ETC EA Financial Mechanisms by T4YX2I

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

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

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
 activities

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

 Interviews of institutions in Upper Tana catchment and in
  Nairobi

 Farmers preferences through household interviews in
  three sub-catchments in Upper Tana
Current Funding Sources in Natural Resource
              Management-1
(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
      etc.

Examples
•     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
              Management-2
(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
  weather.

Examples
• 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
              Management-3
(iii) Agri-business and value chain linkages

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

Examples
•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.
                         Conclusion
 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
  conservation
Thank you for your
    attention

								
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