KEYS TO DEVELOPMENT AND SUSTAINABILITY

The role of an NGO is to serve as a mediator and convener. Identifying and targeting the early adopters in order to prevent missed opportunities and investments. Adopt a broad view point when conducting an analysis of the potential actors and partners.

PRODUCTIVE WATER
IRRIGATION SYSTEMS FOR PRODUCTION
This is not a utopia. It is a worldwide priority. The following case study demonstrates that the pursuit of development strategies that simultaneously contribute to economic growth, poverty alleviation and environmental restoration can reap investment, and demonstrate that a good project is not just an act of faith. The Millennium Development Goals, adopted in September 2000, established specific goals for the year 2015: to reduce global poverty in half and to reverse the process of the loss of biodiversity. Improve environmental practices for reducing the emissions of greenhouse gases (Kyoto Project). The effects of global climate change are dramatic. The continuing drought and inefficient use of irrigation water are generating water losses during the processes of piping and distribution, and soil loss from erosion. This greatly affects agricultural yields, and adversely affects the profitability and competitiveness of agriculture in the rural highlands of the country.

In the pilot of the CARE Peru project, the team tried to understand this market through an initial assessment, and later, by direct coordination with the DPA, which conducts systematic monitoring of opportunities related to value chains throughout the region. This approach ensured that the intervention would be closely aligned with the prevailing market needs and allowed the team to concentrate on their areas of expertise - working with farmers, involvement of actors and the design of irrigation systems. Nonetheless, problems are emerging about the ability of the target beneficiaries to understand and adjust to the changes that are taking place and future changes in trends and demands of the end market. The transition to large-scale is also a cause for concern. The recommendation that emerges from this experience is that the selection criteria for partners improve and be strictly enforced. For financial institutions, this may include assurance that those involved in the activity are available and able to design a new financial product to be offered as a test. For producers, it may be a small co-investment at every stage of the intervention process to clearly demonstrate their commitment. These criteria should also incorporate parameters for withdrawing from a potential partnership. Improving, refining and applying these criteria will ensure that cost-effectiveness and sustainability will continue to be the pillars of all interventions. In addition, it again contributes to a process of advocacy in the financial institutions so that their loan approval criteria are based on cash flows of the economic activity rather than on collateral. Finally, this experience contributes to the objectives of Sustainable Economic Development Program of CARE Peru, in that it is about families living in poverty using technologies such as technified irrigation, which help to improve their income levels and the efficiency of managing scarce water resources.

In order to reverse this adverse scenario, one of the viable alternatives is the use and implementation of technified irrigation systems, aimed particularly at poor rural producers, as well as simple and inexpensive techniques for capturing, distributing and using water in the fields. In this context, CARE Peru carried out the Financing Irrigation Systems for Production pilot in the Department of Ayacucho in the central highlands. A partnership approach brought together microfinance institutions, irrigation technology companies, local government offices, small producers and retailers. Thus sectors interacted to improve water use and increase the incomes of the farmers and to show that there are opportunities to undertake similar initiatives by the local government.

CARE Per

Av. General Santa Cruz 659 Jess Mara, Lima - Per Telfono: 4171100 postmaster@care.org.pe

CONCRETE RESULTS
It is imperative to mention that the people living in rural areas are benefiting the least from the recent progress of Peru. In these areas, 50 percent of children live in extreme poverty and suffer from chronic malnutrition. A quarter of the population lacks access to water, and over half do not have adequate sanitation systems, plus the quality of education is among the worst in South America.

www.care.org.pe This is a publication of CARE Peru, through the AED, under the Cooperation Agreement for the FIELD - LWA program. It has been made possible by the generous support of the American people, through the United States Agency for International Development USAID. The contents do not necessarily reflect the views of AED, USAID or the United States Government

CASE STUDY

aspect of cultivating a culture of credit is to educate loan recipients and the community in general regarding the credit products and their responsibility to repay them. This message is particularly important because forgiving the loans draws attention to the effects, and not the underlying causes of the meaning and purpose of the credit.

Thus it is an enormous achievement that, at the end of the project, the participating families increased their sales per hectare from US$790 to US$2,795 in peas and from US$2,499 to US$11,240 in avocados, and increased yields by 160% and 79%, respectively. Therefore, the project demonstrates the need to evaluate loans for technified irrigation as part of a value chain articulated to the market. In other words, evaluate and approve a cash loan for producing families, regardless of their social and economic level.

This case study presents a valuable experience and has linkages to obtain more information that may help guide other entities with similar initiatives.

and maintenance of irrigation systems and workshops on the operation, maintenance and future management of the systems. Three of the financial institutions involved in the project - Edyficar, Agrobanco and the Los Libertadores Savings and Loan - presented their microfinance products, credit terms, and management approaches. The repayment of 100% of the loans by the 37 producers was the most important achievement of this initiative. Not one of the payments was late, and the producers took full responsibility for the loans. In order to take the project to scale, two learning guides were prepared for use by the SIP and the municipal governments. One guide illustrates the benefits of sprinkler irrigation and the main components of the system, and the other is about the operation and maintenance of the pressurized irrigation system. These will facilitate the approval of the methodologies and the replication of the experience of both actors.

LESSONS LEARNED
Risk aversion by financial institutions was and remains the main obstacle for these efforts. From the perspective of sustainability, overcoming this difficulty is the most difficult aspect of this project. The financial institutions are more willing to provide financial services to small farmers if there is a guarantee fund, but this does not automatically translate into approval of loans. Indeed, the financial institutions that were interviewed reiterated that the creditworthiness of farmers resulted from a combination of factors: the guarantee fund (in the case of Edyficar), CARE Perus work in strengthening the capacities of small producers, and the business plans that proposed the increase of agricultural production of crops using irrigation systems and the identification of the market demand. When financial institutions are highly decentralized and guided by a prominent social mission, they are more willing to develop and test an appropriate credit product. This is why they decided to reduce the risk and operational costs by transferring the funds directly to the accounts of the irrigation technology supplier. This not only benefited the institutions themselves, but was also advantageous for the small farmers, as it significantly reduced the external effects such as transportation costs and, therefore, increased the opportunities for participation by the small farmers. The task of the government in an initiative like Financing of Irrigation Systems for Production is crucial because it defines the roles and responsibilities of the actors. Once the government gets involved, the other actors feel obliged to fulfill their mandate. A key

THE PROJECT
The Productive Water - Financing Irrigation Systems for Production pilot is one of five distinguishable economic development initiatives that CARE Peru has in Ayacucho. The project is based on experiences in the area to improve production chains and establish partnerships with a variety of actors to facilitate access to drinking water in the region to benefit poor families. Thus CARE Peru developed microfinance projects and value chains with poor families. With a view towards achieving the sought success, the first step was to conduct field research. On this basis, a strategy was designed that gathered key factors from related experiences, such as inclusive irrigation and microfinance. Prior to that, the most appropriate productive chains were identified and selected, the actors and partners were mapped, agreements were signed with allies and credit products were developed. Then the process of reporting and disseminating the initiative to the producers continued and finally, leaders who supported the venture were identified. Initially, CARE Peru offered a great support to the interested producers. They did not have to wait for the first evidence of success, and all were more committed to the roles and services offered. Loan analysts fulfilled their functions better without CARE; the private technical irrigation systems provider Tecsagro incorporated training activities into the process of installation, operation and maintenance; and the Agricultural Promotion Directorate of the Ministry of Agriculture (DPA), the regional government office responsible for coordinating and supporting the development of the value chain, became interested in strengthening productive organizations and integrating them into more competitive situations, noting the growing interest of a greater number of producers in taking loans to

and massive waste of water in areas with access to irrigation, which is with low-technology such as flood irrigation.

INNOVATION: THE CARE APPROACH

Despite the long history of collaboration between small producers and the regional government of Ayacucho with respect to water, to date no activity has attracted the private sector in efforts to improve access to improved irrigation systems in agriculture.

The innovation of the project was its ability to involve all the key actors and chart a sustainable and mutually beneficial course. The trust and clarity that was generated among the regional government, community leaders, financial institutions and the private sector technology service provider have sown the seeds for a larger scale process that is focused on the local level. The organizations that participated in the experience with CARE Peru were: EDYFICAR, the Los Libertadores Rural Savings and Loan, Agrobanco, the Agricultural Promotion Directorate of the Ministry of Agriculture, the National Irrigation Subsector Program and Tecsagro.

3. Assure the existence of enough water in the area to support the agricultural intervention. (DPA, CARE) 4. Selection of participating producers. (CARE, organized producers) 5. Verification of credit histories of individual producers (Peru has an institution that is dedicated to credit histories) (Financial Institutions) 6. Conduct studies that describe the need for irrigation and a more efficient structure. (CARE, DPA, local and regional governments). 7. Approval / Award of the loan by the microfinance institution. (Financial Institutions, Tecsagro). 8. Involvement of the company that supplies irrigation systems. (Producers, Tecsagro, CARE). 9. Training in the operation and maintenance of irrigation systems. (Producers, Tecsagro, CARE). 10. Development of the business skills by producers to gain access to the markets. (CARE, Tecsagro). 11. Development of a sustainable culture of credit for production among farmers. (Financial Institutions, Producers).

THE GREAT ACHIEVEMENTS

Thanks to increased agricultural growth and improved crop quality, the participating producers received immediate economic benefits and increased their production for the domestic and international markets.

SPECIFIC AREAS OF INNOVATION

Creation of and greater access to term financial products for small farmers. Improved access to and use of improved irrigation systems for small farmers. Increased interest among the regional buyers in the products produced in pilot agricultural activities. Elaboration of roles for each key actor and development of a clearly articulated collaborative process.

Figure 1: Evolution of avocado and pea sales (Soles/ha)

Pea
8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Increase: 254% 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

METHODOLOGIES AND STRATEGIES

The main pilot activities carried out by the leader and the various actors include: 1. Selection and prioritization of the value chains with the greatest potential to increase the competitiveness of the producers by introducing technified irrigation systems. (DPA, with the support of CARE) 2. Communication of the objectives and approach of the project to the producers and other key actors. (CARE, DPA, PSI, local and regional governments)

Avocado
Increase: 350%

7965.91 2,251.61
Sales Volume/Base Lina (soles/ha) Sales volumen/final evaluation (soles/ha)

32,034.38 7,122.89
Sales Volume/Base Lina (soles/ha) Sales volumen/final evaluation (soles/ha)

Due to increased productivity and quality, sales values of the peas and avocado crops have had extraordinary increases of 250% and 350%, respectively. There were 79% and 160% increases in yield (kg / ha) for avocados and peas, respectively. In the process of completing the project, the regional government has budgeted US$0.9 millones de dlares to implement irrigation techniques in six provinces of the department of Ayacucho. Similarly, the Subsectoral Irrigation Program (SIP), the regulatory authority of irrigation technologies, decided to sign an agreement with CARE Peru to provide advisory services during the implementation of a new national program called PSI III. Each hectare of productive soil required 15 people to work the land. Not only producers increased their income, but members of their community were also provided with employment opportunities. Thanks to the continual access to water, the productivity of the crops of the producers participating in the project increased significantly. With the installation of irrigation systems, farmers could irrigate all their fields and efficiently manage the use of water. In the avocado and pea value chains, this resulted in an increase in production of more than 100 percent. In the case of peas, farmers had yields of 7,906.05 kg / ha in irrigated land, compared to 3,044.90 kg / ha in non-irrigated land. Similarly, avocado producers had yields of 13,135.44 kg / ha in irrigated land compared to 7,305 kg / ha in non-irrigated land. These increases are a definitive example of the opportunity represented by the improvement of agricultural irrigation.

finance their irrigation systems. Finally, as a prerequisite for political advocacy, the team made sure to leave explicit evidence through systematization.

SOCIO-ECONOMIC CONTEXT
PER High rates of growth (GDP increased by 6% to 8% annually between 2002 and 2007). Macroeconomic stability reduced poverty by 15% in the country during that period. Over 45% of the population lives below the poverty line. Unemployment rates remain high. AYACUCHO Second poorest region in the country. Agriculture, the main activity for domestic and international market (potato, avocado, quinoa, Chinese peas - u holantao, peas, purple corn, alfalfa, Hass avocado). Small but growing markets nationally and internationally (guinea pig and dairy products).

Figure 2: Average yield of peas (kg/ha)

Increase: 160% 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 14,000 12,000

Figure 3: Avocado yield (kg/ha)

Increase: 79%

7,906.05 3,044.90

10,000 8,000 6,000 4,000 2,000 0

Access to water is the main barrier to improved production in all these activities. Farmers apply irrigation by flooding during the rainy season and therefore have only one growing season per year, which is a major constraint. Horticulturists have great difficulty keeping their trees alive during the dry months.

13,135.44 7350

Productivity/Base Lina (kg/ha)

Productivity/Final evaluation (kg/ha)

Productivity/Base Lina (kg/ha)

Productivity/Final evaluation (kg/ha)

ENVIRONMENTAL CONTEXT
Deforestation and rapid retreat of tropical glaciers threaten the future productivity of the Peruvian highlands. Experts predict that all the glaciers in Peru below 5,500 meters will disappear by 2015. While there are a number of irrigation canals that allow farmers to improve their yields and maximize the limited supply of water, they supply only 30 percent of the arable land in the highlands, while improved irrigation of farmlands, such as drip systems and sprinklers, supply less than 5 percent of this area. The result is low productivity in non-irrigated areas

From the beginning of the project, 50 clients received support to carry out technical studies of irrigation thanks to the project specialists. 37 of them have had access to loans: 4 from Los Libertadores, 31 from Edyficar, and 2 from Agrobanco. Another nine producers had their applications approved and are awaiting loans from Edyficar. All the beneficiaries participated in a series of free workshops for training in installation, operation