Bridging the Gap Between Irrigation Financing Supply and Demand in Tanzania
The farms of small and emerging farmers in Tanzania consistently underperform due to the lack of access to technology and financing. In Tanzania, where many small and emerging farmers still practice rainfed agriculture, access to irrigation technologies and financing could be the key that unlocks their farms’ full potential.
The Kilimanjaro Water Stewardship Platform (KWSP) and the Great Ruaha Restoration Campaign (GRRC), two catchment-level partnerships established with the support of the 2030 WRG Tanzania to catalyze multi-stakeholder solutions to encourage and improve sustainable water use among small and emerging farmers in Tanzania, together identified the need to improve coordination among farmers so that they can better take advantage of existing supply-side solutions.
Understanding obstacles to financing
As a follow-up, Tanzania 2030 WRG together with KWSP and GRRC commissioned a study to better understand the irrigation financing needs of small and emerging farmers in Tanzania, as well as the obstacles that prevent them from obtaining such financing.
The study found that despite strong interest in irrigation financing from the farmers, farmers themselves lack the qualities of a credible investee. They are ill-equipped to conduct comprehensive business planning, identify appropriate sources of finance, prepare compelling financing proposals, and negotiate loan terms.
On the supply-side, the high costs of identifying investment-ready farmers are a key constraint for financiers that want to provide irrigation financing to small and emerging farmers.
The study also found that even when the above-mentioned barriers have been addressed, such investments require a high degree of confidence in the market. A such, strong sales records or offtake agreements with buyers and processors are therefore also needed.
Align to public sector efforts
Lastly, any opportunity can only be exploited when critical infrastructure such as bulk water supply, access roads, and power sources are in place. Business development in this sector therefore needs to align to public sector efforts to develop and maintain necessary infrastructure.
Taken together, these challenges amount to a coordination failure that ultimately prevents smallholder farmers from accessing existing technology and financing.
To help overcome these barriers the Tanzania 2030 WRG partnership is working together with KWSP and GRRC partnership to develop a portfolio of irrigation projects matching existing financing mechanisms. Among them, a USD $5 million allocation from Tanzania Agricultural Development Bank (TADB) under its Rural Innovation Fund (RIF) program. The project aims to reduce coordination and transaction costs by leveraging 2030 WRG’s extensive network of public and private stakeholders to identify, prioritize, incubate, and package irrigation financing opportunities that meet the requirements of funding sources.
Increasing productivity and abstracting less water
The proposed project would incubate 30 irrigation projects, each targeting 100 farmers, over a three-year period. It is expected that farmers reached would increase their productivity by 30 percent while simultaneously decreasing water abstraction by 50 percent.
The partnership aims to test the model at the sub-national level with the intention of a subsequent national rollout. To that end, it has already kicked off discussions with relevant partners about ways to implement this model within their domains.