ETC EA Financial Mechanisms by T4YX2I


									  Financial Mechanisms
  needed for farmers to
implement Soil and Water
Conservation in the Upper
     Tana Catchment
         Davies Onduru
        Fredrick Muchena
          Sjef Kauffman

• Objective of the Study
• Approach and Methodology
• Findings
• Conclusion

To verify possible financial mechanisms for
farmers to invest in Soil and Water Conservation
 Identify current funding sources (describe existing models);

Identify new (potential) funding sources for soil and water conservation

Identify farmers’ preferences on investment support and stakeholders
 view on investment arrangements
       Approach and Methodology

 Interviews of institutions in Upper Tana catchment and in

 Farmers preferences through household interviews in
  three sub-catchments in Upper Tana
Current Funding Sources in Natural Resource
(i)   Grants

     Registered community groups/associations
     Requirement of farmer contribution (10-30%)
     Access to grants through proposals
     Form of grants: Cash grants, tools for work, food for work, cash for work

•     Food for Asset Model of the Catholic Diocese of Meru
•     Model of Water Fees for conservation through WRMA/WSTF
•     Natural Resources Management Project: Microgrants system through World
      Bank Credit Facility to the Government of Kenya [WRMA, KFS, NIB]
•     Smallholder Horticultural Marketing Programme (SHoMaP)
•     Njaa Marufuku Kenya
Current Funding Sources in Natural Resource
(ii) Loans with Risk sharing/loan guarantee systems

 Include banks/lending institutions : Offer loans and administer credit
  scheme to smallholder farmers targeting selected crop and or livestock
  enterprise, business entity (e.g. agrovets) etc.;

 Integrate risk sharing mechanism where some partner organisations in
  the Model sets up a fund to cater for risks that banks would incur suppose
  smallholders default or production is negatively affected by vulgaries of

• Kilimo Biashara (AGRA, IFAD, Equity Bank, GoK, Amiran)
• Rural Outreach of Financial Innovations and Technologies (PROFIT): Rural
   finance and outreach component has a risk sharing facility for levering commercial
   loans [GoK, USAID, IFAD, AGRA, BRAC Dev. Institute, Consultative Group to
   Assist the Poor etc.)
Current Funding Sources in Natural Resource
(iii) Agri-business and value chain linkages

These models are focusing on selected crops/commodities, which are for
food security and income generation

•Proposed 2SCALE (Towards Strategic Clusters in Agribusiness thro’
Learning and Entrepreneurship) project of IFDC

•Commercial Village Model promoted by Farm Concern International

•Key message-Look for markets for farmers/producer groups
               Potential sources of funding

A) National sources

1. Farmer local contribution (contribute in kind in form of labour, and partly
   tools and equipment)- 10-30%total costs
2. Water Resources Management Authority water fee; and Water Services
   Trust Fund (through WRUAs Development Cycle)
3. Downstream Fees paid by large water users
   • KenGen (fees to Regional Development Authorities)
   • Nairobi City Water and Sewerage Company (Nairobi Water)-currently
      pays water fee to WRMA.
   • Irrigators (water fee paid to WRMA)
5. Carbon Credit
   Potential source but is not fully developed yet in Kenya
   KenGen, Lake Turkana Wind Power, Greenbelt Movement involved in
     carbon trade
    Below ground estimates in Upper Tana: US$ 7-13 per ha annually
6.   Public funding: Potential public benefits include regulated river flows,
     ground water recharge, reduced flood risk etc.
               Potential sources of funding

B) International Sources

•   IFAD and other International Funds for TaNRMP to kick-start the GWC
    Investment Fund
 Farmer’s preferences on investment support

Technical Assistance:
• Advice/extension on SWC practices
• Training and demonstration

Investment support
• Inorganic fertiliser
• Crop protection material
• Off-farm available planting materials
• Tools and equipment
• Organic fertiliser
• Labour
• Locally available planting materials

 Enhancing access to planting materials: fertilisers at subsidised prices, financial
  support (loans and grants)
 Tools and equipment: grants/voucher or through credit (low interest loan)
Respondents Views on Investment arrangements
A mix of grants and suitable credit facility is preferred by respondents with
  the following elements:

(i) Grants: For
     Capacity building (sensitisation/farmer training), coordination and
       management of activities;
     Enhancing farmers access to inputs e.g. through a voucher system
     Setting up risk-sharing and guarantee mechanism

(ii) Credit facility

•   Linked to income generating activities that directly/indirectly target
    conservation activities: high value crops on terraces, raising tree seedlings,
    bee keeping in riverine areas etc.
•   Risk sharing mechanisms and guarantee funds; soft loans

(iii) Farmer contribution: Farmers own labour and tools etc.
 Smallholders prefers technical assistance and investment support on
  Soil and Water Conservation.

A feasible investment mechanism need to take on-board both short-term
 production and long-term investments required for SWC activities
 (entrepreneurial plan)

 Grant-based models, credit based models with risk sharing mechanisms
  and models that emphasise value chain development and market linkages
  can be combined in various shades to design a Sustainable Commercial
  Investment Package for implementation of soil and water
Thank you for your

To top