Research by the Institute of Development Studies (IDS) shows people in poor communities of five low-income countries are eating less frequently and are withdrawing children from school as they begin to feel the direct impacts of the financial crisis.

In addition more people are resorting to illegal or dangerous activities. The work in Bangladesh, Indonesia, Kenya, Jamaica and Zambia is part one of a set of 10 studies by IDS exploring the impact of the financial crisis on developing countries published as a series of In Focus Policy Briefings ahead of the G20 meeting in London next week.

The studies investigate several areas where the financial crisis is likely to have most impact on developing countries including: the effect on world prices and trade; the availability of trade finance; how the crisis might affect China’s investment in Africa and the impact on poor households. The work, funded by the Department for International Development (DFID), also explores what lessons can be learned from previous financial crises and how the crisis is viewed in different G20 countries.

Key findings from the research include:

• People are adapting livelihoods in order to cope but often into illegal or dangerous activities.
  In Indonesia Kalimantan men were travelling to another island to pan for gold; in rural Bangladesh there were reports of rising cross-border smuggling both illegal and dangerous but potentially lucrative activities. Children were reported to be leaving school and entering work and there were unconfirmed reports from Kenya and Zambia of growing numbers of children and young girls selling sex.
  Read the IDS In Focus Policy Briefing on Voices of the Poor in the Current Crises

• People are eating less frequently, less diverse and less nutrient-rich foods.
  Across all five countries people were coping by changing diets. In Nairobi, Kenya mothers were recognising signs of malnutrition in their children.
  Read the IDS In Focus Policy Briefing on this research above

• There are signs of rising domestic violence, tensions between groups, crime and drug and alcohol abuse.
  In Nairobi Muslims and Asians were accused of running exclusionary feeding programmes or taking advantage of the crisis. In Jakarta local police statistics show a rise in crime over the past three months.
  Read the IDS In Focus Policy Briefing on this research above

• Different countries are putting the blame for the crisis in very different places
  20 negotiators will not reach an agreement on a solution unless they understand each others’ viewpoints. A study of national media from selected G20 countries shows where they place blame. It will be essential for different nations to trust in any new financial regulations and it is unlikely they will agree to anything seen as pre-designed by the crisis ‘culprits’.
  Read the IDS In Focus Policy Briefing on From Crisis Management to Institutional Reform

• Recession in rich countries will hurt developing countries’ exports but it is also lowering the price of oil, reducing the severity of the impact on oil importing nations.
  Shrinking world trade of over five per cent will reduce developing country export revenues by US$71 billion and oil exporters, such as Nigeria, will experience the biggest drop in revenues. This study used GLOBE, a special multi-country and multi-sector model, to simulate the impact of a slowdown in economic activity in developed countries on world trade, prices, production, demand and welfare across the world.
  Read the IDS In Focus Policy Brief on The Impact on Developing Countries of an OECD Recession

• Access to trade credit is not a major problem for established garment and horticultural firms in Africa. It is however a serious problem for some Latin American firms.
  Previous financial crises in developing countries have led to significant cutbacks in trade credit. A survey of 25 horticulture and garment exporters in sub-Saharan Africa shows that established horticulture businesses are seen as good risks for domestic banks and Asian-owned garment  firms are receiving credit from parent companies.
  Read the IDS In Focus Policy Brief on Trade Credit

• Major global buyers are forcing developing country suppliers to absorb the bulk of the risks associated with the crisis.
  Companies reported that buyers are delaying making new orders and pushing for lower prices. Horticultural firms, in particular, reported that some British buyers were keeping the prices they pay fixed in pounds despite the dramatic fall in the pound relative to the US dollar forcing developing country suppliers to absorb all the exchange rate risk.
  Read the IDS In Focus Policy Brief on this research above

• China’s state enterprises are using the crisis as an opportunity to consolidate investments in Africa, particularly in the energy sector.
  Chinese analysts in Africa are investing in commodities for long-term food and energy security and growth. China’s stimulus package focuses heavily on infrastructure, which will maintain  demand for oil, cotton and copper when global demand is falling.
  Read the IDS In Focus Policy Brief on China and the Global Financial Crisis: Implications for Low-income Countries