N° 23 - July 2004

Republic of Benin: Income-Generating Activities Project (PAGER)

PAGER set out to improve the incomes and food security of poor rural people in southern Benin and to protect the environment which is being adversely effected by over-population. The project area covers 24 000 km² and 2.4 million people (excluding Cotonou and Porto Novo). Population pressure means that land is divided into ever smaller plots: coupled with continuous farming (land is not left fallow and given the chance to recover its nutrients) this has led to land degradation, soil erosion, loss of fertility and decreasing yields. Project activities aim on one hand to facilitate access to financial services, develop financial service associations (FSAs) and support viable small businesses, and on the other to provide literacy training and improve infrastructure such as feeder roads, village wells, and livestock watering points.

The encouraging results achieved by PAGER since 2001 confirm the validity of the project’s design. However, the evaluation found that the improvements made to people’s lives are fragile given that the increased farming areas are mostly rented rather than owned. In addition, although micro-enterprises may, for the time being, satisfy local markets and reduce poverty among small-scale entrepreneurs, these markets are becoming saturated and competition is already leading to failure for the weakest who risk falling back into poverty. That some people’s lives have improved means that many more (project participants and others) people will see a deterioration: increasing the amount of arable land where land is scarce will force some producers to switch to off-farm income-earning activities; without training in new skills or alternative employment opportunities, poverty will increase. Although people’s livelihoods may well improve through activities aimed at boosting production and income-generating activities, increased market activity will have negative repercussions.

A key finding from the interim evaluation is that a second phase is justified, although the sustainability of PAGER’s achievements is in doubt unless appropriate steps are taken, including the following:

• Sole-proprietor micro-enterprises are far more likely to last than those run by groups. In encouraging the development of income-generating activities (mostly done by women), emphasis needs to shift from the group to the individual, but to continue promoting groups as a means of sharing information (about marketing for example) and training.

• Several small entrepreneurs no longer match the target group criteria - since the project has had a positive impact on their lives - but they still need assistance if they are to stay out of poverty. Interventions tailored to this particular group such as bigger loans, medium- and longer-term credit, a group approach to marketing produce, and help in seeking out support systems (other than IFAD) more suited to their new situation are now needed.

• While the importance of FSAs and their potential for sustainability is clear, long term support is needed in terms of consolidating their achievements so far and creating new associations as required using successful FSAs as models. The development of an umbrella FSA will help improve organisation and efficiency.

Groups vs. the individual

PAGER initially intended to encourage farmers to grow, process (cassava into gari, pineapple into juice, palm tree oil into soap, for example) and market their produce in groups, rather than as individuals (even though there was very little collective marketing pre-PAGER). Project effectiveness in general is often assessed in terms of the number of groups established – but the evaluation findings tell a different story: a number of micro-enterprises have been successfully established but these are mostly individual concerns and are expected to be more viable and sustainable than those run by groups, no matter how much extra support the latter receive. Encouraging individual micro-enterprises would be a more effective way to increase incomes. Groups are more useful socially than economically, offering access to training, credit and information services, increased opportunities for women, and solidarity and support between group members.

Making a success of small businesses

Three challenges have arisen with regard to the viability of micro-enterprises: firstly production of a number of commodities (traditional and new) have reached their ceiling levels: local markets are saturated and producers are facing problems selling their goods outside the project area; secondly, a secure land tenure system is necessary if micro-entrepreneurs are to expand and produce more; and thirdly, women working in new processing activities (such as making soap from palm oil) don’t have the right equipment or access to medium-term credit to buy what they need. Making it possible for poor people (women in particular) to own land as well as providing them with access to credit to buy land and the necessary equipment to work it, is of paramount importance. In addition, suitable production techniques and open access to non-local markets are essential ingredients in the success and sustainability of micro-enterprises. If the success of micro-enterprises is to continue, a two-pronged approach is needed: firstly to continue supporting the development of new and weaker micro-enterprises; and secondly to back the expansion of the more successful ones - by promoting a collaborative approach to selling produce, supporting the formulation of business plans and ensuring access to medium-term credit to buy land and equipment.

How sustainable are FSAs?

The Financial Service Associations clearly meet one of the greatest needs of poor rural people in Benin. To date, they cover one third of the country and are very popular among the most disadvantaged groups and women, in fact the FSAs are finding it difficult to meet the overwhelming demand for credit. Evidence shows that the FSA system is likely to last: out of a total of 44 FSAs, ten are able to cover their expenses without project support and a further seven cover 90 percent of their expenses. Around 30 percent of all FSAs are well established and another 30 percent show great promise of being so in the foreseeable future. The associations have already weathered a number of crises (such as fraudulent management and loan defaults) and have learnt from experience the need for a trial period to test their viability and sustainability. A critical mass of FSAs has already taken a number of steps to continue operations and safeguard their legal status in revising their rules and regulations and improving procedures for calculating interest rates, for example, and they are planning to set up an umbrella structure in 2005. Several problems need addressing before sustainability can be assured, such as acquiring legal recognition, mobilising more savings in order to increase loan funds, and improving a number of control and management systems.

Project Data
Total cost of project	USD 13.8 million
IFAD loan	USD 12 million
Government contribution	USD 1 million
Co-financier	DANIDA (USD 800,000)
Cooperating institution	United Nations Office for Project Services (UNOPS)
Principal partners	Ministry of Agriculture, Livestock and fisheries and non-governmental organizations
Project dates	February 1994 to June 2002

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Further information

Republic of Benin:Income-Generating Activities Project Interim Evaluation (forthcoming August 2004), Office of Evaluation, International Fund for Agricultural Development, 107 Via del Serafico, 00142 Rome, Italy.