Microfinance initiatives should put savings for self-insurance on the agenda. Macroeconomic stability during income downturns would also allow self-insurance to function better. Income smoothing can be achieved by income portfolio adjustments. Income diversification for effective risk-reduction appears limited. Observed diversification patterns are often not aimed at reducing risk.
Households face entry constraints to enter into profitable activities.
Income risk reduction often comes at a cost. Income skewing is likely if less protection is offered by investing in assets. Observing specialisation does not necessarily imply that the household follows a high-risk strategy. Also, entry constraints may limit the diversification that can be achieved, leaving only low-return activities free to the poor. Finally, several income-based strategies are only be invoked when a crisis looms.