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Boosting knowledge and financial security in Peru

©IFAD/Franco Mattioli

armers gather in the Moyobamba agency of the Agrarian Bank of Peru to apply for an IFAD loan.

Increasing the knowledge and assets of poor families is an effective way to fight poverty. An innovative IFAD-supported project in the southern highlands of Peru provides grants directly to small producers and to farmers’ organizations so they can develop new income opportunities. Project activities are helping participants better manage natural resources and gain access to Internet services, financial services and insurance.

In Peru, the poorest people are indigenous peoples living in remote areas of the southern highlands. About 73 per cent of the indigenous Quechua and Aymara communities – more than five million people – live on less than US$1.25 a day. An IFAD project in the area is helping about 15,000 of these families break the cycle of poverty.

The Market Strengthening and Livelihood Diversification in the Southern Highlands (Sierra Sur) Project – Proyecto de Fortalecimiento de los Mercados, Diversificación de los Ingresos y Mejoramiento de las Condiciones de Vida en la Sierra Sur – began in 2005 and is due to run through 2011. Its three main components focus on improving natural resource management, strengthening local markets and better managing local knowledge and cultural assets so that families in poor rural communities can diversify their sources of income.

“One of the project’s most innovative features is that it transfers funds directly to communities to enable small farmers and microentrepreneurs to hire local contractors to provide the technical assistance they need to make their products competitive in national, regional and international markets,” says Roberto Haudry, IFAD’s Country Programme Manager for Peru.

Rural women in the region are often among the poorest people. The project “provides resources specifically to women farmers for securing property rights to land, obtaining legal recognition for small crafts businesses, and learning to manage their own finances,” Haudry says.

Helping the environment helps families, too

The native people of the high Andes have always had to contend with an inhospitable environment. High winds, sparse ground cover, frozen water and extreme temperature variations are the norm.

“Climate change is making all these conditions more pronounced,” says Haudry. “Temperature variations have become even more pronounced in recent years, and water shortages have become a real problem, for people and for animals.”

The project is working directly with families, over an area of almost 78,000 square kilometres, to help them become more resilient to the impact of climate change and improve their management of natural resources.

Water from rain and melting ice is being trapped in pits so it can be used for irrigation. Project participants are diversifying their crops and are now cultivating maize, beans, cereals, potatoes and oregano in terraces, separated by stone walls, on the mountain slopes. The stone walls break the wind and trap soil and water to prevent run-off. The stones act as heat reservoirs, soaking up warmth from the sun during the day and releasing it slowly, which helps control freezing during the cold mountain nights.

Project participants are also planting trees, which serve as wind breaks, provide fuelwood, regulate the temperature and stabilize soil on the slopes. Many have also improved their homes, building double walls to help absorb solar heat and adopting fuel-efficient stoves, instead of cooking over open fires. Because their homes are no longer filled with irritating smoke, people are able to remain comfortably indoors for longer periods, and health conditions have improved substantially.

Thanks to the more efficient stoves, families participating in the programme are saving 2.6 tons of fuel per year – the equivalent of 32 hectares of forest saved per family each year. And with fewer trees being felled, greenhouse gas emissions from deforestation have been reduced.

Increasing women’s financial security

Part of the Sierra Sur project’s effort to strengthen local markets rests on improving access of poor rural people – particularly women – to a variety of financial services. The project encourages women to take advantage of formal savings mechanisms by providing training in and cash incentives for the use of bank savings accounts and life insurance. Participants also benefit by having increased assets, financial security and financial sophistication. As of September 2009, some 8,500 women had opened saving accounts.
As one project participant explained, “Before the project began, we women were not organized. Whatever money we had, we kept in the house, hidden in corners or wrapped in clothing. The mice chewed it and we spent it on unnecessary things. Now we know how to converse with the banks. Our savings are secure. We no longer spend on unnecessary things. We will have savings for treatment when we get sick. We will have savings for things our children need for school.”
Thanks to a groundbreaking initiative undertaken in collaboration with private insurance companies as part of the Sierra Sur project, 3,600 households are now eligible for death and accident benefits. The goal is that 15,000 participating households will be insured by the end of this phase of the project.

“Insurance coverage is an important tool for combating poverty,” says Haudry. “If poor households receive such coverage, they will not be forced to sell the few assets they have in the event of the illness or death of a family member.”
Project participant Margarita Puma Taco knows the financial consequences of family deaths all too well.

“Before the project, we didn’t know anything about life insurance or savings,” she says. “We could not afford caskets and buried our dead wrapped in blankets. We had to sell animals, blankets and other belongings. When a mother died, her children were often abandoned. I raised many of these abandoned children. When you are poor all you have to leave your children is more poverty. But this life insurance is very good for all of us. Now we will not have to suffer as much.”

The policies of the rural life insurance programme pay benefits of 3,500 Peruvian nuevos soles (S/.) (about US$1,200 in September 2009) for accidental death, and 1,500 S/. (about US$515) for natural death. The Sierra Sur project pays two thirds of the modest premiums.

Increased Internet access brings new opportunities

“I used to be scared to touch the computer,” says Teófila Anchahua. “I thought I would break it. But now I check my e-mail three times a week.” Anchahua lives in the town of Pucyura, where an Internet facility, the Commercial Information Centre (CIC), was set up a year ago.
In Pucyura, a half-hour drive from the city of Cusco, pigs and guinea pigs are native to the region and used as a source of food. Here, the Internet has provided people raising these animals with opportunities to expand their business operations through information on new breeding techniques developed in other areas, recipes to promote their products at fairs, and contacts with potential buyers.
The dozen computers in this town of 4,500 people were installed by the Development of the Puno-Cusco Corridor Project – Proyecto de Desarrolo Corredor Puno-Cusco – jointly supported by IFAD and the local municipality. Among other initiatives, the project promoted information and communications technologies (ICTs) as tools for development.
Internet facilities have been installed in 24 districts across five provinces – Arequipa, Cusco, Moquegua, Puno and Tacna – with support from the Peruvian Government and from both IFAD projects.

“The initiative was very successful,” says Luis Andrade of the Sierra Sur project. “It helped more than 80,000 families in the region use the Internet to develop value-added agricultural production.”

There are challenges, however, in bringing the benefits of ICTs to remote rural populations, Andrade adds, including overcoming the literacy barriers of participants, obtaining a commitment from local authorities to sustain the project, and dealing with a lack of capacity to maintain services once the project is over.

To deal with literacy issues, Margot Huamán, administrator of the CIC in Pucyura, first uses computers to teach non-literate community members to read, and then moves on to basic computer skills. Huamán, who is both a teacher and computer technician, is able to combine her two professions to teach both basic and computer literacy.

“I teach them the alphabet using the computer keyboard, and then teach them to join the letters together to make words, and then have them transcribe texts on the computer. It is not easy, but we are slowly making progress,” she says.
YouTube and Flickr – two web-based systems for exchanging videos and pictures – have some of their most eager users in the Peruvian highlands. The web page of Peru’s Ministry of Agriculture offers a broad range of audio-visual materials illustrating experiences, innovations and participatory evaluations, as described by project participants.

Exceeding expectations

In September 2009, a mid-term independent evaluation of the project concluded that it was “exceptionally well implemented and very effective.” The project has already exceeded many of its end-of-project result targets.

For example, the project estimated that it would help 560 organizations and 8,000 individuals implement business plans. By the mid-term review, it had helped 1,174 organizations and 28,200 people. On average, implementing a business plan resulted in additional income of US$1,840 per family annually.

Moreover, while the project aimed to help 2,500 women open savings accounts, by mid-2009 that number already stood at 8,500.

And of the 34 organizations and 912 families that completed a natural resource management plan, the project helped increase physical assets by an average of US$3,368 per family, surpassing the goal of US$1,000.

IFAD would like to thank Milagros Salazar and the Inter Press Service News Agency for permission to use their material in this article.