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
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.
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.
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 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.
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.
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.
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 |
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.
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.