Sarhad J. Agric, Vol. 26, No.4, 2010 665 AN ANALYSIS OF LIVELIHOOD SOURCES IN HILLY AREAS OF NORTHERN PAKISTAN MUHAMMAD ISRAR, HUMAYUN KHAN Institute of Development Studies, KP, Agricultural University Peshawar-Pakistan. ABSTRACT The aim of the present study was to analyze the sources of livelihood in rural areas of Northern Pakistan. Shangla were selected as sample district for the research. Information regarding income from different sources of livelihood was collected form the sample households from 323 respondents by random sampling techniques. Data were analyzed by using descriptive statistics and chi-square test at 50:50 percent. The findings show that main sources of livelihood were agriculture and its related activities and supplemented by off farm activities in the area. Among the farm households income from crops, livestock, forest, and rental land was important, while the non-farm households were dependent on small scale businesses, public/private sector services, to some extent on remittances, and working as daily wage laborers. The average income of the households was R.s: 252578 per annum. The contribution of the farm sector was 40.63%, while the rest of the income (59.37%) was from the off farm activities. Among the farm sources the lion share of income was contributed by growing of crops followed by income from livestock. In the income from off farm sources the people are relying on the public sector followed by small scale businesses. The ratio of agriculture to non agriculture sources was 0.684. The study concludes that off farm livelihood sources are more popular than the farm sources in the area showing that the natural resources available are under utilized. There is a need to properly exploit these resources through launching such development project that can enhance the agricultural productivity. Moreover the area under reference has a natural advantage of free/cheaper grazing facility so encouragement of dairy farming business can enhance the income of rural people and hence overall development of the area. Key Words: Livelihood Sources, Farm income, Non-farm income, Northern-Pakistan. Citation: Israr, M., H. Khan, 2010. An Analysis of livelihood sources in hilly areas of Northern Pakistan. Sarhad J. Agric. 26(4): 665-672 INTRODUCATION Agriculture is considered the back bone of rural economies in most of the developing countries. The population of these economics depends on agriculture and its allied activities for their livelihood. But agriculture alone cannot provide livelihood to all the living population of rural areas. So they resort to other non farm income available in their vicinity. Rural population not only earning income from agriculture but also support their income from other sources as well. The main sources of livelihood in rural areas are land, water, forests, and pastures etc. The rural people utilize these resources for their survival. Beside these livestock and off farm activities are also important means of employment and sources of income for these people. The main concern of the policy makers and planners of the Third Would countries is to exploit the natural resources available in rural areas for the growth and development of these areas. Their stress is on the improving of small farm efficiency. The basic tenets of this paradigm are that agriculture plays a key role in overall economic growth and that small farmers are rational economic agents who can take advantage of new technologies. Focusing on small-farm agriculture fulfils the objectives of economic growth and improved equity. In terms of rural development, the small-farm first model led to a focus on projects that provide some form of assistance, such as new technologies, inputs, credit, etc. to small farmers in order to improve their productivity. The livelihoods approach, while similar to the bottom-up approach of the small-farm first paradigm, takes as a starting point the importance of households assets and the diversity of households activities and is therefore fundamentally different from the small-farm paradigm (Ellis and Freemen, 2004). Barrett et al. (2000) define assets as stocks that produce cash or kind in returns. These assets are the bases for the households’ ability to participate in activities to generate income. In the literature various classifications of assets can be found. For example, Reardon (1995) differentiate natural, human, on-farm physical capital, off-farm physical capital, and community owned resources. Productive assets are inputs used in the production process and therefore generate income indirectly via the activities. In contrast, non-productive assets generate in-come directly through transfers or capital gains. Ellis (2000) distinguishes natural, physical, human, social, and financial capital.