1. A specialized agency of the United Nations, IFAD was founded in 1977 as a multilateral financial institution focusing specifically on poverty reduction in rural areas. The Fund's main objective is to provide direct (loan) financing to governments and to mobilize additional resources for innovative cost-effective programmes that have a sustainable impact on improving the condition of the rural poor in developing countries.

2. The 21 countries in the Eastern and Southern Africa region have a total population of 350million. Approximately three quarters of the region's inhabitants live in rural areas, and more than half of the rural population live in extreme poverty. The potential for improvement in the rural sector thus represents the most immediate practical opportunity to reduce poverty and stimulate broad-based growth, particularly in the context of globalization and market liberalization where the successful commercialization of small-scale agriculture is vital.

3. However, this opportunity must be exploited by intervening not haphazardly, but systematically in rigorously identified 'constrained' sectors. To achieve this focus and to direct its development assistance more effectively, IFAD has recently carried out an analysis of rural poverty in the region. Starting from an understanding of the historical context of rural poverty – one in which the rural poor were used as a tool for the development of other more advantaged groups in an environment marked by low or diminished access to land and water, monolithic and confiscatory marketing policies, limited access to capital and inappropriate technology supply – the Fund has determined that the following related sectors must be reinforced if sustained rural and agricultural development is to be attained:

• market systems and linkages;
• natural resources, with emphasis on land and water management;
• rural finance; and
• knowledge, information and technology.

4. Besides their historically disadvantaged position, the poor in eastern and southern Africa are also subjected to continuous shocks that impinge on their development – wars, natural catastrophes such as drought, and the 'new' shock of HIV/AIDS, which has a negative impact not just on the livelihoods of the rural poor, but also on all socio-economic sectors. Active consideration of the effect of these shocks and their mitigation must therefore be an integral part of any development strategy.

Sector Problem Analysis and the Way Forward

5. Market systems and linkages: Globalization dictates that there must be collaboration, consolidation and knowledge if producers in the developing world are to prosper – and this applies to both small and large-scale producers. However, smallholders are disadvantaged in that they face an uncertain production environment and constraints to market access. Furthermore, their market relations, which are primarily through middlemen and constrained by weak bargaining power, often result in poor terms of exchange. For the service providers (i.e. the private sector), the absence of basic infrastructure discourages the entry of efficient and competitive private-sector services. The situation is further compromised by uncertain government policy on private investment.

6. Given this background, in order to support efficient and equitable market systems and linkages, IFAD has identified the following priority areas for intervention: the development of rural communications and transport infrastructure; the development of smallholder market organizations and the promotion of wider access of small-scale producers to markets; the establishment of more equitable market relations between producers and markets; the development of rural market information; and the fostering of private-sector partnerships.

7. Natural resources (land and water management): Though land and water are the keys to smallholder economies, access by this group is quite limited. Not only are landholding structures in the region inequitable, but poor people are also constantly under pressure to cede their land to outsiders who are in a better position to profit from market development. Moreover, where smallholders have land, its quality is often compromised by poor fertility, erosion and other forms of environmental degradation. IFAD's strategy in this area will be to support orderly and consensual land redistribution in the region; defend the landholdings of the poorest against encroachment, and expand access by women; develop tenure choices in the context of the need to use land as collateral; and support user-level organization for sustainable land use and conservation.

8. Though the water assets in the region are considerable, of the 18 million hectares suitable for water management, approximately 3 million are managed, with only 2 million irrigated (about half of which are in Madagascar alone). Public investment in irrigation in the region is characterized by poor and non-participatory management, unsustainable operation and maintenance, and lack of systematic development of market opportunities for high-value crops in order to justify the high investment and production costs. Policy, legislative and institutional contexts are also inadequate.

9. Thus IFAD’s strategy in the area of water management involves increasing access to irrigation above current low levels and promoting sound water management; exploiting opportunities for small-scale and traditional systems; and putting ownership and management of these resources in the hands of organized users. Fundamental to this strategy is the promotion of the production of high-value crops, for which access to production technology and markets is essential.

10. Rural finance: Post-independence rural finance was primarily through parastatal institutions that principally provided credit. Because of an unfavourable economic environment, poor management and the poor viability of investment in the smallholder sector, most of these institutions either ceased operations or changed mandate altogether. With structural adjustments and financial- sector reform, a vigorous private-sector banking system has emerged in many countries. However, banks in most countries either have no outreach into rural areas or their products are not tailored to the needs of rural clients.

11. The Fund’s activities in this sector will be aimed at promoting the orientation of credit beyond agriculture and investment to include consumption credits and support for diversified enterprises, reflecting demand among the rural poor for a broad range of financial services. Priority areas of support will include: assisting smallholders to develop their own organizational framework for capturing and recycling local savings; identifying viable linkages that may be established between locally based savings and credit institutions and the upstream formal banking system; and facilitating the graduation of some smallholders to direct financial relations with upstream financial institutions.

12. Knowledge, information and technology: Smallholder development must encompass not just organizational empowerment but also knowledge empowerment. A key to this empowerment is the interaction of smallholders with public- and private-sector technology and information suppliers. However, this is compromised in many rural areas by the dearth of private-sector operators able to provide relevant technical assistance and the lack of organized, knowledgeable, ready-to-pay purchasers (i.e. smallholders). In fact, the poorest smallholders lack the purchasing power to pay for the kinds of services and technologies being offered.

13. IFAD’s focus will therefore be to assist smallholders in developing relations with new and more diverse information and technology suppliers, and to support the public sector in rural technology development. This will involve broadening the scope beyond agricultural production to the knowledge required for diversification, and directing sources of information not just to extension workers but also to the private sector and NGOs. The ‘extension’ model will be one of information systems that respond to the requirements of smallholder producers engaged in production, trade and technology.

Underlying Principles

14. If results-oriented development is to be achieved in the sectors defined above and in rural development in general, three basic principles need to be applied:

Targeting: A growth-oriented strategy for rural poverty reduction must focus on where the poor are and on what they do for a living.

Empowerment: The rural poor must be empowered to strengthen their own productivity and increase their asset bases. Empowerment embraces both access to material goods and organization in order to exert influence.

Accountability: The democratic accountability of governments is the best guarantee that public policy and institutions will effectively facilitate rural poverty alleviation. Support for the development of policies for rural poverty reduction and the establishment of institutions, structures and processes that enhance the ability of the poor to articulate their needs and monitor the performance of service agencies is therefore essential.

Partnerships in and for Rural Poverty Alleviation

15. The above issues underline the considerable constraints faced by the rural poor in Africa – overcoming these obstacles is no mean feat. IFAD’s mission is to enable the poor to overcome their poverty. In this context, the Fund is working towards three overarching objectives: raising the global commitment to pro-poor development in rural areas; focusing public/official assistance on areas critical to the economic empowerment of the rural poor; and broadening partnerships with NGOs and community-based organizations. Achieving these objectives requires partnerships – partnerships enabling the poor to be at the forefront of their development, partnerships enabling the poor to overcome their poverty. This will involve: harnessing knowledge and disseminating it to a broad spectrum of national and international partners; supporting the development of national partnerships between the poor and governments, the private sector and civil society; building regional and international coalitions; and helping to establish institutional and policy frameworks in support of the poor.