Phase I of SFDP was designed to assist small farmers and the landless rural poor in increasing their incomes and standards of living, and to promote self-help and self-reliance through:
- building up the institutional base for organizing the disadvantaged rural poor into small-farmer groups around common economic activities and/or production resources;
- providing supervised credit to enable these groups to undertake a range of income-generating activities; and
- providing training and technical assistance to ensure effective utilization of facilities provided by the project.
Phase II was designed to intensify and expand the activities of Phase I.
The
main components under Phase I of the project were of three types:
- Provision of credit for livestock-related economic activities.
The project was to extend credit lines through the Agricultural Development
Bank of Nepal (ADBN) to small farmer groups or individual small farmers
within the small-farmer groups for the purchase of milk buffalo, buffalo
heifers, bullocks and bullock carts, goats, sheep and sows.
- Provision of training for small farmers and small farmer
groups. Training was to be provided in areas such as planning
group activities, bookkeeping, livestock development and agro-processing
activities.
- Provision of technical assistance for institutional capacity-building.
A livestock-insurance specialist was to spend three person-months examining
the viability and assisting in the establishment of a livestock-insurance
scheme.
- Phase II of the project consisted of two main components:
- Provision of credit for livestock production. Credit
was to be provided to improve the productivity of buffalo and goats
and, in the case of farmers with very little or no land, for animals
to hire out for draught and transportation.
- Provision of technical assistance for institutional capacity-building. The project was to support training, establishment of subproject offices and formation of small-farmer groups.
Phase I
Significant numbers of small farmers were provided with access to institutional credit; disbursement of credit for livestock activities exceeded targets by 21%. A study carried out by the Agricultural Projects Service Centre indicates that income from livestock rose considerably in some project areas as a result of increased sales of milk and milk products. One of the factors that played a role in raising market demand was the restriction of imports of subsidized powdered milk from the European Union, which created new incentives and improved prices for Nepalese milk producers. The consequent establishment of a milk-collection system through the state-owned Dairy Development Corporation improved farmers’ market access and linked them to urban milk consumers.
Project credit provided beneficiaries with the opportunity to take advantage of rising market demand. Draught bullocks purchased under the project gave beneficiaries flexibility at land-preparation times and allowed timely planting of crops. Other beneficiaries were able to upgrade their transport businesses by acquiring bullock carts with rubber tyres and superior load-carrying capacity.
A significant unplanned achievement was the participation of poor rural women in development activities through the creation of women’s groups. These groups enhanced women’s roles and status by increasing their incomes and economic independence.
Phase II
The project was successful in providing financial assistance to small-farmer group members and in encouraging them to save. The introduction of income criteria for credit eligibility paved the way for the inclusion of landless labourers and village artisans as members of small-farmer groups. About 40% of the credit was allocated to livestock, but credit was not associated with sustained adoption of improved livestock breeds, as intended at appraisal. Moreover, feed and fodder management did not improve over the project period.
The women’s group organizers were a significant factor in increasing women’s involvement in the project. The most common purpose of loans to women was livestock rearing, which accounted for 37% of the total. A common economic activity undertaken by women was the breeding of goats, buffalo, poultry and pigs.
| Government agencies involved in the delivery of services to livestock producers in Nepal were found to be generally weak. The Department of Agriculture and the Department of Livestock Development and Health suffered from inadequate numbers of staff and inadequate training. Field staff and extension services had few incentives. Such limitations handicapped the ability of these agencies to support livestock development. |
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| Planned |
Achieved |
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| To form small-farmer groups and recruit project support staff, including group organizers and assistant group organizers. The strategy involved organizing small farmers and landless labourers into groups based on common economic activities and production resources so that they could benefit from the larger scale of operations and access to credit. Under Phase II, 5 810 small-farmer groups with a total of 58 100 members were to be formed, 200 subproject offices were to be established and staffed and 30 women’s group organizers were to be recruited. To establish four regional training centres and provide training
including livestock development for small-farmer group members,
group organizers, assistant group organizers and women’s group
organizers. In Phase II, five regional training centres were to
be constructed or rehabilitated. |
By 1989, 4 667 small-farmer groups
with 42 345 members had been formed. By the end of Phase II, 6 954
groups with more than 47 455 members had been formed. At project
completion, 323 ADBN staff had been selected and trained as group
organizers. Although not provided for at Phase I appraisal, 532
women’s groups with 4 271 members were formed and received
training in goat and buffalo husbandry. By 1991, 89 women’s
group organizers had been recruited and 1 978 women’s groups
had been formed, with 16 351 members. The four regional training centres were established
at Letang, Biratnagar, Anandaban and Napalganj; 30 176 beneficiaries
received training in 42 subjects including group concepts, group
savings and livestock development. Under Phase II, 594 group organizers
or assistants and 257 women’s group organizers received training;
5 043 beneficiaries participated in workshops/seminars on livestock
development; 6 257 completed training in agricultural and livestock
development and 4 384 in organization and management of small-farmer
groups. In Phase II, five rural training centres were established
in Morang, Banke, Kailali, Rupandeli and Chitwan. |
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Buffalo raising is associated with high risks and high initial costs. A possible solution was to establish a livestock-insurance scheme, with the aim of protecting small farmers against the risks. |
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Planned |
Achieved |
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| To support a feasibility study into the proposed livestock-insurance scheme and launch it on a pilot basis in eight subproject offices. To facilitate establishment of a group savings scheme
with the objective of making small-farmer group members self-reliant.
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Consultants hired to carry out the feasibility study and develop a livestock-insurance scheme recommended a group scheme based on a 10% premium. At project completion, the scheme was under trial at Mahendranager, where it was popular and livestock mortality had been checked. The group savings scheme grew from NPR 4.5 million
in 1986-1987 to NPR 14.5 million at the end of 1991. |
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Access to inputs and infrastructure
One of the weaknesses in the Nepalese development process was lack of institutional arrangements for delivering services. This is exemplified by the inadequacy of credit for small farmers. Most agricultural credit for small farmers provided by financial institutions actually goes to large farmers. Nepal lacks the institutional infrastructure for delivery of the credit services needed to boost farmers’ production and incomes. High initial costs mean that small farmers cannot afford to purchase a pair of bullocks out of their own resources. In Phase II, the livestock component targeted only those districts that had the potential for livestock production, including support services and access to stable markets. Applicants for livestock credit were required to follow guidelines and undergo training. They were encouraged to plant fodder trees and grow forage. Only animals certified as being in good health could be purchased. Preconditions for granting loans for livestock development included:
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| Planned | Achieved | |
To provide loans for activities identified by groups and their members on a group guarantee basis requiring no other collateral or security. In cases of default by one member, the group was to be collectively responsible; no further loans would be advanced until the default was remedied. Part of the income generated by the group was to be transferred to a group savings fund to provide for members’ consumption loans, or other purposes according to group decisions, reducing dependence on private borrowing at high rates. In Phase I, to provide credit to purchase:
In Phase II, to provide credit to purchase:
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Group solidarity was weakened by the bank’s
demand for individual collateral in addition to the group guarantee.
Repayment became problematic, because group liability was not introduced
and groups did not impose enough social pressure for repayment.
Lack of extension and training compromised productivity, however. As pig raising was a relatively new activity in Nepal, small farmers had little understanding of housing, feeding and husbandry requirements; the advice they received was generally poor. Among the smallest farmers, introduction mortalities for milk buffalo were about 10-15%; of the buffalo purchased, 10-15% failed to get back in calf and 20-25% contracted mastitis. In some cases, buffalo were provided in areas with underdeveloped milk markets and low milk prices, making credit repayment difficult. Under Phase II, farmers were able to purchase:
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- It is important to provide small farmers with adequate training and
extension services in livestock production. They must have full access
to feed resources and animal health services and should possess adequate
experience in animal husbandry. Limitations in these areas result in
high mortality rates and low productivity.
- Buffalo milk-cows are a risky investment for poor small farmers because
of high maintenance requirements. Considerable proportions of farm resources
in terms of labour, fodder production and finance are required to maintain
the buffalo at productive levels sufficient to allow repayment of credit.
If milk prices are not high enough to give an adequate return, or animals
die, contract serious diseases or do not get back in calf, milk buffalo
are a non-viable investment.
- The introduction of improved exotic breeds in areas where veterinary
services are limited or non-existent is likely to result in high mortality
because of inability to adapt to local feed and disease conditions.
- Any large increase in numbers of livestock that depend on forest
and public lands for fodder will require careful monitoring to control
environmental degradation.
- For the small farmer undertaking new activities with the help of
credit, risk is reduced through emphasis on training and extension activities.
- Promotion of individual investment as opposed to group investment
around common activities or production resources may hamper development
of a spirit of collective self-reliance.
- Broad credit eligibility criteria may compromise an intended focus
on small farmers, weakening group cohesion and reducing the benefits
gained by the poorest farmers.
- Poor farmers may be reluctant to accept responsibility for their
group members’ debts. Sound assessment of the credit-worthiness
of borrowers is an essential component in extending credit to the poor
on a sustainable basis.
- Timely loan repayment depends on a sufficient number of project staff with adequate resources performing regular field visits and monitoring defaulters.
