Photo by Thomas Rath. Mongolia - Arhangai Rural Poverty Alleviation Project. A herder guards his sheep while they graze in a pasture. Nomadic or semi-nomadic pastoralism is the basis of livestock production in Mongolia and an essential activity of rural poverty reduction efforts.

Project area. Activities not related to value chain development will be carried out in the aimags (provinces) of Arhangai, Bulgan, Gobi-Altai, Henti and Huskhul. Value chain development activities, which are more innovative, will be tested in pilot initiatives in different parts of the country to determine the feasibility of subsequent scaling up.

Target group. The project targets men and women from two types of households: nomadic herder households and households living in permanent settlements in soums (districts) and aimags (provinces). At least 50 per cent of the households should have incomes near or below the poverty line, and women should represent at least 50 per cent of the beneficiaries. Households headed by women - and those classified by the local government as poor and vulnerable in the lists at bagh (local administrative unit) and soum levels will be targeted specifically.

Project objectives. The development objective of the project is to reduce poverty and improve livelihoods of poor herder and soum and aimag centrehouseholds in the project area.

Project description. In addition to project management and policy support, the project will have two components:

• Market development. Three subcomponents are envisaged: (i) A value chain development subcomponent will be geared to improving the market position of producers by first identifying demand and then linking it to producer groups through direct purchases. The project will support an estimated 100 business and investment plans; cover the costs of an initial value chain analysis and the selection of corporate buyers; provide grant funding for the implementation of approved business and investment plans; and finance producer group formation, skills and management training, and infrastructure. (ii) A small enterprise development subcomponent will include studies determining the feasibility of establishing small-scale processing units in two or three soums. Investments - to be undertaken jointly by producer groups and private enterprises - may include vegetable processing, milk collection, powder milk production, slaughterhouse and meat processing, among others. The project will help finance producers' shares through a loan guarantee fund mechanism. (iii) The microenterprise development subcomponent is aimed at supporting poor households of herders and those in soum and aimag centres in undertaking microenterprise activities through microfinance and a guarantee fund mechanism. Voluntary microfinance self-help groups will be established (with women expected to make up 75 per cent of the membership). The project will finance an initial formation and dissemination campaign; skills training; analyses of market opportunities and the potential for product differentiation; improvements in product quality, design and presentation; feasibility studies for labelling, branding for green or sustainable practices, etc.

• Pasture management and climate change adaptation. The project will support the establishment of grass-roots herder institutions for sustainable pasture management. This will involve the formation of pasture herders' groups, including extensive and participatory sensitization and information campaigns, training, the preparation of pasture management plans and technical and management support for their implementation. Project resources will also be provided for implementing the pasture management plans of pasture herders' groups and for training and other activities carried out to increase the capacity and resilience of herders to cope with the impacts of climate change and manage pastoral risks.

	Photo by Thomas Rath. Mongolia - Arhangai Rural Poverty Alleviation Project. Project participant using a milk and cream separator for the production of dairy products. By producing dairy products, herders can increase household food security and earn additional income through sales.

Important features. The project is entirely aligned with Mongolia's Agricultural Development Strategy 2006-2016. It also conforms to the second pillar of the National Programme for Food Security 2009-2016. The project reflects the current IFAD country strategy for Mongolia. It is also fully consistent with the emphasis in the IFAD Strategic Framework 2007-2010 on sustainable management of natural resources. In addition, it will focus on governance of natural resources and ensure participation of poor people in governance through representation in pasture users' groups. In terms of innovation, the project applies an approach - demand-driven value chain development - under which profitable value chains are selected on the basis of their poverty reduction, environmental and gender aspects. Within such value chains, potential buyers will be identified and involved from the beginning in structuring the value chain so as to benefit both producers and buyers. Through the loan guarantee fund, the project is pioneering an approach to mobilizing existing liquidity in the banking system.

Cofinanciers and domestic contribution. The Global Environment Facility's Special Climate Change Fund will provide US$1.5 million. Participating financial institutions will provide US$2.7 million. The Government and beneficiaries will provide US$0.9 million and US$1.8 million respectively.