Improving the Availability and Effectiveness of Rural and “Micro” Finance for Small Scale Irrigation in sub-Saharan Africa: A Review of Lessons Learned. IWMI Working Paper 185. Colombo, Sri Lanka: International Water Management Institute (IWMI).
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This paper reviews the evidence available on the provision of financing for African smallholder farmers to purchase irrigation equipment such as pumps, pipes and drip irrigation systems. It sets the scene by first reviewing the literature on experiences with providing microcredit and other microfinance services as a poverty reduction strategy. Based on both case studies and several systematic reviews of the literature, it finds that the outcomes and impacts on poverty, gender equity and broader economic development are mixed at best. Microcredit is not a silver bullet solution to poverty, but it can often help poor households improve their lives. The paper then reviews the demand for and supply of financing for smallholders to purchase irrigation equipment. In surveys, farmers express a strong demand for equipment such as pumps, but often point to the lack of affordable and appropriately designed credit as a critical impediment to gaining access to such equipment. Even where microfinance institutions offer agricultural credit, it is usually short-term seasonal credit to purchase seeds and fertilizer. Credit on these terms is not useful to purchase equipment costing several hundred dollars. Focusing on programs specifically aimed at enabling farmers to purchase irrigation equipment, no credible detailed studies were found documenting the impacts and lessons learned. However, there are currently (as of 2018) numerous promising pilot studies and small projects offering a variety of approaches to enable smallholders to make such purchases. The paper reviews what information is available on these. A major recommendation of this paper is that a research project should be designed to carry out studies of these various experiments to identify what works under what conditions, as a basis for scaling out programs to offer financial services aimed at assisting smallholders to gain access to small-scale irrigation equipment.