyze the influence of formal and informal financial credit, market and road access, and forest access on livelihood diversification strategies. Using econometric techniques to control for interrelated effects, we find credit utilization is significant with off-farm business and wage livelihood activities, land transactions, livestock activities, and remittances. Households below the poverty line use credit primarily for consumption and agricultural investments, but above the poverty line for business investment or for buying land, houses, or vehicles. Market access is significant with total income and expenditures, as well as portfolio shifts to off-farm business and wage activities. Forest access contributes significantly to both total income and expenditures in multivariable regressions controlling for credit and market access, and we find evidence that poverty alleviation is maximized when households have both high forest and market access. We do not find that, in aggregate, households near to forests are in a “poverty trap” due to market remoteness, but we do find that they are disadvantaged in pursuing agricultural livelihoods and households with both low forest and market access are poorest. Using the technique of dominance analysis, we find that financial credit contributes more than market or forest access to total income, expenditures, and livestock income. However, market access is more important than credit for off-farm, on-farm and crop incomes. Forest access contributes more to total income than road access when controlling for access to Phnom Penh and is more important than credit for crop livelihoods