Funding irrigation development in Kenya with special reference to funding by the Smallholder Irrigation Scheme Development Organization, M.K. Gakundi

M.K. Gakundi
General Manager, Smallholder Irrigation Scheme Development Organization, Kenya

Formation of the smallholder irrigation scheme development organization
Objectives of SISDO
Start up of SISDO operations
SISDO loan programmes
SISDO's achievements
Impact of SISDO loan programmes
Sustainability of SISDO programmes
Constraints
Lessons learnt

Formation of the smallholder irrigation scheme development organization

The economy of Kenya relies on Agriculture. Eighty percent of the country is arid or semi-arid. In the arid and semi-arid areas sustainable agriculture can only be achieved through well planned and operated irrigation. The Government of Kenya has identified irrigation as an important tool for improving food self-sufficiency and enhancing household incomes in the rural sector.

In the past, irrigation development has had the following characteristics:

· Projects were identified by donors or donors determined the project location.

· Projects were designed by expatriates attached to the donor community who also supervised the implementation, operation and maintenance works.

· Projects were funded almost virtually by donor funds.

· Projects were identified more or less on an ad hoc basis and there was very little or no participation by the beneficiaries in project preparation and development.

The result of the above approaches was that projects were implemented on the basis of their potential for development rather than on demand for the facility. Many of the projects are no longer in operation and farmers are awaiting outside support to revive these projects. Some projects are operating very inefficiently while others are still operating but rely on outside support.

In 1989, the Ministry of Agriculture (MoA) conducted a review of irrigation development. It was evident that donor funds were becoming increasingly limited. It was also noted that those projects implemented earlier, without full farmer participation were not sustainable and were a continuous drain on the government funds. The MoA created the Smallholder Irrigation Scheme Development Organization (SISDO) to manage a revolving fund for irrigation development. This organization also ensured farmers' participation in planning, implementation and operation of irrigation projects.

SISDO was formed in 1991 with the assistance of the MoA and the approval of the Ministry of Finance and Economic Development. The organization signed a memorandum of understanding with the MoA setting out how it would operate in development of irrigation activities. Currently the organization is an independent body with its own management and Board of Directors.

Objectives of SISDO

The organization's main objective is to improve the standard of living of smallholder farmers/groups by assisting them to develop and manage sustainable income generating projects without having to seek outside assistance.

The organization aims to create a revolving fund from which farmers can borrow for scheme development without having to always rely on donor funds.

Start up of SISDO operations

SISDO began major operations in 1992. It started with projects earlier identified by the Ministry of Agriculture. Some of these projects were ongoing and needed either rehabilitation or upgrading. Currently the organization is working on projects identified by the beneficiaries but it still relies on irrigation and drainage project profiles drawn by the Irrigation and Drainage Branch (IDB) of the Ministry of Agriculture.

During the few years of operation, the SISDO has realized that maximum results are achieved when there is cooperation with all organizations involved in similar activities -government, non-governmental institutions and the communities.

SISDO loan programmes

SISDO is currently involved in the following programmes:

i. Development of group-based irrigation projects developed with and managed by the farmers.

ii. Development of pump-fed irrigation systems for individual farmers in clusters.

iii. Provision of farm inputs to groups of farmers in irrigation schemes (normally women who make up the majority of agriculture farm workers).

iv. Provision of high grade milk cows farmers' groups. This is the high stage for farmers who have excelled in utilization of farm input loans.

SISDO plans to become involved in:

i. Provision of credit to small-scale traders in rural and urban centres for various enterprises.

ii. Lending to individuals for irrigation development. Involvement in this area has become necessary as a result of the numerous requests received from individual farmers for irrigation development.

In 1995 the Cooperative Bank of Kenya agreed to handle lending issues while SISDO concentrates on identification and preparation of groups who could be assisted and in follow-up during loan repayment period. Other commercial banks have expressed interest to work with SISDO. Under this scheme:

· SISDO will deposit a guarantee fund to the bank equal to 70% of the project cost. This ratio will be reduced as smallholder credit worthiness is proved through good loan repayments.

· The farmer will contribute 15% of the project cost and deposit it with the Bank. Thus the loan required is 85% cash secured.

SISDO is working to sensitize commercial banks to also start providing credit to smallholders, hence the cooperation.

SISDO's achievements

Achievements in Infrastructure Loan Programme

SISDO has prepared and assisted farmers to install irrigation infrastructure in five schemes which are already operational. These include:

· Mukurira Kiambongo in Meru
· Mwethya Muveleki in Makueni
· Kagati in Nyeri
· Mbanya in Machakos
· Ciambaraga project in Tharaka Nithi

Repayment has started in Mukurira Kiambongo, Mwethya Muveleki and Kagati.

Many other projects are in various stages: preparation, surveys, designs, farmers training/mobilization and repayment of security fund. The following four are in the final stages prior to implementation.

· Mwicuiri project in Karatina region is in the final stage of raising the security fund. Surveys, designs and tendering have been finalized and a contractor identified. Construction is due to commence in April, 1997.

· Ruungu project in Meru region is being implemented.

· Tumaini and Matangini projects in Machakos region are under preparation. They have contributed the necessary security fund of Kshs 500/- per farmer for famine relief areas. Implementation is planned to begin in 1997.

SISDO has prepared and financed one group of 17 farmers in Mitunguu Irrigation to replace their outdated and malfunctioning irrigation equipment (pipes and sprinklers). A second group is being prepared. Tables 1 and 2 show the organization's achievements and the progress of the irrigation infrastructure loan programme.

Achievements in Farm Inputs Programme

Fifty-four groups from Makueni, Meru, Kirinyaga and Nyeri have received credit for farm inputs. Some of the groups are on their second and third loans. Groups range from 20-35 members with loans varying from Kshs 3 000 to Kshs 15 000 per farmer depending on the area to be cultivated. Loan repayments have been good with most groups achieving 100 percent repayments on time. The achievements and progress of the farm inputs programme are shown in Table 3.

TABLE 1 Achievements in irrigation infrastructure loan programme

Project	District	Value (Kshs)	Status
Mwethya	Makueni	728,730.00	Project implemented Loan repayment in progress - 74 percent repayment
Muveleki		63 farmers
		30 acres
Mukuria	Meru	704,949.50	Project implemented Farmers repaying loan since Nov '95 Repayment rate 100 percent
Kiambongo		15 farmers
		15 acres
Kagati	Nyeri	2.2 Million	Project implemented Farmers repaying loan since Aug. 96. Repayment 100%
		41 farmers
		41 acres
Ciambaraga	Tharaka Nithi	10.2 Million	Designs and Tendering have been finalized Construction work in final stages.
		135 farmers
		135 acres
Mbanya	Makueni	1.2 Million	Construction works finished in November, 1996 Loan repayment to start in January 1997
		63 farmers
		30 acres
Ruungu	Tharaka Nithi	4 Million	Preparation of design and tender documents finalized Tendering done in Aug '96 Construction in progress.
		160 farmers
		160 acres
Mwicuri	Nyeri	15 Million	Designs and tender documents ready Farmers finalizing payment of security fund
		250 farmers
		125 acres
Total		33.2 Million
		727 Farmers
		536 Acres

TABLE 2 Progress in Irrigation Infrastructure loan programme

TABLE 3 Implemented/funded projects (as of February, 1997) farm inputs

Project	District	Date disbursed	Amount disbursed	Amount payable	Amount repaid	Balance
Sagana	Nyeri	June 93	626 974	739 829	204 754	524 785
Mwireri	Nyeri	June 93	184 568	217 790	230 073	0
Wendani	Nyeri	June 93	125 321	212 843	214 287	0
Warumwe	Nyeri	June 93	218 961	258 374	264121	0
Karikoni	Kirinyaga	June 93	90 000	90 000	60 317	29 683
Nyakio	Kirinyaga	June 93	75 000	75 000	41 881	33 119
Mugumo 1	Kirinyaga	June 93	151 175	178 000	178 800	0
Gitaga 1	Kirinyaga	June 93	181 410	214 062	214 560	0
Ragati 1	Kirinyaga	June 93	154 645	182 481	183 375	0
Arimi 1	Meru	June 93	389 467	411 970	152 039	259 931
Mugumo 2	Kirinyaga	June 93	47 988	55 800	55 800	0
Gitaga 2	Kirinyaga	June 93	49 536	57 600	57 600	0
Ragati 2	Kirinyaga	June 93	17 716	20 905	20 600	305
Ivuao	Makueni	Apri 94	90 550	106 849	91 112	15 737
Kiumoni	Makueni	Apri 94	90 550	106 849	94 812	12037
Wikwatyo	Makueni	Apri 94	90 550	106 849	90 512	16 337
Kaliani	Makueni	Apri 94	90 550	106 949	96 512	10 437
Mugumo 3	Kirinyaga	Apri 94	98 647	116 403	50 706	65 697
Gitaga	Kirinyaga	Apri 94	77 062	90 933	56 700	34 233
Ragati 3	Kirinyaga	Apri 94	63 167	74 537	32 199	42 338
Waraza 1	Nyeri	Oct 94	280 810	331 356	322 775	8 581
Kimahuri	Nyeri	Oct 94	351 090	414 286	345 000	69 286
Mwicuine	Meru	Oct 94	125 946	136 444	108 960	27 484
Mwangaza 1	Nyeri	Mar 95	234 780	277 040	273 000	4 040
Wendani	Nyeri	Mar 95	53 054	62 604	39 995	22 609
Mwireri	Nyeri	Mar 95	8 643	10 199	10 050	149
Warumwe	Nyeri	Mar 95	34 983	41 280	21 373	19 907
Mwicuine	Meru	Mar 95	44 132	44 132	0	44 132
Arimi 2	Meru	Mar 95	205 470	227 707	168 490	59 217
Rongai	Nyeri	July 95	214 631	253 265	94 500	158 765
Mwangaza 2	Nyeri	July 95	195 900	231 162	105 000	126 162
Kabati 1	Nyeri	July 95	183 936	217 044	189 841	27 203
Mwihoko	Nyeri	July 95	211 443	249 503	0	249 504
Mugumo 4	Kirinyaga	July 95	19 000	228 920	228 920	0
Gitaga 4	Kirinyaga	July 95	2 411 756	285 272	285 272	0
Ragati 4	Kirinyaga	July 95	114 339	134 920	67 122	67 798
Waraza 2	Nyeri	Oct 95	211 850	276 120	92 000	184 120
Mima	Nyeri	Oct 95	157 380	183 000	110 000	73 000
Kuugagwika	Nyeri	Oct 95	280 881	322 846	322 846	0
Gatagati	Nyeri	Oct 95	184 800	210 660	120 000	90 660
TaaUta	Makueni	Dec 95	57 975	66 092	66 092	0
Wuumisyo	Makueni	Dec 95	51 018	58 161	61 222	0
Kikalini	Makueni	Dec 95	55 656	63 448	63 067	381
Nzyawa	Makueni	Dec 95	57 975	66 092	66 092	0
Muuo	Makueni	Dec 95	46 056	52 504	55 267	0
Kilome	Makueni	Mar 96	32 112	37 620	28 640	8 986
Kwasau	Makueni	Apr 96	28 625	34 194	34 931	0
Munyaka	Kirinyaga	May 96	216 000	246 240	218 025	28 215
Mbuani	Kirinyaga	May 96	216 000	246 240	227 941	18 299
Mugumo	Kirinyaga	June 96	180 000	205 200	215 826	0
Gitaga	Kirinyaga	June 96	240 000	273 600	222 874	50 726
TaaUta	Makueni	July 96	30 400	34 656	0
Gitero	Laikipia	July 96	112 762	128 549	0	128 549
Kahuhoi	Nyeri	Nov 96	210 000	239 400	0	239 400
Kabati	Nyeri	Nov 96	99 890	114 000	0	114 000
Kuuga na g	Nyeri	Nov 95	191 519	209 502	88 025	121 477
TOTAL			8 078 130	9 422 779	6 555 881	2 900 467

TABLE 4 Achievements of zero grazing programme

Project	District	Date disbursed	Amount disbursed	Amount payable	Amount repaid	Balance
Mugira 1	Kirinyaga	May 95	352 000	540 320	139 885	400 435
Muruguru	Nyeri	May 95	442 400	844 250	194 026	650 225
Mugira 2	Kirinyaga	May 95	88 000	135 000	17 009	117 991
Muteitha	Meru	May 95	448 600	626 568	171 900	454 668
TOTAL			1 331 000	2 146 138	522 820	1 623 318

TABLE 5 Progress in ISH programme

Project	District	Date disbursed	Amount disbursed	Amount payable	Amount repaid	Balance
Kwandara	Muranga	Feb 93	917 388	1 408 191	41 664	1 366 527
Kaweru 1	Muranga	Feb 93	699 287	1 073 406		1 073 406
Gura 1	Nyeri	Feb 93	326 189	500 700		500 700
Mwiria 1	Embu	Feb 93	444 656	682 547		682 547
Mwiria 2	Embu	Dec 94	231 299	355 044		355 044
Kuweru 2	Muranga	Dec 94	699 287	1 073 406		1 041 706
Gura 2	Nyeri	Oct 95	213 750	328 106	24 742	303 364
TOTAL			3 531 856	5 421 400	522 820	5 323 294

TABLE 6 Summary of status of projects by SISDO

Programme	implemented schemes	Final stages of preparation	Initial stages of preparation
Gravity infrastructure	6	6	12
Individual pump-fed and in-field units	37	54	30
Zero Grazing Units	32	20	36
Farm inputs groups in irrigation schemes	54	30	33

Zero grazing programme

This is a new loan programme which arose from the farm inputs programme. The farmers involved in this programme produced large quantities of agricultural by-products. Consequently, high milk yielding cows were identified as a good way to make use of these by-products. The programme is however not restricted to the farm inputs groups. It caters for all smallholder farmers who need cows and whose climatic conditions are suitable for maintaining high grade cows. The status of this programme is given in Table 4.

Many groups are in the preparation stage in Meru, Nyeri, Kirinyaga, Muranga, Embu and Makueni.

Achievements in pump-fed programmes

Four groups, one in Embu, one in Nyeri and two in Muranga, have received credit for pump-fed irrigation systems. The status of this programme is shown in Table 5. A summary of status of projects funded by SISDO is shown in Table 6.

At present SISDO is dealing with 2 200 smallholder farmers who will benefit from the projects. The land area to be utilized by farming groups amounts to 1 700 acres. Loans worth Kshs 25 million have been disbursed.

Training

In February 1996 the Relief Society for Tigray (REST), an Italian Government Organization, requested SISDO to train and expose Ethiopian-funded REST staff to operations of SISDO. Training was successfully conducted both in the classroom and in the field.

Impact of SISDO loan programmes

SISDO has assisted many groups and in the process it has disbursed Kshs 25 million worth of credit. Seventy-four groups with a total of 1 947 members have received credit, five projects with 600 members have been assisted to install irrigation schemes, seven groups with a membership of 37 families have been assisted to acquire equipment for pump-fed irrigation, 54 groups with 1 277 members received credit for farm inputs, four groups with 96 members received credit to keep high grade cows. Another 4 groups with 44 members received credit for pump-fed irrigation systems.

The farmers assisted have a more reliable supply of food and are earning cash incomes from the sale of their produce. The country is earning foreign currency from export of the horticultural crops grown. Farmers see agriculture as a commercial enterprise and they are able to make rational decisions on what crop to grow, where to market the produce, negotiate marketing and farm inputs supply agreements. They can now have and manage bank accounts. They have developed communal responsibility through the group guarantee network system.

It is currently difficult to quantify the benefits arising from loans disbursed by SISDO. However the following are noteworthy.

Training in commercial agriculture

It is very clear now that smallholder farmers assisted by SISDO view agriculture as a commercial enterprise. They are able to develop cost and income projections and are able to make rational decisions on farming e.g. what crop to grow, where to market the produce, negotiate marketing and farm inputs supply agreements.

Training in financial management

Farmers involved with SISDO are trained in financial management. They are trained in the importance of saving and being self-reliant. Most of the farmers can now handle their own bank accounts. The farmers have also developed communal responsibility through the group guarantee network system.

Creation of cash economy, etc.

SISDO loans are aimed at making agriculture commercial. Where loans were disbursed, farmers have been able to make profits of up to Kshs 45 000 per season from 0.5 acre land portions and loans of Kshs 10 000. Farmers have therefore entered into a cash economy and are now able to purchase items they hitherto could not afford. Indeed farmers state that they are now able to:

· afford proper clothing;

· meet school fees demands better than before;

· start up of other commercial ventures, shops, etc.; and

· buy or get directly from the fields, high value foods, notably vegetables and roots (sweet potatoes in Kirinyaga) and milk for the zero grazing groups.

A review of SISDO activities is necessary to document its successes, note its failures and advise on expansion.

Sustainability of SISDO programmes

Before SISDO disburses any loan, beneficiary training is held on the following areas:

· development on cost recovery;
· saving to create development fund; and
· management for operation and maintenance

It is hoped that a group assisted by SISDO will have developed enough savings to finance future developments on its own after 3 years. SISDO would still be available for specialized more capital intensive projects.

Further, SISDO aims at becoming financially independent (able to operate without donor funds) by the year 2000. At this time, the organization aims at developing enough long term loans to generate interest to defray the organizations operational costs. At the same time projects developed now, will have begun substantial repayments to create enough funds for new developments.

Table 7 shows loan repayments since 1993. The years 1991 and 1992 were formative years while in 1993 SISDO was mainly involved with experimental loans. SISDO requires funds to create a development fund for project funding between now and 2000.

TABLE 7 Loan repayments: 1993 - 1996

Year	Loans disbursed	% repayment	Remarks
1993	3 986 814	30	Mainly experimental loans
1994	1 687 078	73	Start of long-term loans
1995	5 440 966	54	Mainly long-term loans in grace period
1996	13 673 137	31	Mainly long-term loans in grace period

Constraints

SISDO has been faced with three main constraints, namely:

i. lack of funds for development purposes;
ii. farmers negative attitude towards credit; and
iii. continued funding through grants for activities which SISDO is funding on credit.

Lack of development funds

SISDO has exhausted its funds available for disbursement, for two main reasons.

· The loan repayment period for irrigation and zero grazing projects is 3-4 years. However, the fund has only been operational for a short period (1.5 years) and as such, repayments to date are not sufficient for disbursement.

· Donor and financial support has not been forthcoming as initially expected.

If further funding is not available immediately, the organization will have to concentrate on recovery of disbursed loans only - more disbursement will not be possible. The Organization requires Kshs 150 million to meet its expected disbursement target in the next 4 years (1997-2000), after which funds loaned out to long-term programmes will have become eligible for further lending.

Farmers attitude towards credit for development

Initially there was a negative attitude towards credit for development due to the past experience. At that time all funds came from donors and GoK grants. However, this negative attitude is slowly changing and demand for credit for development is increasing.

Continued funding on grant basis

The government and other NGOs continue to provide grants for activities SISDO is funding through credit. This arrangement creates a misunderstanding as farmers believe that they can wait for grant funding, for example, in the Taita and Taveta Nyambene districts. There is need for clarification of funding policy to remove this misunderstanding.

Lessons learnt

Since SISDO has been in operation, several lessons have been learnt. These include:

· Establishing appropriate interest rates based on costs rather than on philosophical reasons.

· Need to develop appropriate action for dealing with defaulters and fraud by loan staff.

· Need to have impact performance indicators.

· Credit is not only provision of money but also involves equipping borrowers to use it wisely. A loan constitutes a burden and should empower rather than burden the borrower.

· The need to be conscious of gender sensitive issues at the household level as it relates to credit. These issues should be incorporated in training programmes on lending. It is also important to sensitize the private financial sector to these challenges. Innovation and testing of Micro finance must continue as these are unique from community to community.

· The concept of micro credit contradicts the conventional view held by large banking and private sector institutions that collateral is necessary for credit. This concept has been demonstrated by the numerous requests from various groups for credit. Micro credit goes beyond lending money and includes participation in social transformation.

· Handouts are not the solution to poverty and are a further degradation of mankind; credit provides dignity.

· As opposed to corporate loans, micro credit provides direct advantage to families and communities, by enabling members to take control of their lives rather than depend on charity.

· Most people in developing countries live in poverty and micro credit is a sure way of helping them become independent and self-reliant. This assistance requires capacity building and raising awareness of recipients so that funds can be used properly.