financing water for productive use

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CASE STUDY

FINANCING WATER FORPRODUCTIVE USE


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Case Study: Financing Water for Productive Use

CARE PerAv. General Santa Cruz N 659, Jess MaraTelfono: (511) 417 1100

Fax: (511) 433 4753www.care.org,peLima - Per

Autors

Alejandro Rojas SarapuraSustainable Economic Development ProgramCoordinator. CARE Per

Julio Nishikawa Menacho

Regional Coordinator.CARE PERU Ayacucho

Christian PennottiTechnical Advisor, Learning and Impact. EconomicDevelopment Unit. CARE USA

Sybil ChidiacLearning and Impact Technical Advisor.Save Up Program. CARE USA

This report was prepared by CARE with support from USAID and the AED FIELD Program.The report does not necessarily reect the views of USAID or AED.

Legal Deposit made in the National Library of Peru N 2010-03227

1st edition: March 2010

Printing: 500 copies

Design and Printing: SINCO Editores S.A.C.

Jr. Huaraz 449 - Brena Phone: 433-5974 [email protected]

Printed in Peru, March 2010


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Table of Contents

INTRODUCTION 7

PROJECT DESCRIPTION 9

THE OPPORTUNITY 10

Socio-economic context 10Environmental context 11

THE INNOVATION 12Introduction to CAREs approach 12Nuts and bolts 14

THE RESULTS 18

LESSONS LEARNED 22

RECOMMENDATIONS 28

ANNEX: PARTNERS BREAKDOWN 35Financial institutions 36Public sector 38Private sector 39


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Introduction

The need to pursue development strategies that simultaneously contribute to

economic growth, the reduction of poverty and the restoration of the global

environment has never been more critical. The Millennium Development Goals,

signed in September 2000, established two targets for the year 2015: a 50 per-

cent reduction in global poverty and a reversal of the loss of biodiversity.1 Inaddition to setting targets for the reduction of greenhouse gas emissions, the

Kyoto Protocol raised global recognition of the need to rapidly improve envi-

ronmental practices in order to sustain the planet.2

The continuing drought, inuenced mainly by the effects of global climate

change, to which can be added the inefcient use of irrigation water that is

typical of the traditional (gravity) irrigation system, is generating losses of wa-

ter during the processes of channeling and distribution, as well as soil loss byerosion, thus causing substantial declines in agricultural productivity, which is

having a negative impact on the protability and competitiveness of agriculture

in the rural highlands of the country.

Therefore, to improve the competitiveness of any agricultural production sys-

tem, one of the viable alternatives becomes the use and implementation of tech-

nied irrigation systems in its different forms, such as drip, sprinkler, exuda-

tion, multi-gate tubes, micro-sprinklers, etc., and implementing simple andinexpensive techniques for gathering, distribution and application of water in

the eld. However, the acquisition of this equipment remains nearly impossible

for rural producers in the highlands, especially for those living in poverty, due

to the high costs and lack of nancial products that facilitate access to them.

In this context, CARE implemented the Financing Water for Productive Use pilot

to test a partnership approach that brought together micronance institutions,

1 See: http://www.un.org/millenniumgoals

2 http://unfccc.int/kyoto_protocol/items/2830.php


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irrigation technology companies, local government ofces, small producers

and traders in a series of relationships that improved water usage, increased

farmer incomes and demonstrated opportunities for the local government toscale similar initiatives. At the end of the project, the families increased their

sales per hectare from S/.2,251 to S/.7,966 and from S/.7,123 to S/.32,034 in peas

and avocados, respectively. The productivity also increased by 160% and 79%

for peas and avocados, respectively. Finally, the project demonstrated the need

to evaluate the loans for technied irrigation not in isolation, but as part of a

value chain articulated with the market. That is, evaluate a loan more for its

cash ow, regardless of the social and economic status of the producing family.

This case study provides an overview of the project experience and links to fur-

ther information to guide other agencies pursuing similar initiatives.


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PROJECT DESCRIPTIONAt the beginning of the project, the rst thing done was a eld study. On the

basis of this, a strategy was outlined that brought us success by placing value

on those key factors collected from related experiences, such as irrigation and

inclusive micronance.

Prior to the operation of the project, the most appropriate productive chains

were identied and selected, then the stakeholders and partners were mapped

and agreements signed with partners, loan products and then the process ofdisseminating information on the initiative to producers were developed and

nally, new business persons and leaders with whom to start the project were

identied.

Initially, CARE Peru offered much support to the rst producers who showed

interest. When evidence of success was shown, not only the producers, but also

the roles of the supporting players were becoming claried and everyone was

engaging more in the services they provide. Loan analysts fullled their rolesbetter without CARE, the private rm (Tecsagro) added training activities in

the process of installation, operation and maintenance, the DPA was more in-

terested in strengthening the productive organizations and integrating them

into more competitive dynamics, a growing interest of a larger number of pro-

ducers was observed in taking loans to nance their irrigation systems.

Finally, the team was concerned with leaving explicit evidence through the sys-

tematization as a prerequisite for political advocacy.

CASE STUDY

Financing Water forProductive Use


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THE OPPORTUNITY

Socio-economic contextOver the past six years, Peru has experienced strong growth rates.. Drivenlargely by increased exports and high global prices for raw materials, GDP in-

creased by six to eight percent annually between 2002 and 2007. This growth,

coupled with macroeconomic stability, reduced national poverty by 15 percent

over the same period.3Despite these impressive statistics, however, more than

45 percent of the population continues to live below the poverty line and un-

deremployment levels remain high.4 Those living in rural areas are beneting

the least from Perus recent progress. In the countryside, fty percent of chil-dren live in extreme poverty and nearly the same percent suffer from chronic

malnutrition. A quarter of the population lacks access to water, and more than

half lack adequate sanitation. Education quality is among the poorest in South

America.5

The Department of Ayacucho, in which the CARE Peru pilot took place, is

the second poorest in the country with over 72 percent of the population in

poverty.6The reasons for the departments profound poverty are rooted in Peru-

vian culture as well as in the economic realities of the region. Situated at 2,700

meters above sea level in the Andes Mountains, Ayacucho is located in the cen-

tral highlands of the country, an area known for its remoteness. Agriculture is

the principle economic activity with production for both domestic (potatoes,

palta avocados; quinua, snow peas, peas; purple corn, alfalfa) and international

markets (haas avocados, purple corn). In addition, smaller but growing mar-

kets exist in the guinea pig (domestic and international) and the dairy sectors

(domestic). Access to water represents the principle barrier to improved pro-

ductivity across all of these activities. Farmers use ood irrigation during the

rainy season and are therefore limited to a single growing season annually. Hor-

ticulturalists struggle to maintain the vibrancy of their trees through the dry

months.

3 Inter-American Development Bank, IDB Country Strategy with Peru 2007-2011.4 See: https://www.cia.gov/library/publications/the-world-factbook/print/pe.html5

IDB, 2006. Nota Tcnica Sector Educacin, Nota Tcnica Sector Agua y Saneamiento; Notas Tc-nicas Sector Salud.

6 http://www.regionayacucho.gob.pe/portal


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Environmental context

Deforestation and rapid tropical glacial retreat two distinct but interrelated

challenges threaten the future productivity of the Peruvian highlands. Theglacier that provides much of Huanta and Ayacuchos water has retreated at a

rate of 200 meters over the past 10 years, with experts predicting that all Pe-

ruvian glaciers below 5500 meters will disappear by 2015.7. For years, regional

and municipal governments have worked with communities, NGOs, water-

user associations and international donors to build a series of canals to enable

farmers to improve their productivity and maximize the limited water supply.

These irrigation canals, however, serve only 30% of the arable land in the Sierra

(approximately 400,000 hectares) and improved farm-level irrigation, such asdrip systems and sprinklers, service less than 5 percent of this area,8 and 9The re-

sult is both low productivity in non-irrigated areas and massive water waste in

areas with access (limited to four hours per month) to irrigation but low-tech

approaches like ooding.

In the Sierra, rewood is the principle cooking fuel. Consequently, rampant

deforestation is a scourge of the region. This particular form of environmental

degradation coupled with glacial retreat have marked the lands in the Peru-vian Sierra with increased forest disturbance and clearance for the 2004-2005

year.10

In Ayacucho, deforestation is concentrated in the VRAE, the Ene and Apruri-

mac River valleys found in the northern jungle portion of the department. De-

forestation is not as acute in the highlands where there have been strong refor-

estation programs. Ayacucho suffers from critically high levels of deforestation

where trees are felled to make room for illegal coca crops and to pursue informalmining and logging.

7 See: http://news.bbc.co.uk/1/hi/world/americas/4720621.stm8 The phrase improved farm-level irrigation is used in this report to represent the Spanish term riego

tecnicado. It refers to systems that enable producers to improve water usage and availability on theirland by linking private irrigation solutions, consisting of small reservoirs, drip systems and sprinklers,into larger public irrigation canals.

9 World Bank,Project Appraisal Document, Appraisal Stage, Report No. AB3809. 3/17/08.10 See: http://news.mongabay.com/2007/0809-peru.html


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THE INNOVATION

Introduction to CAREs approachThe Financing Water project created a model that aligned the interests andcapabilities of micronance institutions, government ofces, technical service

companies, CARE and small producers in an effort to improve crop irrigation

and increase household income and security.

Specically, the project drew together:

CARE Peru:x

An afliate of CARE USA, CARE Peru has been working inthe country since 1970 and in the target region, Ayacucho since 1995.

CARE Perus interventions focus on economic development, maternal

health and climate change. CARE Perus strategy is principally to vali-

date opportunities for change through the establishment of strong pilot

initiatives and subsequent advocacy for their integration into the func-

tions of the public, private and local non-prot sectors.

EDYFICAR:x A micronance institution, EDYFICARs mission is to pro-

vide nancial services to people with few economic resources, witha focus on micro-entrepreneurs and small businesses, contributing to

improvement in their quality of life. The institution was established

with support from CARE Peru in 1997 and transformed into a publicly

traded non-bank nancial institution in 2008. It has been operating in

Ayacucho since 2002.

Caja Rural Los Libertadores:x Established in 1994 by a group of agricultural

producers, merchants and small enterprises, Caja Rural Los Libera-

tordes is a private nancial company. The enterprise has ve operatingbranches in the Department of Ayacucho and offers a range of savings

and credit products that are focused on meeting the needs of low-in-

come clients in both rural and urban areas.

Agrobanco:x A national, public agriculture bank with a branch in Aya-

cucho, Agrobanco offers both direct and indirect credit designed to im-

prove access to nance among micro, small and medium enterprises.

The Directorate of Agrarian Promotion in the Ministry of Agriculture:x DPA-

MINAG is a regional government ofce responsible for, among other


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things, coordinating and supporting value chain development. DPA-

MINAG currently works across 12 value chains and maintains an ofce

in each of Ayacuchos 11 provinces.The National Sub-sector Irrigation Program:x A national program implemented

with support from the World Bank and the Japanese Bank for Interna-

tional Cooperation and operated by MINAG, the Programa Subsectorial

de Irrigaciones (PSI) leads national efforts to increase the protability

of agribusiness through improvements in the efciency of water usage

for productive purposes through improved irrigation systems. PSI estab-

lished its rst ofce in Ayacucho in 2007.

Tecsagro:x A private Peruvian company established in 2004, Tecsagrohas a presence in 12 regions across the country and provides a range

of adaptable products and services focused on improved the efcient

use of water for both both consumption and irrigation. A smaller ac-

tor in the water technology sector, Tecsagro sees servicing the MSME

market as a strategic niche opportunity as well as a means of incorpo-

rating social responsibility into its work. The company is currently in

the process of opening a branch ofce in Ayacucho.

The projects innovation was its ability to engage all key stakeholders and out-

line a sustainable and mutually benecial way forward. Though there is a long

history of collaboration between small producers and the Ayacucho regional

government on water issues, to this point no activity had successfully drawn

the private sector into those efforts to enhance access to improved farm-level

irrigation systems. The resulting trust and clarity among the regional govern-

ment, community leaders, nancial institutions and the private sector technol-

ogy service provider have planted the seeds for a larger and more locally-drivenprocess.

Specic areas of innovation include:

Creation of and improved access to term-nance products for small producers.1.

Enhanced access to and use of improved farm-level irrigation systems for small producers.2.


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Increased interest among regional buyers in products produced on pilot farms.3.

Development of clear roles for each stakeholder and a clearly articulated process for col-4.

laboration.

Nuts and bolts

The following section provides a step-by-step outline of the pilot activities in-

cluding listing the lead and supporting stakeholders at each stage.

Attached are the roles of stakeholders at the beginnings of the project. It is im-

portant to note that CAREs participation was higher at the start of the project,

but it declined in order to give local players a greater role.

Step Activity Lead Support

1 Selection and prioritization of value chains with best po-tential to increase producer competitiveness through theintroduction of technical irrigation systems.

DPA has 12 decentralized agencies throughout Ayacucho. Eachagency works with a variety of value chains that are particularto the area in which they are located. One of DPAs primary

mandates is to develop an understanding of national and inter-national market opportunities and to coordinate with produc-ers and the private sector to improve Ayacuchos capacity totake advantage of those opportunities. Using DPAs analysis,CARE selected the value chains in the best position to gainthrough improved irrigation.

DPA CARE

2 Introduction of the projects objectives and approach toproducers and other key stakeholders.

At the initial stage of the pilot, CARE united multiple actors,

and related the initiative to them. Always aware of their exist-ing activities or interests, CARE helped these actors to iden-tify their respective roles within the project and outlined theexpected outcome.

CARE DPA

PSI


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3 Evaluate whether the primary infrastructure can support

the project

In the Tambillo community, a 2007 USAID project con-structed a canal that provided 1,000 users across three differ-ent communities, access to productive water. This initiativeimplemented by the regional government is one of many thatallowed improved irrigation systems to be used in farmingcommunities, such as Tambillo. Indeed, this canal providedthe basic infrastructure that enabled producers to irrigatetheir potato, purple corn, and snow pea crops. Producers suc-cessfully leveraged the existing infrastructure to improve theirfarm-level irrigation systems.

PSI CARE

4 Ensure there is adequate water in the area to support theagriculture intervention

Water supply is one of the key challenges facing the region.Learning how much water was available and recognizing itssupply sources was a crucial rst step conducted by the DPAand CARE.

DPA CARE

5 Selection of participating producers

Producers that participated in the initiative were all volun-teers. The selection of the producers was vital to the successof the initiative. The basic selection criteria for the producerswas the following:

Existence of large-scale irrigation infrastructure and suf-cient availability of water.

Producers operating or able to operate as part of a prot-able production chain.

Clean credit history.

CARE Orga-

nizedproduc-tores

6 Verication the individual producers credit histories

(Peru has a national credit agency)

The nancial institutions collected the producers national IDcards, which they scanned to conduct a credit check to en-sure that the producers did not have any outstanding negativecredit. Because Peru has a national credit agency, this was astreamlined process. The credit check did not serve or replacethe guarantee but rather ensured institutional condence in

the project.

FinancialInstitu-tions


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7 Development of studies outlining irrigation needs and most

efcient structure

In order to access a loan from any of the three participating nancialinstitutions, the producers had to engage the CARE irrigation spe-cialist and the DPA Mesa Technica to assess their lands irrigationneeds and determine if a system would be feasible. To complete thesetechnical studies, irrigation specialist for CARE Peru used tapes, aGPS, and AutoCAD, a computer technical drawing tool used to de-sign the water system more efciently. He is the specialist who as-sesses the irrigation requirements and determines if your system isviable. The technical group was no longer involved in the evaluation,

but occasionally the DPA extension agent was. In order to carry outthese technical studies, the specialists used tape measures, a GPSinstrument, and AutoCAD, a software drawing device to design themost efcient water system. This software enables the producer tosee a highly detailed plan for developing the actual irrigation system.However, both a technical service provider and an engineer are nec-essary to ensure that the systems are installed correctly. Tescagro iswilling to support these study-related activities for land plots of fouror more hectares.

An important consideration for the sustainability of this system isidentifying who has the resources and incentives to carry out thestudies. In the case of CARE Perus work in Ayacucho, if a major irri-gation canal is under consideration, the state will conduct this work.For smaller plots, the state may do it, particularly if farmers are orga-nized. Alternatively, NGOs or the technology service provider maybe willing to do it, although the latter only if producers guaranteethey will purchase the technology in advance. Who could or willconduct the studies varies based on the actors involved.

The regional and local governments can also undertake the studies,especially when it benets the entire community or organized group.Who would conduct the studies varied, depending on the actors in-

volved.

CARE DPA

Localandregionalgovern-ments

8 Development of credit application

After completing their technical les, the producers had to submitother documents that supported their credit application to the -nancial institution: a land title and an attestation that demonstrat-ed the lands productivity which required a signature by a com-munity leader. Approximately, 70% of the producers did not havetitles for their land. To circumvent this hurdle, the village elderswould sign a declaration, afrming that the producer had workedthe land for many years. Caja Rural and EDYFICAR adjusted theircriteria in order develop loan products for these producers lackinga title. Agrobanco could not extend loans without titles.

Producpers CARE

Finan-cialInstitu-tions


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9 MFI credit ofcer conducts eld visit to check income, as-

sets, land and market potential.

An analyst from the nancial institutions visited the produc-ers to verify all the data on their credit application. CARE Perusupported both the nancial institutions and the farmers byhelping to verify the producers creditworthiness, supportingmarket linkages, providing training in negotiation skills andhelping to nalize loan applications.

In the exiting phase of the project, CARE is working with thenancial institutions to identify an approach that would not

rely as heavily on NGO assistance to farmers and FIs in order toexecute these agreements.

Financial

Institu-tions

CARE

10 Approval/ Release of Credit by the micronance institu-tion

Once the credit was approved, the producer was allowed tovisit the agriculture input supplier to purchase the necessaryequipment and begin installation.

FinancialInstitu-tions

Tecsa-gro

11 Producers engage the irrigation-system-supply company

In this pilot, the producers never received the loan amountscash equivalent. Rather, producers purchased their irrigationsystems, and Tescagro received the rst 50% of the equipmentcost. Within ve days, Tescagro employees arrived to installthe system, along with the CARE irrigation specialist to verifytheir work. Tescagro received the remaining half of the equip-ment cost from the nancial institution once it was deemed tobe installed correctly and working well. Initially Tescagro wasto receive half of the money directly, and the producer was toreceive the other half. However, the nancial institutions de-

cided against this approach because prior evidence had pointedto delays. In past experiences, evidence showed that producersconvinced of the projects benets took out loans and movedforward with the installation of the irrigation equipment.Those that were unconvinced did not take out a loan andmoved slowly on steps 6 -9.

Producers Tec-sagro,

CARE

12 Training on sustainable use and management of the irriga-tion systems

After the irrigation system had been installed by Tescagro, the

input supplier, CARE Peru and the PSI provided ongoing tech-nical assistance in the use and maintenance of the systems.

CARE Tecsa-gro


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13 Building the producers business skills for market access

During the project implementation, CARE also worked to fur-ther develop the business skills of the producers. The avocadoproducers in Huanta that are linked to the Mesa Tecnica hadthe opportunity to learn about seeking better markets and pric-es, as well as learning how to better organize as producers. Thepea producers from Uchuypampa received training in how toimprove their marketing practices, and some have even signedcontracts with buyers.

CARE DPA

14 Sustainable productive credit culture for the producers.

CARE believes that developing a healthy credit culture is a pro-cess, and this project contributed to this process. The producersinvolved in this pilot attended nancial-institution sponsoredworkshops on the meaning of credit. Due in large part to thesetalks, the producers repaid their loans on time. The credit cul-ture established through this project for agricultural purposesis sustainable if following conditions are in place:

When there is an existing business or productive activitywith an assured market

When producers are willing to invest and access the fund-ing they need to improve their economic situation

When nancial institutions have more condence in smallproducers and develop appropriate loan products

When there is no corruption in the nancial system

Financial

Institu-tions

Produc-

ers

THE RESULTS

After some initial false starts, the project worked for 18 months to rene andoperationalize the process above yielding the following results:

1. Economic gains

Due to improved crop growth and quality, producers involved in the project en-

joyed immediate economic benets and increased their outputs for both domes-

tic and international markets. After the installation of the irrigation systems,

producers sold Hass avocados for 2.80 soles/ kilo and Huerte avocados for 2.40

soles/ kilo. The prices for these two varieties of avocado prior to the projects

implementation were 2.60 soles/kilo and 2.20 soles/kilo respectively. Due to


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increased productivity and quality, sales values have been extraordinary, with

increments of 253.79 and 349.74% for the pea and avocado crops, respectively.

Moreover, producers sold their avocado on the national market for 5 soles/ kilo

as compared to 4.80 soles/ kilo the year before. Using the new irrigation sys-

tems, producers increased their incomes by an average of 20 soles or 6 percent.

The rapid and abundant growth of their elds prompted many producers tohire help in the cultivation of their crops. Each hectare of productive land re-

quired 15 people to the help with the cultivation. Not only did the producers

increase their own incomes, they also provided employment opportunities to

members of their community.

2. Increase crop yield of producers

Due to regular access to water, the crop yield for the 37 producers involved in the

project signicantly increased. With the installation of the irrigation systems,the producers were able to irrigate all portions of their elds, and set timers to

efciently manage water usage. In both the avocado and pea value chains, this

led to more than 100 percent production increases. As illustrated by Figures 3

and 4 below, in peas, farmers realized yields of 7,906.05 Kg/Ha on irrigated land

versus 3,044.90 Kg/Ha on non-irrigated land. Similarly, avocado farmers real-

ized yields of 13,135.44 Kg/Ha on irrigated land versus 7,305 Kg/Ha on non-ir-

rigated land. These increases provided farmers with signicant income gains

while also establishing a dramatic example of the opportunity represented byimproving on-farm irrigation.

Figure 1Evolution of the sales of peas (Soles/ha)

Figure 2Evolution of the sales of avocados (Soles/ha)

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Sales volume (base line)

(soles/ha)

Sales volume (final

evaluation) (soles/ha)

2,251.61

7,965.91

Increase: 254%

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0


(soles/ha)

Sales volume (final


7,122.89

32,034.98

Increase: 350%


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8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0


(soles/ha)

Sales volume (final


3,044.90

7,906.05

Increase: 160%

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0


(soles/ha)

Sales volume (final


7,350.00

13,135.44

Increase: 79%

Figure 3Average Yield of Peas (kg/ha)

Figure 4Yield of Avocados (kg/ha)

3. Neighboring producers wanting to purchase irrigation systems due to demonstratedincreases

The project initially outlined the involvement of 50 producers; yet, only 37 ac-

cessed credit to purchase irrigation equipment. This unexpectedly low level ofinvolvement stemmed from producers indecision and risk averion; they feared

the impact loan repayment might have on their respective incomes. However,

after seeing their neighbors improved crop yields and increased incomes, these

formerly reluctant producers are now seeking opportunities to access credit

to purchase irrigation systems. Additionally, avocado producers in the in the

Secellas community of Huanta District, who took out loans to nance a large

reservoir, are now exploring options to charge their originally hesitant neigh-

bors access to the reliable water source.


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4. Acquisition and understanding of irrigation systems

Since the inception of the project, 50 clients have received support in the com-

pletion of irrigation technical studies thanks to CARE and its irrigations spe-cialist. Of these 50 clients, 37 have currently accessed loans (4 from Los Liberta-

dores 31 from Edycar and 2 from Agrobanco), and nine more producers have

had their les approved and are awaiting loans from Edycar.

All 37 of the producers who obtained loans participated in a series of training

workshops on the installation, operation and maintenance of the irrigation sys-

tems. Five workshops focused on the sprinkler-irrigation systems installation

process, followed by eight workshops about the systems operation, mainte-nance, and future management. Aimed primarily at credit users, these work-

shops were conducted openly and were free to any community member inter-

ested in learning about the benets of sprinkler irrigation.

To date, the systems purchased and installed have worked awlessly. Tecsa-

gro has proved adept in modifying product design to the needs of target small

producers, and has been very willing and able to work on plots as little as four

acres. Often these small plots are divided among multiple producers.

5. Disbursement of loans and building of the credit culture

The project initiated four training and information events on loan manage-

ment and credit culture aimed at avocado producers from the district of Lu-

ricocha and pea producers from the District of Tambillo. A total of 69 people

participated in these events, and the three nancial institutions involved in

the project-- Edycar, Agrobanco and Los Libertadores Rural Savings and

Loan-- presented their micronance products, credit terms and managementapproaches.

The 100 % loan repayment from the 37 producers was undoubtedly the most

signicant achievement of this initiative. None of the payments arrived late, and

the producers assumed total responsibility for the loans. Indeed, the producers

never felt as though the government would ultimately forgive the debt or heal

any responsibility for loan repayment.


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6. Publications and marketing materials

To scale up the project, two teaching guides were prepared for use by PSI and

municipal governments. One guide illustrated the benets of sprinkler irriga-tion, as well as the main components of the system. The second guide concerned

the operation and maintenance of the pressurized irrigation system.

LESSONS LEARNED

As with any new initiative, there are many lessons to take away in order to en-

sure future scale up and replication. In addition, lessons learned point to weak-

nesses that need strengthening or paths for advocacy efforts. Lessons from theProductive Water pilot are outlined below and divided into ve sections.

Financial institutions:

1. Barriers to agriculture lending are high and likely to remain

Though three nancial institutions participated the pilot initiative, they were-

- and still remain-- very hesitant to continue with the agriculture loan program.

It is important to note that the pilot included several risk-reducing initiatives,including the establishment of a guarantee fund with Edycar, the preparation

of business plans, and the completion of technical studies on the land proposed

for the irrigation systems. Despite these seeming guarantors, risk aversion on

the part of the nancial institutions was and continues to be a major hurdle.

Thus from a sustainability perspective, overcoming nancial-institution risk

aversion is the most challenging aspect of this project.

In order to access credit producers had to complete a technical study of theirland, had to be organized into a producer association, and had to present their

past history devotion to improving their specic value chain through increased

crop production. In addition, the nancial institutions required land titles and

a demonstrated credit history. Without these two key documents, nancing

was much more difcult for a small producer to obtain. The following criteria

were obligatory for a small farmer to access credit:

a. Organized association

b. Land Title


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c. Demonstrated Household income

d. Participation in viable VC Demonstrated past productivity

e. National ID card for each HH memberf. Documentation that you work as a farmer

g. Business plan demonstrated opportunity

h. Larger individual plots or linked plots

Financial institutions are more willing to provide small producers with nan-

cial services if there is a guarantee fund. The existence of a guarantee fund, how-

ever, does not automatically translate to loan approval. Indeed, the nancial

institutions that were interviewed repeated that the farmers increased creditworthiness was due to a combination of factors: a guarantee fund (in the case of

Edycar), CAREs capacity-building work with the small producers, and busi-

ness plans articulating the viability of increasing crop output using irrigation

systems.

2. Social mission and operational structure are likely to affect a productive partnershipwith a nancial institution

If nancial institutions are highly decentralized and if they are guided by aprominent social mission, they are more willing to develop and pilot an ap-

propriate loan product. For example, EDYFICAR, a large but decentralized

MFI with a clearly articulated social mission, extended 31 loans to a variety of

small producers. In contrast, Agrobanco, a centralized and national agricultural

bank, was not as exible to extend what it deemed to be risky loans to small

producers.

3. Reducing operational costs and riskFinancial institutions decided to reduce operational costs and risk by transfer-

ring funds directly into the irrigation-technology supplier accounts. This deci-

sion not only beneted the nancial institutions but was advantageous for the

small producers, as well. Indeed, it signicantly reduced externalities, such as

transportation costs, and therefore, increased the possibility for small-producer

participation.


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4. Government has a strong role to play and has incentives for supporting similar initia-tives

The task of the government in an initiative like Financing Water is crucial be-cause it denes the actors roles and responsibilities. Once government is in-

volved, other actors feel obligated to commit to their mandate. A key aspect of

cultivating a credit culture is educating loan recipients and the general com-

munity about loan products and the responsibilities of their repayment. This

message is especially important because the Peruvian government has forgiven

loans, undermining true understanding of the meaning of credit.

NGOs:

1. An NGOs role is to serve as mediator and convener

NGOs are powerful convening actors for new initiatives. Additionally, they

serve as mediators, effectively mitigating constraints that might otherwise pre-

vent project implementation. An NGO, however, should not completely remove

the risk of participation for any party.

Acting in the capacity of convener and mediator, the NGO should assist in clari-fying the implementing actors roles from the beginning. Dening these roles

initially and continually reviewing them through a participatory process can

ensure sustainability. Having key actors articulate and internalize their agreed

upon roles will only allow for further sustainable actions.

2. Identify and target early adopters to avoid lost opportunities and investments

Understanding the reasons why some producers are likely to be early adopt-

ers of the irrigation technology while others are prone to be late adoptersshould be examined further and better understood. Designing a tiered-engage-

ment intervention, one which recognizes the early/late adopter phenomenon,

would lead to improved outcomes. Under the Financing Water pilot, early ef-

forts to work with 20 small avocado producers overlooked this issue, conduct-

ing a technical study on the producers behalf based on their apparent com-

mitment to working with the project. When the costs of building the reser-

voir were subsequently revealed, however, 13 of the producers backed out. The

remaining 7 forged ahead but took on additional nancial risks to do so andthe project had expended precious resources on a group that was not ready to


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invest in the systems. By requiring a higher level of initial investment on the

part of farmers or using other qualitative techniques to ensure commitment to

the process, projects can improve results and reduce unproductive investments.If the intervention is successful, late adopters will certainly come on board. In

the Peru example, the 13 farmers that exited before investing are now paying

the other 7 to access their reservoir and also exploring credit opportunities to

build their own.

3. Take a broad lens when looking at stakeholders and potential partners

Taking a broad lens to the questions, who is a stakeholder and who has an

incentive to support or thwart this effort from the projects onset is likely tolead to more sustainable project approaches and systems. By establishing a

larger pool of potential partnerships, projects have increased opportunities to

match the needs of target beneciaries with those of others or, in other words,

nding win-win opportunities. They are also able to identify opportunities to

go beyond one-off deals and catalyze systemic changes. By analyzing the op-

portunities, activities and incentives of various stakeholders, NGOs are better

positioned to facilitated changes or improvements in the system. In CAREs ex-

perience in Peru, the project worked to understand the motivations of a range ofactors and pursued partnerships where they found the most interest in work-

ing together and investing. A number of these proved to be unsustainable but,

by taking a broad lens from the start, the project had approached enough actors

to be able to adapt over time.

Government actors:

1. Use of a Technical Coordinator

The Mesa Tecnica-- under the direction of the regional governments DPA--

can play a crucial role in the understanding and dissemination of key informa-

tion around existing and potential markets; different input suppliers; and gov-

ernment initiatives. Additionally, it can help in value-chain coordination and

technical support specic to the producers value chain. The Mesa Tecnicas

support in the areas of market development and the cultivation of business

skills is especially important because not all producers have innate business

acumen.


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2. Clear role of the government in supporting the agriculture sector

In the Financing Water Initiative case, the various actors roles were nebulous

from the onset. However, a collective understanding of the respective mandatesof government institutions or agencies can improve their ability to engage in

aligned opportunities that surface through NGOs or other stakeholders.

It is also important to note that government agencies with specic mandates

can play a supporting or lead role. For example, including PSI as an actor pro-

vided the CARE technical-irrigation specialist support in implementing the

technical studies. Moreover, PSIs national experience with improved irrigation

systems and its specic technical capabilities added expertise to the studiesand augmented regional knowledge.

3. More sub-ofces with their own priorities

Composed of 12 agencies located throughout Ayacucho, the DPAs decentral-

ized structure allows for focused attention to specic crops or products in

distinct areas. Each agency works with a value chain specic to a geographic

area. These value chains include: tara, quinoa, native potatoes, milk products,

avocado, livestock, citrus fruit, bananas, cacao, and coffee. This decentralizedstructure provides the opportunity to gain highly specialized knowledge in and

an in-depth understanding of a variety of value chain systems.

Producers:

1. Producers are just as risk adverse as a nancial institution and condence must beinstilled for small producer credit acquisition

Even when provided with technical support and the opportunity to improve theirirrigation methods through an appropriate loan product, producers remain hesi-

tant to access credit. Experience from the Water Financing Initiative demonstrat-

ed that it was benecial to identify a producer-leader. As an early adopter of the

irrigation technology, the producer-leader would serve a role model for his fellow

producers. His improved crop yields and subsequent increases in prot would in-

still greater condence and encourage more producer participation, as well.

As the experience of a producer-leader illustrates, many producers must see[something] to believe it. Because they lacked evidence that sprinklers and


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reservoirs would increase their crop yield, the producers were reluctant to take

out a loan in order to invest in the unfamiliar technologies. However, the in-

volvement of an agronomist and a technical irrigation specialist in the devel-opment of personalized business plans assuaged the producers fears. Indeed,these experts presence conrmed the validity and the protability of the newirrigation systems, which engendered the producers condence. Additionally,

the personalized business plans gave the producers a sense ownership in theirloans and pride in their investments.

2. Seize opportunities where the government already took a big step

This pilot highlighted the advantages of integrating existing infrastructure. Theregional government had already constructed water channels and was in the

process of building more. The producers and other stakeholders were able to

surmount the challenge of water access by taking advantage of the infrastruc-

ture provided by another stakeholder. Involving multiple stakeholdersin this

case the regional governmenthelped to overcome the potentially signicant

challenge of a main water connection and ultimately allowed the producers to

successfully irrigate their crops.

3. There is still room to include the extreme poor

The extreme poor are unlikely to directly participate in an initiative like Financ-

ing Water because they lack the assets required to access credit. However, their

participation in productive value chains should not be discounted. Producers

able to invest in improved irrigation can provide employment for the extreme

poor. With the extra income generating from improved crop yields, these pro-

ducers can hire the extreme poor to help in the elds and collect the harvest.

As described, the extreme poor are included in productive value chains. How-

ever, their rather indirect role raises important questions:

1.) How can the extreme poor be better included in an initiative like Produc-

tive Water given its focused on productive and protable value chains?

2.) How does credit, a critical component of the Productive Water Initia-

tive, apply to the extreme poor?

3.) How is it possible to prove to nancial institutions that individuals(those not poor, poor, and extremely poor) are engaged in a protable

value chain? What kind of approach is needed?


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An answer to Question 3 will engender more trust in the producers repay-

ment ability and thus make the nancial institutions more willing to invest in

them with appropriate loan products.

Working with the private sector:

1. The right partner is key

Finding a private-sector partner whose strategy coincides with the projects

objectives will enhance its outcome. A demonstrated willingness and ability

to work with the target population, as well as the provision of appropriately

designed technology will improve the private-sector partners public visibilityand ensure customer satisfaction. Word of mouth is still an important form of

advertising.

2. Flexibility in a partner is important

Not all producers need the same irrigation system to improve their crops. A

smaller rmespecially on pursuing a growth strategy is more likely to be

willing and able to design a specic product. CAREs experience with Tescagro

is illustrative: The Company had not previously operated in Ayacucho, but tookadvantage of the project to expand operations into the region.

3. Skills transfer starts with everyone

It is important to work with a private sector actor who is willing and able

to undertake some responsibility in educating target clients about the prod-

ucts value and use. This type of participation, coupled with post-installa-

tion technical support, created a winning client-outreach/marketing plan for

Tescagro (the input supplier), the producers, and CARE (the coordinatingpartner).

RECOMMENDATIONS

The following represent both general recommendations for similar initiatives

aiming to go to scale and project-specic recommendations which were devel-

oped during the research phase of this case study. They are presented here to

illustrate general points.


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1. Develop, and base activities on a comprehensive market understanding

Ensure your project has an effective understanding of the value chains in which

you are working. This understanding should begin at the level of the input andsupport-services suppliers, and continue through to the nal consumer. This

understanding is critical not only for the success of the project at hand, but also

to ensure that the intervention uses scarce resources as strategically as possible.

In the CARE Productive Water pilot, the team sought to achieve this market

understanding through an initial market assessment and subsequently through

close coordination with the DPA, which consistently tracks value chain op-

portunities across the region and serves as a market-information hub. This ap-proach ensured the intervention was closely aligned with prevailing market

needs and allowed the project team to focus on its areas of expertise working

with producers, stakeholder engagement and irrigation system design. Looking

forward, however, concerns loom about the ability of the target beneciaries to

understand and adapt to emerging and future changes in end-market demands

and trends. Similarly, there are concerns about a transition to scale. Indeed two

questions arise: one about which actors will drive the projects momentum and

a second about the potential consequences of doubling regional productionwithout a greater depth of engagement with other actors in the value chain and

an understanding of end-market demands and trends.

Recognizing this, CARE Peru should consider pursuing the following activities:

x Conduct-- or facilitate an alternative partners management-- of a series

of meetings with buyers operating in the region. This would enable the

project to better understand the perspective and motivations of these ac-tors, as well as their perception of market trends. It may also illuminate

opportunities to facilitate buyer participation in improving producer ac-

cess to improved farm-level irrigation systems.11

x Engage other organizations that provide information and other services

to value-chain actors in order to improve competitiveness and the over-

all market understanding of the producers. (I.e. Industry associations

and initiatives such as AgriNegcios Peru - www.agrinegciosperu.org,)

11 For instance by providing producer groups with credit guarantees, value chain nance or by develop-ing some form of mutually-benecial agreement with producers and other key stakeholders.


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2. Engage stakeholders in developing the exit strategy

For an exit strategy to succeed, all stakeholders must recognize and prepare for

the facilitators exit as well as take ownership in roles they have, both incentiveand the capacity to fulll. Having demonstrated that producers are willing and

able to repay and that, through improved on-farm irrigation, they are able to

double their yields, CARE Perus focus has switched to ensuring these dem-

onstrations translate into sustainable access to nance and irrigation systems

equipment for producers. Achieving this will require a bit of rapid adjustment

on the part of CARE Peru.

Though the project team has long envisioned their exit strategy, its vision hasnot necessarily been shared equally with all stakeholders at this point. The

rationale for this has been that it was unclear exactly which roles various ac-

tors would and could take on given the limited experience of all stakeholders

in working on this challenge. Presenting potential stakeholders with typecast

roles at the outset of the project was likely to deepen their sense of insecurity

rather entice them to participate. Having overcome this issue, the established

roles must now be validated, and the stakeholders must recognize and move to

ll the service gaps that will remain when CARE retreats.

As an initial step toward achieving its exit strategy, CARE should:

Facilitate or convene a stakeholders meeting at which CARE Peru and the

other actors can collectively map their current roles and responsibilities in

order to continue with the pilot. They should identify and develop plans

to address gaps that will emerge with CAREs exit, as well. The meeting

may also provide opportunities to further fortify existing relationships androles of these stakeholders, demonstrating the strength of what has been

achieved to date.

Support DPA in establishing an irrigation mesa technica. DPA has al-

ready voiced a plan to create such an ofce, but as of yet, is unclear on what

that ofcer would do. CARE Peru should guide DPA as it makes this deci-

sion. As the self-identied information hub in this system, DPA could

play a strong and ongoing role in drawing together relevant actors around

issues of improved on-farm irrigation, taking on many of CAREs currentresponsibilities.


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3. Look for opportunities to inuence or leverage larger-scale development initiatives

As a relatively small effort to go the last mile in connecting a public resource

to private resources, the Productive Water pilot team has consistently workedwith larger-scale national and regional initiatives, including the national invest-

ment plan and the regional irrigation systems development project. This has

planted the seeds for further scaling the project, while also improving CAREs

ability to affect future policy to ensure that benets reach down to the extreme

poor and other highly marginalized groups-- a core element of the organiza-

tions mission.

In the coming nine months, recommendations in line with this principleinclude:

x Identify the benchmarks set in the forthcoming PSI Sierra Project and

ensure that the individuals CARE has supported are prepared to partici-

pate at that level. Here it is important to recognize that the new initia-

tive gives preferential treatment to larger groups of water users in order

to the lower the cost per beneciary.

4. Be realistic on project length. Be strategic on project timing

Though initially conceived as an 18-month initiative, the CARE Peru Produc-

tive Water pilot took nearly three years to execute. A general recommenda-

tion is that projects should be realistic about how long a pilot of this degree of

complexity will take. Though it was possible to accurately predict the amount

of time required to complete many of the technical aspects of the project (land

surveys, systems installation, etc) at its root, this pilot-and other enterprise

development projects using a facilitation approachwas about behavior changeacross a diverse range of stakeholders, almost all of whom were beyond CARE

Perus authority. Though behavior change can be stimulated in various ways,

setting realistic timelines for a projects ability to affect long-entrenched behav-

iors and ways of operating is vital for accurate timing, and ultimately, project

success. While of the project activities were predictable behavior change, re-

gardless of scale, is not a quick process. Projects and donors should recognize

this and ensure project timelines include enough space experiment, validate

and integrate.


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A related issue that affected the overall length of the pilot was the timing of

activity introduction. CARE began operating shortly after the rainy season. In-

ducing producers to invest in irrigation systems during a period of abundantwater, somewhat unsurprisingly, led to more limited interest than would be

likely in the lead up to or during the dry season. As with all agricultural initia-

tives, getting the timing in sync with the seasons can have a substantial impact

on the projects potential for success.

5. Focus on quick wins but do not lose sight the ultimate target

A core element of CARE USA and consequently CARE Perus strategy is to

improve the lives of women and the disadvantaged. Yet women representedonly 20 percent of project participants, and the extreme poor were not repre-

sented at all. These statistics reect the projects strategic necessity to focus

on inuencers and those who could act quickly and successfully on the oppor-

tunity to work with CARE on the pilot. Traditional roles meant this strategy

pushed CARE toward working with slightly better off, largely male producers

that held positions of respect and inuence in their communities. Doing other-

wise would likely have led to lower initial numbers of successful participants

and would have reduced the demand the pilot created among producers thathad not yet acquired an improved on-farm irrigation system.

Despite the general absence of women and the extreme poor, the project has

provided an opportunity to continually reinforce that the notion that improv-

ing the lives of women and the high disadvantaged are the ultimate goals of

CAREs actions and that until these are met, the participating stakeholders have

not truly succeeded. Similarly, for other initiatives working on behalf of the ex-

treme poor or other highly disadvantaged groups, introducing a new technol-ogy may often require that initial efforts target beneciaries that are better off

and more capable of affecting their peers. However, this does not preclude the

implementer from constantly reinforcing the ultimate objective and from build-

ing ownership of this concept among other stakeholders.

6. Do not be afraid to walk away

Partner selection is one of the most critical aspects of a development activity,

and attempts to improve access to term nance for producers are no different.In identifying partners for the Productive Water pilot, the CARE Peru team


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was challenged to ensure secure and dedicated partners without committing

to take on larger shares of projects responsibilities and thus undermine the

sustainability of the model. It was apparent during this process that some -nancial institutions and some producer groups were moderately interested but

had substantial reservations. The CARE Peru team decided to work with these

actors anyway, and in more than one instance, invested substantial time and

resources into partnerships that were unlikely to succeed from the outset, and

ultimately, did not.

The recommendation that emerges from this experience is that partner selec-

tion criteria be further developed and rigorously adhered to. For nancial insti-

tutions, this might include assurances that the branch engaged in the activity is

willing and able to design a new product and offer it on a pilot basis. For pro-

ducers, it may include a minor co-investment in each step of the intervention

process in order to clearly demonstrate commitment. These criteria should also

incorporate parameters for walking away from a potential partnership. Devel-

oping, rening, and using such criteria will ensure that cost effectiveness and

sustainability remain cornerstones of any intervention.


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CARE Peru, an afliate of CARE USA, has been working in the country since 1970

and in the target region, Ayacucho, since 1995. CARE Peru interventions focus on

economic development, maternal health and climate change. Given the relatively

limited amount of ofcial development assistance directed to Peru and due to the

countrys own increasing resources and capacity, the CARE Peru strategy is to

leverage its experiences across the country to affect local, regional and national

policy. This action to advocacy approach includes engagement at all levels of gov-

ernment.

Within Ayacucho, CARE Peru has an existing portfolio of ve distinct economic

development initiatives, of which the Productive Water pilot is one (see text box).

The project builds off earlier experiences in Ayacucho, enhancing the highly prot-

able guinea pig production chain, collaborating with Frito Lay to develop a con-

tract-farming scheme and partnering with a range of stakeholders to increase accessto potable water in the region.

Financing Water Project Role: CARE was the initiator of the Productive Water pilot

project. In this role, the organization worked to engage and support all other part-

ners and, through a combination of facilitation and direct technical assistance, de-

velop the model and move the project forward. The ability to effectively balance

the risks and concerns of this diverse array of partners was a key element to the

projects overall achievements. Link: www.care.org.pe.

ANNEX

Partners Breakdown

CARE Per


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Financial institutions

With a focus on micro-entrepreneurs and small businesses, the EDYFICAR missionis to provide nancial services to people with few economic resources and thus con-

tribute to improvements in their quality of life. The institution was established as an

EDPYME (Entidad de Desarrollo y de la Pequea y Micro Empresa)12 with support

from CARE Peru in 1997, and transformed into Financiera EDYFICAR, a publicly

traded, non-bank nancial institution in 2008. It has been operating in Ayacuchosince 2002. The Product Water pilot represented one of a number of EDYFICARs

initial forays into rural and agricultural lending.

EDYFICARs mission, combined with the latitude provided to the branch managerto test this product and the exibility demonstrated from the outset, solidied the

institutions place as a partner from the start. Link: www.EDYFICAR.com.pe.

Financing Water Project Role: Financiera EDYFICAR designed and piloted a new ag-ricultural loan product that enabled farmers to access the credit necessary to pur-

chase and install irrigation systems for their farms. The product EDYFICAR devel-

oped offers eight- to nine- month loans of up to $1500 with a three-month grace

period after which payments are required on a monthly basis. With the support of

a guarantee fund from CARE, the loan was offered at a 2.5% monthly interest rate.

The rate will be raised to 3% as the guarantee fund is phased out.

EDYFICARs willingness to place trust in the process and its exibility in adapting

its traditional loan products to the needs of the initiative were vital to the projectssuccess and served as a demonstration for partners added later in the process.

Established in 1994 by a group of agricultural producers, merchants, and small en-

terprises, Caja Rural Los Liberatordes is a private, nancial company. The enter-12 Micro and Small Enterprise Development Entity.

Financiera

EDYFICARFinanciera EDYFICAR

CAJA

Los Libertadores Caja Rural Los Libertadores


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37

prise has ve operating branches in Aycucho and offers a range of savings and credit

products that are focused on meeting the needs of low-income clients in both rural

and urban areas.

Caja Rural Los Libertadores presence in the region and its mandate to meet the

needs of the rural poor t well with the projects objectives. Its subsequent willing-

ness to work collaboratively with the project to develop a new nancial product

made it a strong partner, as did its ability to offer this product without the necessity

of a guarantee fund establishing a separate model for nancing productive water

use.

Financing Water Project Role: Caja Rural Los Libertadores designed and piloted a newagricultural loan product that enabled farmers to access the credit necessary to pur-

chase and install irrigation systems for their farms. The product developed offers

loans of up to $670 at a 2.7% monthly interest rate and a six-month grace period.

Loans are repaid in full at the end of the six-month period. Los Libertadores will-

ingness to place trust in the process and its exibility in adapting their traditional

loan products to the needs of the initiative were vital to the projects success. Link:

www.libercaja.com.

Agrobanco is a national, public agriculture bank with a branch in Ayacucho. The in-

stitution offers both direct and indirect credit designed to improve access to credit

among micro, small, and medium enterprises. Direct credit, along with technical

support is provided to producer groups able to demonstrate protable integrationwithin an agriculture, livestock or other-agribusiness value chain. To reach micro-

enterprises, Agrobanco commonly provides lines of credit to other nancial inter-

mediaries (banks, cajas rurales and municipal governments and EDPYMES), which

are then lent to microenterprises engaged in agricultural value chains.

Financing Water Project Role: Although initially seen as a strong potential partner.due

to a high degree of risk aversion and centralized decision making process, during

the pilot it became apparent that Agrobanco was unable to adapt its traditional

lending methodology to the majority of the producers the intervention aimied to

Agrobanco


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serve. As a result, Agrobancos role was limited to providing two loans to clients

with larger plots of land and resources, both of whom had already met Agrobancos

lending criteria. Link: www.agrobanco.com.pe.

Public sector

The Directorate of Agrarian Promotion in the Ministry of Agriculture (DPA-

MINAG) is a regional-government ofce responsible for, among other things, coor-

dinating and supporting value chain development. DPA-MINAG currently works

across 12 value chains and has ofces in each of Ayacuchos 11 provinces. The ofce

elds proposals from local, municipal government to conduct agriculture-related

studies, which if approved, are funded through the national public investment fund

(Sistema National de Inversiones Publicas or SNIP). This process allows DPA to estab-

lish and maintain a regional understanding of both the opportunities and the con-

straints inherent in improving agriculture productivity and value chain develop-ment in the region.

As the leading governmental institution mandated to improve agricultural produc-

tion and competitiveness in the region, engaging DPA was never in question on the

part of the project team. The question was one of developing the most appropriate

role through mutual consultation. DPAs eagerness to be engaged in the process

particularly once it had begun to show some resultswas and is critical to scaling

the initiative.

Financing Water Project Role: DPA-MINAGs principle contribution to the projects

success was its role in convening Mesas Technicas. These stakeholder round-

tables (convened by regional governments throughout Peru) helped to identify

and develop approaches to overcoming constraints in high-potential value chains.

In addition to bringing actors together, the Mesa Technicas serve as a key avenue

through which market information is shared with actors up and down the vaule

chain. Link: www.regionayacucho.gob.pe.

Directorate of Agrarian Promotion,Ministry of Agriculture


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A national program implemented with support from the World Bank and the Japa-

nese Bank for International Cooperation and operated by MINAG, the Programa

Subsectorial de Irrigaciones (PSI) leads national efforts to increase the protability

of agribusiness through improvements in efcient water usage for productive pur-

poses through improved irrigation systems. PSI was established in 2005, at least in

part to address past failures in irrigation schemes, which were traditionally devel-

oped and executed at the regional level, without the benet of nation-wide experi-ences upon which to draw. The initial focus of PSI was limited to the coastal areas

of the country, though it has since expanded, establishing an ofce in Ayacucho in

2007. A scaled up presence, titled PSI Sierra, is currently being planned in collabora-

tion with the World Bank. Link: www.psi.gob.pe.

PSI entered the region in 2007 after the project had been initiated. However, their

presence provided the opportunity to engage a national-level entity in developing

and further nancing local infrastructure. Thus, the decision to reach out to the

program was instinctive. The resulting partnership has been mutually fruitful, as

PSI will play a key role in the pilots further development, and has already begun

doing so by reviewing the proposals of regional governments.

Financing Water Project Role: PSIs principle role in this pilot was to review farmer

business and irrigation plans and subsequently approve the conduct of technical

studies. In addition, the pilot served as an opportunity for the regional PSI repre-

sentative to identify modalities through which it could effectively work with the

farmers in the Sierra.

Private sector

Tecsagro

Tecsagro is a private, Peruvian company established in 2004. The enterprise has a

presence in 12 regions across Peru and promotes innovative technology use, princi-

pally focused on improved access to potable water and irrigation systems. A smaller

actor in the water technology sector, Tecsagro sees servicing the MSME market as a

strategic-niche opportunity, as well as a means of incorporating social responsibil-

PROGRAMA

SUBSECTORIALDE IRRIGACIONES

Programa Subsectorial deIrrigaciones (Sub-Sector

Irrigation Project)


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ity into its work. The company is currently in the process of opening a branch ofce

in Ayacucho.

Tecsagros alignment with the objectives of the project, demonstrated past experi-

ence trying to serve this population, and vast array of highly adaptable solutions

made them the most appropriate irrigation technology with which to partner.

Financing Water Project Role: Following a competitive bidding process run by CARE

Peru, Tecsagro was selected as the projects irrigation-systems supply partner.

Under the Productive Water pilot, Tecsagro worked closely with the CARE Peru,

various nancial institutions, and farmers associations to develop memoranda of

understandings, tailor mutually-benecial nancial products, provide some techni-cal training to farmers and procure and install working irrigation systems based on

studies developed by CARE Peru agricultural engineers. Link: www.tecsagro.com.


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GDP: Gross Domestic Productx

NGO: Non-Governmental Organizationx

VRAE: Apurmac and Ene River Valleyx

DPA: Directorate of Agrarian Promotionx

MINAG: Peruvian Ministry of Agriculturex

PSI: Subsectoral Irrigation Programx

MIPYME: Micro, Small and Medium-sized Enterprisex

USAID:x The United States Agency for International Development

DNI: National Identity Documentx

GPS: Global Positioning Systemx

MFI: Micronance Institutionsx

AGROBANCO: Peruvian Agrarian Bankx

VC: Value Chainx

COFIDE: Development Finance Corporation S.A.x

Acronyms


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financing water for productive use

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