Dynamics of Formal and Informal Responses to Shocks. Empirical Evidence from Cameroon

"Increasing upsurge of extreme natural shocks jeopardizes the capacity of traditional social protection mechanisms to effectively manage risks and associated shocks. This paper analyzes the differentiated dynamics of formal and informal response mechanisms to shocks of surviving households of the 1986 Lake Nyos natural disaster in North West Cameroon. Two hypotheses are tested: (1) Informal response mechanisms to covariate shocks are important. (2) The co-functioning of state, market and informal arrangements can provide an appropriate mix of instruments for reducing shock impacts and supporting economic development of vulnerable households. The three key messages are: (1) Informal response mechanisms in managing idiosyncratic and covariate shocks are vitally important. (2) Through learning and experience, households adopted innovative, complex combinations of formal and informal response mechanisms to manage shocks. (3) High levels of trust in formal and informal institutions provide incentive for cross level adaptive, collaborative long term risk management."