MANAGING RISK THROUGH ECONOMIC DEVELOPMENT (M RED) IN NEPAL. Case Study on Disaster Risk Reduction and Economic Development Nexus Projects

Transcription

1 Chet Bahadur Tamang / Mercy Corps MANAGING RISK THROUGH ECONOMIC DEVELOPMENT (M RED) IN NEPAL Case Study on Disaster Risk Reduction and Economic Development Nexus Projects MAY 2016

2 Table of Contents Executive Summary 3 Purpose 4 Program Description 5 Impact 10 Lessons Learned 18 Recommendations 19 MERCY CORPS Nepal M-RED: Case Study A 2

3 Executive Summary The Managing Risks through Economic Development (M-RED) program is a 5 million dollar, 3.5 year, multicountry program in Nepal, Timor-Leste, and Indonesia. The program aims to build resilience of vulnerable communities by reducing the human and economic toll of natural disasters while simultaneously reducing poverty. Mercy Corps took a systems-based facilitation approach to design and implement M-RED, ensuring that communities not only have plans to cope with the next disaster, but also make critical investments and build relationships instrumental to their success, while influencing the disaster policies and practices that impact their long-term resilience. M-RED piloted the innovative nexus model of integrating disaster risk reduction (DRR) and market systems development (MSD) to incentivize the sustainability of DRR activities, while giving vulnerable communities the opportunity to increase their incomes. M-RED implemented two innovative nexus interventions in Nepal: Planting sugarcane on silted and erosion-prone riverbanks of the Terai (flood plains) to prevent river cutting (DRR) while making productive use of marginal lands, and generating income (MSD) Planting fodder species in marginal lands of hilly areas to mitigate the impact of erosion on soil and slopes (DRR), while also contributing as an input for the growing dairy sub-sector (MSD) The program identified three pivotal factors that constrained the sugarcane and dairy markets in the M-RED target areas: lack of information and skills regarding production and management of sugarcane and livestock; weak supply chain linkages for input supplies; and non-existent or weak market access to industry-level buyers. M-RED leveraged this knowledge to gear program activities towards building technical and financial capacity of supply chain actors, and facilitate supply chain and market linkages. Several key lessons emerged from implementing the nexus interventions in Nepal that could benefit those interested in pursuing similar market systems development programs to increase long-term, sustained DRR impacts: An integrated approach CAN work to make DRR interventions sustainable with market-based economic incentives. But, it is not a quick fix. Ensuring joint DRR and income generation prospects requires more than one solution and should be context specific. Expertise in multiple economic sub-sectors and additional DRR support is needed, in addition to investment of time for facilitation. Direct economic incentives are the best approach. Direct incentives give traction that more quickly result in easily recognizable benefits, and thus faster up-take of program activities. Building an enabling environment is key to developing market systems. A good approach needs to consider: social capital; priorities and concerns of all stakeholders; and access to finance and microinsurance, amongst other inputs and services. It s the HOW you do, not what you do. Taking the facilitative approach to improve linkages (social capital) among stakeholders is what made the M-RED interventions successful. A high level of facilitation is required, especially at the beginning. MERCY CORPS Nepal M-RED: Case Study A 3

4 Purpose The Managing Risks through Economic Development (M-RED) program is a 5 million dollar, 3.5 year (December April 2016) multi-country program in South East Asia. The program aims to build resilience of vulnerable communities in Nepal, Timor-Leste, and Indonesia by reducing the human and economic toll of natural disasters while simultaneously reducing poverty. Mercy Corps has been working in Nepal for over a decade, with experience in the distinct technical areas of both disaster risk reduction (DRR) and market system development (MSD). Through M-RED, Mercy Corps is pioneering the integrated approach of combining DRR with MSD. The integrated approach emerged in response to the shortcomings of traditional DRR programs that focus on early response, but are far less effective at mitigating the economic losses suffered by poor communities. In addition to building DRR capacity, M-RED is piloting two nexus interventions in Nepal that simultaneously reduce disaster risk while generating income; in this way, the DRR outcomes have an economic incentive. This Case Study compiles our experience of implementing the nexus interventions in Nepal. In particular, the study examines and compares the effectiveness of economic incentives in supporting long-term sustained DRR outcomes of the two nexus interventions in Nepal, with focused analysis of private-sector engagement in DRR and MSD. Through this Case Study, we intend to inform and share lessons we learned from M-RED s innovative approach within Mercy Corps, and with peer agencies and program stakeholders who want to pursue similar resiliencebuilding approaches. BACKGROUND Nepal is both food insecure and disaster prone. Nepal s annual monsoon brings flooding and landslides, with evidence that climate change is adding to the severity and frequency of these events. The Far West districts are the last to receive monsoon rains that travel from east to west. The hilly areas of the Far West are prone to incidences of draught as well as flashfloods and landslides. The Terai (flood plains) experience river cutting and flooding that damage productive land. The Far West region of Nepal also has the highest rate of poverty in the nation, with communities comprised largely of marginalized groups and ethnic minorities. 12 Baseline studies of the program revealed 50.5% of the target population to be under the poverty line (PPP 2005: $1.25/day) and 11.6% to be below the USAID Extreme Poverty Line. The young mountain ranges give rise to earthquakes, regular rock falls and landslides, and contribute to severe and unpredictable rainfalls that have severely affected the poor farming communities of this region. Unable to sustain as farmers, migration of rural men to urban centers and to foreign countries has become a national issue in Nepal. The Government of Nepal has endorsed a number of key legislative documents and community-level planning processes in support of its target of 1,000 Community-Based Disaster Risk Reduction projects working with Village Development Committees (VDCs). However, allocation of dedicated resources or community-level implementation has not been fully realized, as there is no functional government structure at the community level through which funds can be channeled (the VDC structure has never fully recovered from the Civil 1 Country Poverty Analysis Nepal, ADB < 2 Regional Dimensions of Poverty and Vulnerability in Nepal, Department of International Development and UKAID < loads/ attachment_data/file/209483/regional-dimension-poverty-nepal-background.pdf> MERCY CORPS Nepal M-RED: Case Study A 4

5 War). District Authorities and a number of line departments do have funds available, which they allocate where they see opportunities and community capacity to handle them. The case of Nepal demonstrates the shortcomings of traditional DRR. Despite the scale of the problem, many communities in Nepal remain unprepared. While some standard DRR projects have benefited disaster prone communities and sub-districts, the sustainability of these efforts has often been limited without economic incentives, links to government support and capacity across scales, and proper analysis of the root causes of vulnerability. Program Description The Managing Risks through Economic Development (M-RED) program was designed and implemented by Mercy Corps to tie DRR with strategies that build economic security and increase incomes in the Nepali Far West. M-RED is building DRR and income-generating capacities of 40 hazard-prone and povertyaffected communities. These communities lie in the flood plain (Terai) districts of Kailali and Kanchanpur, and the hilly districts of Baitadi and Dadeldhura. Out of 3,248 households engaged in the program,1,176 are exclusively engaged in two economic sub-sectors identified as nexus interventions. KANCHANPUR BAITADI DADELDHURA KAILALI M-RED s programming was guided by Mercy CHINA Corps resilience philosophy of building diverse connections and relationships among NEPAL people, communities, and the systems that support them to plan, prepare, and manage KATHMANDU for change in times of increasing complex and INDIA dynamic crises. Taking a systems approach, BANGLADESH the program design was informed by a combined set of assessments; this included a vulnerability and capacity assessment (VCA), a community-level participatory disaster risk assessment (PDRA), and a market assessment. These specifically analyzed livelihoods and economic development opportunities, emphasizing the overlap of hazard risks, ecosystems, livelihoods, and markets. The results of the combined assessments found distinct differences between the Terai (plains) and the hilly target areas. Flooding in Terai is the priority hazard, affecting lives and livelihoods. River cutting and deposits of sand both affect agricultural land, resulting in less land holding and declining production. Migration to India for seasonal work is a recurring phenomenon as the productivity of the Terai lands have been in continual decline; production from farmland in the area is insufficient to meet annual food needs. In the hilly districts, flash floods, landslides, and soil erosion are the major hazards affecting livelihoods. In the hilly district of Dadeldhura, the target communities are located in a highly erosion-susceptible watershed where boulders and sand are carried by flash floods and deposited on agricultural lands. The communities in the valley are highly dependent on food MERCY CORPS Nepal M-RED: Case Study A 5

6 imports and labor migration to India to meet their annual food consumption needs. Based on these assessment findings, M-RED prioritized interventions that could protect land against river cutting in the Terai, and could conserve or utilize marginal lands (i.e. silted land). In the hilly districts, the program prioritized utilization of marginal lands for landslide mitigation. NEXUS SUB-SECTOR SELECTION The amalgamation of a market assessment, the VCA, and the PDRA determined viable economic sub-sectors to prioritize, which have both market potential and hazard mitigating potential. The sub-sectors were identified through a participatory process that involved key stakeholders from local government departments of water management, agriculture, livestock and fisheries, soil conservation, forestry and environment, as well as representatives from the target Community Disaster Management Committees (CDMCs). The following two subsectors were prioritized as M-RED nexus interventions in Nepal: A A Sugarcane sub-sector identified as a nexus intervention for the Terai areas to prevent river cutting, make productive use of marginal lands, and generate income. As sugarcane withstands inundation and helps to retain soil/trap sediment to build up the soil along riverbanks (DRR), and is a viable cash crop with a growing market (MSD), it is considered a direct nexus intervention. Planting fodder species (Amriso/broom and Napier grasses) in marginal lands of hilly areas was selected as a nexus intervention to mitigate the impact of erosion on soil and slopes, while also contributing fodder for improved dairy production in the hilly communities. These grasses are an effective way to retain soil and stabilize landslide-prone slopes (DRR). They are also a nutritious source of fodder for buffalo and dairy cows, which can support a growing dairy sub-sector in the hilly areas (MSD). The fodder is not directly sold in the market, but is an input to dairy production and serves to incentivize the application of risk-reducing grasses on unstable slopes. This sub-sector is considered an indirect nexus intervention because the fodder is indirectly linked to the market potential through resulting dairy products. MARKET SYSTEMS DEVELOPMENT A detailed Participatory Market Mapping 3 and sub-sector analysis revealed three factors that constrained the sugarcane and dairy markets in the M-RED target areas: 1. Lack of information and skills regarding production and management of sugarcane and livestock. Some communities planted few sugarcane species that were vulnerable to pests and diseases, while other communities were not planting any sugarcane. In the hilly area, local cattle breeds were raised following traditional practices that barely met households daily consumption needs, and often left no surplus for sale at the local village market. 2. No or weak supply chain linkages for input supplies. Farmers lacked knowledge of and access to financial services such as loans and insurance, as most insurance companies were reluctant to insure hazard-prone areas. Given farmers low knowledge of technical products and services, and Agrovets (local provider of basic animal health and agriculture technical support services) weak technical capacity, interaction between farmers and Agro-vets was non-existent or minimal. In addition, both the District Agriculture Development Office (DADO) and the District Livestock Service Office (DLSO) have 3 Practical Action < MERCY CORPS Nepal M-RED: Case Study A 6

7 limited staff capacity to provide technical and financial assistance outreach to farmers. 3. No or weak market access to industry-level buyers. Access to market was identified as a core constraint for both sugarcane and dairy farmers. In Kailali, after the only Sugar Mill in the district closed down in the late 2000s, farmers in the area experienced irrecoverable losses and feared losing any new investment especially farmers with plantations in hazard-prone areas. A sugarcane-processing factory is located in Kanchanpur District. Some communities in Kanchanpur were already cultivating sugarcane and connected with this processing factory before M-RED. However, communities had not cultivated sugarcane on marginal/silted lands. Khaptad Dairy Industry Pvt. Ltd., one of the largest plants in the region, had been collecting milk from a cooperative s chilling center in Dadeldhura for a few months prior to M-RED. However, the milk was only transported once in 7-10 days (400 liters per collection) because of the low volume of milk collected by the chilling center and the fact that Khaptad Dairy lies over 100 km away in Kailali. This lengthy wait, in addition to load shedding of electricity, had led to spoilage of milk and incurred losses by the chilling center. Baitadi still remains cut off from industry-level dairies that only have a domestic market. FLOW OF RESOURCES BETWEEN STAKEHOLDERS FOR NEXUS PROJECTS PRIVATE SECTOR PROCESSORS AND BUYERS (sugar mill, molasses mill, chilling center, dairy) CASH TECHNICAL & PRODUCT SERVICES PRODUCTION FACILITATION SUGARCONE PRODUCTION FARMERS WELFARE PROTECTION (SPFWP) FARMER FIELD SCHOOL (FFS) (produce, sugarcane, fodder, dairy) AGRO-VETS KNOWLEDGE & INFO GOVERNMENT (DADO / DLSO CASH KNOWLEDGE & INFO TECHNICAL & PRODUCT SERVICES TECHNICAL & PRODUCT SERVICES CASH NEPAL INSURANCE COMPANY MERCY CORPS Nepal M-RED: Case Study A 7

8 M-RED INTERVENTIONS IN THE SUGARCANE SUB-SECTOR DIRECT NEXUS Build technical capacity and facilitate supply chain linkage: M-RED facilitated linkages among seed suppliers, Agro-vets, millers, farmers, and insurance providers. Technical staff from the Sugar Mill and the program developed a training module encompassing production and management of sugarcane. The module covered the varieties, timing, irrigation and protection for marginal soils. Existing Agro-vets in each district were trained under this module by technical trainers and were also given agent certification training on micro-insurance by the Nepal Insurance Company (NIC). Agro-vets were empowered to carry out three functions to build knowledge and capacity of farmers: suppliers of agricultural inputs (seeds, fertilizers, pesticides, etc.); providers of technical service through program-supported Farmers Field School (FFS), and commissioned agents of microinsurance. Through Agro-vets trainings and demonstrations to farmers, farmers increased their capacity and knowledge of financial management and a range of farming practices and strategies, including disease and pest management, fertilizer application, improved seed variety (sugarcane, sweet potato, banana, chilies, etc.), off-season crop types, inter-cropping strategies, and river-bed farming in the winter. With increased awareness and support from other stakeholders, the CDMCs cultivated sugarcane on 115 acres of silted/sandy lands in the first year of the program. This was a novelty for all stakeholders, as sugarcane (let alone any kind of crop) had never been deliberately planted in riverbanks to reduce the risk of flooding and to generate income. Foster market linkages: The program identified investors to establish a mill in Kailali. With support from the program, a private investor established a Molasses Mill. In Kanchanpur, the program supported the Sugar Mill to conduct a feasibility study about buying sugarcane from M-RED target communities in Kanchanpur and Kailali. The program also convened and facilitated meetings among the Sugar Mill (in Kanchanpur), the Community Disaster Management Committees (CDMCs), Sugarcane Production Farmers Welfare Protection (SPFWP) Committee (where applicable), and DADO. A written agreement has been signed, with each counterpart contributing to facilitate the market. Coordination and facilitation have continued in Kailali between CDMCs and a Sugar Mill at the border with Kanchanpur. COST CONTRIBUTION OF THE PROGRAM = Entrepreneur /Private: 52% = M-RED Project: 38% = GON Office: 10% As a result of the agreement, DADO funded the establishment of demonstration plots for sugarcane plantation, and has been instrumental in raising awareness. DADO also supports CDMCs to purchase agriculture equipment through existing government programs and subsides. The Sugar Mill opened access to M-RED farmers and signed a contract to buy the CDMCs production. This reduced the cost of transportation for farmers and has helped build a sustainable market for their product. The mill also provides community-level training on optimal sugarcane growing practices supplies hybrid seeds, and transports press mud (fertilizer byproduct of sugarcane processing) from the mill to farms. The SPFWP Committee continues to work with the Sugar Mill to improve the payment process, in addition to maintaining roads of key transportation routes, and raising awareness about insurance and MERCY CORPS Nepal M-RED: Case Study A 8

9 nexus intervention benefits. The Sugar Mill and the Committee jointly provide technical and equipment support to farmers and monitor growth of the plantations. Finally, the program and DADO are jointly facilitating an interaction program on cane development amongst farmers to expand cross learning. M-RED INTERVENTIONS IN THE DAIRY SUB-SECTOR INDIRECT NEXUS Build technical capacity and facilitate supply chain linkage: M-RED s interventions improved production by introducing improved cattle breeds and shed management practices, and fodder improvements. Similar to the sugarcane nexus intervention, M-RED assessed the knowledge and skill gaps of farmers regarding livestock management to develop a training module. Technical experts from M-RED and the government (DLSO) trained the Agro-vets in the module, while the Nepal Insurance Company certified and commissioned them to be their agents. Through the Farmer Field Schools (FFS) and their services, Agro-vets became primary drivers of increasing farmers technical capacity. M-RED-trained Agro-vets taught farmers shed management practices and optimum feed practices (mixing feed, fodder planted for DRR, and mineral blocks), and organized health camps for the farmers. Through program interactions, Agro-vets raised awareness about micro-insurance as well. M-RED also compiled and disseminated a manual on dairy production and livestock management with information on breeds of cattle suitable for specific areas; care and management for each breed; disease and parasite control; and methods of producing clean milk. To build financial capacity of farmers, the program identified and coordinated with financial institutions in the district to extend their services to M-RED target areas. Village Development Committees (VDCs) were involved from the planning phase to integrate M-RED communities into the local government s annual plan and to raise awareness on government subsides. The program and DLSO jointly provided partial financial support to help farmers buy improved-breed cows (with insurance coverage), and build M-RED model stables. Chilling Center Owner, Kumbhar Budha, inistially used Khaptad Dairy s vehicle to transport milk to Kailali. He has now bought his own vehicle with a loan from Khaptad Dairy. In the first year of the program, leader farmers (with smart-subsidy) bought improved-breed cattle, built M-RED model stables to reduce degradation, and practiced better livestock health and shed management practices. M-RED further facilitated cross visits amongst farmers of different communities within and between the two districts to advance awareness of program activities and learning. Rigzom Wangchuk / Mercy Corps MERCY CORPS Nepal M-RED: Case Study A 9

10 Foster market linkages: M-RED facilitated meetings between Khaptad Dairy, the chilling center, cooperatives, and CDMCs to find solutions to improve market access and capacity of chilling centers. Khaptad Dairy agreed to support the chilling centers by providing logistical and technical support with other stakeholders. The Dairy initially provided a transport vehicle, travel allowance, storage cans, and crates, and then later gave a loan to the center to purchase a vehicle. The program and other stakeholders have supported the chilling center to purchase a generator and milk analyzers (for transparency and quality control). Khaptad Dairy invests in improving linkages with M-RED communities because of the high quality of milk produced in these areas. Higher milk quality is credited to a combination of improved-breed cattle and optimal rearing practices employed by M-RED farmers. Impact The quantity of sugarcane production has increased significantly within M-RED target communities over the life of the program. Farmers applied new knowledge to cultivate sugarcane on silted riverbanks with technical support from the Sugar Mill and Agro-vets hectares of silted land has been cultivated and a cumulative 36.5 hectares of land have been protected against river cutting and flooding. Farmers, as well as the District Soil Conservation Office (DSCO) and DADO, have reported improvements in soil quality. Communities sold $75,887 worth of sugarcane in the final year of the program almost double the revenue of $40,500 in the previous year. CDMCs developed business plans that project sugarcane plantation continuing to increase over the next few years. Farmers also plant a variety of crops that they use for consumption and sale. In Kailali and Kanchanpur, some CDMCs made a range of investments to benefit their communities, including purchasing or leasing more land to expand plantation and machinery (such as tractors, thrashers, trolleys, harrows, etc.). One community started giving informal loans from its Community Emergency Fund to earn interest. The sugar mill in Kanchanpur has increased its capacity, and another sugar mill has been established and is now also operating there. This indicates expansion of the industry and a high probability of continued demand in the future. While farmers in In 2010, extraordinary flooding wiped out homes, crops, and livestock of this community in Lalitpur, Kailai. All 45 families of the village were forced to move to neighboring communities, returning only to farm land that was still usable. In the final year of the program, all 45 households had returned and had begun cultivating sugarcane on riverbanks. They had invested in machinery (such as this trolley and thrasher) by using proceeds from the sale of sugarcane and loans they learned about through M-RED. Rigzom Wangchuk / Mercy Corps MERCY CORPS Nepal M-RED: Case Study A 10

11 Kailali now receive favorable prices from both the Molasses Mill and the Sugar Mill at the border in Kanchanpur, the Molasses Mill is very close to the target communities in Kailali but offers comparatively low prices, while the Sugar Mill is farther in Kanchanpur but offers higher prices. Transportation of sugarcane to the Sugar Mill and its associated costs remains a hindrance for the Kailali communities. During the first harvest of M-RED sugarcane, communities in Kailali were only connected to the Molasses Mill and thus had little bargaining power. Subsequently the CDMCs began negotiations with the Sugar Mill, and as a result the Molasses Mill became more competitive, increasing their price per quintal from Nepali Rupees up to 250 per quintal. The Sugar Mill offers Nepali Rupees 382 per quintal, from which Rupees 110 is deducted for transportation costs (resulting in approximately NPR 272 per quintal). However, the communities receive subsidies and aid from both the Sugar Mill and SPFWP Committee. Although negotiations for long-term understanding with the Sugar Mill are underway, time lags in payments remain an industry-wide issue, which leaves CDMCs opting to earn fast but lesser cash by selling to the nearby Molasses Mill. In Dadeldhura and Baitadi, both the number of improved-breed cows and production of milk have increased in M-RED target communities. Farmers applied their learned knowledge of cattle breeds and access to financial services (loans, government subsidies, and M-RED subsidy) to purchase 103 improved-breed cows. Most farmers have insured their improved-breed cows, and many are also now insuring their local-breed cattle. The farmers are practicing better shed management and are mixing the fodder planted on slopes with cattle feed to have greater control over cattle nutrition. Prior to M-RED s interventions, most farmers reported issues of lower quantity and quality (lower fat percentage) of milk production due to feeding with local grasses, using open grazing techniques. After M-RED trained on fodder and shed management practices, the farmers adopted new techniques to mix improved fodder with local grasses, other dry matter, and supplemental feed. All M-RED participant households have completely stopped the traditional practice of open grazing in favor of shed management practice. Farmers now report an improved quantity and quality (higher fat percentage) of milk produced. Two communities in Jalgada, Daldeldhura have been prioritized in the Government s plans. They have received electricity and drinking water after being linked to the district level development offices through M-RED s assessment, planning, and implementation phases. Rigzom Wangchuk / Mercy Corps MERCY CORPS Nepal M-RED: Case Study A 11

12 Both farmers and the chilling centers are selling more milk. With better capacity and more supply of milk 4, the primary chilling center is now transporting milk to Khaptad Dairy every other day. Responding to demand for better market access, two more chilling centers have been established by farmer cooperatives in proximity to their communities. Khaptad Dairy now collects 900-1,200 liters every two days from all of Dadeldhura. Prior to M-RED the capacity in Dadeldhura was just liters of milk collected every nine days. This represents a more than tenfold increase in dairy production quantity as a direct result of M-RED interventions with the communities, market actors, and local government. However, transportation issues with low fuel availability and rising costs of maintenance remain a constant barrier for the chilling centers. The integrated DRR and EMD model has effectively generated economic incentives for sustained risk reduction interventions for vulnerable communities. However, the timeliness and effectiveness of the model differ between the direct and indirect nexus interventions. Uptake and expansion of the nexus model has been more visible in the sugarcane nexus (direct DRR benefit and direct income generation) than the dairy-fodder nexus (fodder direct DRR benefit, but indirect income generation). Impacts of the market on DRR are difficult to prove in the case of the indirect nexus for two reasons: 1. DRR impacts of fodder plantation are difficult to demonstrate in comparison to sugarcane. Because of the intensity of hazards in the hilly areas, DRR interventions required more than fodder plantation on marginal slopes. 5 At the end of the third year, a total of 29 hectares of land had been protected in Dadeldhura through the use of mixed interventions (fodder plantations with enforcement of gabion embankment). Elimination of open grazing by M-RED farmers in M-RED communities has also contributed to slope improvement. Landslides are also difficult to monitor due to their complex causal factors and unpredictable timing.. In addition to landslides, draughts pose challenges to hillside farming. Significant fodder plantations in some areas were lost to draughts in the first and second years of the program. It also takes a whole year for the fodder saplings to yield, so the term of the program was not long enough to realize the full DRR impacts of fodder plantations alone on landslide-prone slopes. Contrastingly, the DRR impacts of sugarcane are quicker to realize and more visible this can be partly credited to the predictable nature of yearly floods as natural hazards in comparison to unpredictable and more complex landslides. Terai plains are also more stable than the fragile geology and ecosystems of the hills. However, it did take significant time and effort for the communities in Terai to understand the dual benefits of the nexus projects, and to be convinced to plant sugarcane on hazard-prone areas. Initially, the only way to convince the leader farmers was through advocacy of DRR benefits. Communities did not typically plant in the silted riverbanks, and were very skeptical of the ability to produce any cash crop in that marginal land. However, when farmers understood the risk-sharing approach of planting the sugarcane as a community, and realized how insurance could protect their investments, they were willing to try planting sugarcane on hazard-prone areas. And, as communities began seeing soil improvement and marginal damage by the river the following year, more farmers began to replicate. As linkages to local sugar mills and molasses mills were facilitated by the program, the economic opportunities with sugarcane were another important incentive for farmers. 4 The chilling center used to collect 18 liters of milk per day now they collect more than 500 liters per day. The chilling center has increased its capacity by purchasing another chilling vat. 5 In Jalgada, Dadeldhura, two CDMCs have planted 13,130 saplings of fodder on marginal land with program support and an additional 17,000 saplings through self and government support. They have also mixed 400 fruit saplings (mango, pomegranate, lemon, etc.) on hedgerow system for extra DRR leverage. MERCY CORPS Nepal M-RED: Case Study A 12

13 Farmers in target areas of Terai have replicated and existing farmers have scaled up the plantation. In 2014, only 40 hectares of marginal land was planted with sugarcane in Kanchanpur, with additional management interventions such as restriction of open grazing by cattle. In 2015, there was 100% area expansion of planting on marginal lands in the district. The quality and value of barren land itself has increased (as people recognize it is useful for productive purposes); the Lalitpur community noted this change. Seeing these results of DRR, soil improvement, and livelihood opportunity, Indian communities living downstream of M-RED target communities sought advice from M-RED and have replicated the model It is difficult to show the link between DRR and economic incentives for indirect nexus. Since both DRR results and economic gains from fodder took longer to surface in the hilly areas, farmers took much longer to realize the economic incentives to plant fodder for DRR. First, multiple factors contribute to the optimization of milk production improved feed is just one of them. The program had to show farmers the how all controllable factors for enhanced milk production from improved breeds such as better shed management practices, improved feed mix (planted fodder, traditional fodder, commercial feed, and mineral blocks), better health care, as well as improved milk collection and storage techniques work together to improve milk supply and quality. Over all, up-take of supply side M-RED activities took longer in the hilly areas than in Terai. It took two years to convince communities to invest in M-REDrecommended cattle and to follow the program-recommended management practices. Ten champion farmers were pivotal in demonstrating the production potential of the dairy industry to other farmers. However, financial support in the form of smart-subsidy from the program (to buy cows, construct new sheds, and insure their livestock) was required to incentivize leader farmers to take the initiative. Similarly, it took the collective effort of Agro-vets, District Livestock and Agriculture Offices, Mercy Corps and Red Cross staff, FFS, and select champion farmers to make communities understand the role of insurance. M-RED provided a smart subsidy for 103 improved-breed cows, as well as funds for a bundle of micro-insurance and Agro-vet health services, and to construct improved feeding sheds for any household that took a loan to purchase an improvedbreed cow. An additional 50 improved-breed cows were purchased independently, and all of those cows are also insured by the owners. One insurance company is now investing in a branch to better serve Dadeldhura and Baitadi Districts as a result of this early success with livestock insurance products. Although the number of improved-breed cows has now increased in these areas, natural demand constraints have impeded market up-take by the communities. Most farmers have already purchased one or more improved-breed cows without program support. Communities expressed that they Biju Bista of Dadeldhura is able to sell her morning milk, but the Chilling Center is unable to buy her evening milk. Says she will buy more cows if demand from Chilling Center increases. Rigzom Wangchuk / Mercy Corps 6 saveusfromriver.com MERCY CORPS Nepal M-RED: Case Study A 13

14 are willing and able to buy even more improved-breed cattle, but are not doing so because of the low confidence in market access. Communities have the capacity to meet the demand from Khaptad Dairy, and are aware of the dairy s unmet demands. However, communities distrust in collection capacity of chilling centers and transportation remains a critical obstacle to their full up-take. Given that the Terai are plain areas, transportation is comparatively more feasible and frequent than in the hilly distracts, with their winding and often unpaved roads. Although the sugarcane farmers do have transportation costs, they have access to low-cost transportation through the SPFWP Committee and do not have physical barriers like the dairy farmers in the hills. Overall, as the dairy sub-sector s market has not reached its potential, communities economic incentives to invest in fodder (one of many required factors to increase milk production) has not been fully stimulated. In addition, due to the relatively long timeframe required to see DRR impacts of fodder on landslide-prone areas, communities have not been able to fully link fodder plantation with DRR benefits. ANAYLSIS OF PRIVATE SECTOR ENGAGEMENT Thirty micro and small businesses or associations are supported by or closely involved with the nexus interventions. The private sector does not invest in DRR directly. However, using DRR benefits to advocate support from private-sector actors has been effective at garnering their engagement. Implementing staff and private actors themselves acknowledged that including private-sector actors as early as the assessment or planning phase of program activities has been critical in leveraging their long-term commitment. Moreover, resource sharing has helped build social capital and trust amongst stakeholders. The MOU between the CDMC farmers, Sugar Mill, SPFWP Committee, and M-RED implementers (Mercy Corps and Nepali Red Cross Society) is, in essence, an example of how such resource sharing builds social capital and ensures mutual benefits. Fortunately, M-RED has a flexible donor that has allowed the program itself to be flexible as it supports continual learning and iteration of program activities. M-RED s adaptive management practice enabled the program to add more stakeholders as needs arose and to align the program s priorities with the stakeholders. Through key interviews with private stakeholders, M-RED staff identified the following incentives as important drivers for private-sector actors to be part of the M-RED consortium: Sugar Mill: M-RED farmers grow quality species of sugarcane. Through the MOU, the Mill is guaranteed a stable supply of quality sugarcane every year. An indicator of the Mill s investment in M-RED communities is its provision of inputs and technical services to farmers. The Mill has more knowledge and technology regarding sugarcane farming than government organizations, thus their support has been very beneficial to the farmers. Khaptad Dairy: Located in Dhangadhi, Kailali, the Dairy can easily get milk from Terai. But they prefer to invest in M-RED communities in hilly areas, as the quality of milk is better than that from the Terai. The milk quality differential is primarily due to improved-breed cattle reared by M-RED farmers and the M-RED-recommended feed mix they utilize. M-RED farmers also have hygiene training and practice price-quality transparency by using milk analyzers at Chilling Centers. Currently, Khaptad Dairy collects and processes 1,500 liters of milk everyday it needs to collect 500 liters more per day to reach its breakeven capacity. The Dairy also has prospects of product MERCY CORPS Nepal M-RED: Case Study A 14

15 diversification in the future (including powdered milk for low-production months), so its demand will continue to rise. To ensure a regular supply of quality milk, Khaptad Dairy is keen on building a relationship with the CDMCs and investing in M-RED communities through the dairy sub-sector, predominantly by aiding the Chilling Center to improve market access. Chilling Center: Frequency of transportation has increased due to a higher volume of milk being collected and an increased travel allowance from Khaptad Dairy. This lowers the risk for the chilling center as incidences of milk spoilage have decreased significantly. M-RED-facilitated meetings with stakeholders have also resulted in cost sharing to improve market access, of which chilling centers are the principal linkage. Chilling centers have received investments and support from Khaptad Dairy and other stakeholders. Since the chilling center is owned by the cooperative, which is comprised of dairy farmers themselves, they too have benefitted from M-RED s capacity and knowledge-building trainings. They also benefit from the linkage to Agro-vets and micro-insurance. Bimla Devi Khati, Agro-vet in Dadeldhura, used to earn Rs. 5,000 Rs. 6,000 every year as an Agro-vet before M-RED. She now earns Rs. 20,000-Rs. 25,000 through her Agrovet business. This year, she also received Rs. 24,000 as commission from being an insurance agent of Nepal Insurance Company. Rigzom Wangchuk / Mercy Corps Agro-vets: Both demand and supply of Agro-vets merchandise has increased since becoming part of M-RED. Agro-vets report between 50%-75% increase in profit from sales and receive substantial commissions from the insurance company. Instructing at FFS allows them to cultivate relationships and boost demand for their products by raising awareness. Nepal Insurance Company: Although many insurance companies initially showed interest in new offerings for agriculture and livestock insurance products, many backed out because they assumed the risks were too high especially with sugar plantations on riverbanks. Nepal Insurance Company (NIC) was the only company willing to insure the sugarcane farmers and livestock. Micro-insurance products on crops and livestock existed but had not been applied because of the lack of people with technical expertise to run cost-benefit analysis valuations. NIC is now using rates calculated and recommended by M-RED s technical staff. M-RED has thus given NIC the opportunity to extend their micro-insurance products for the first time to farmers engaged in DRR.. Through M-RED, NIC has been able to expand to all four districts. The expansion to hilly areas is especially notable, as it was not possible earlier without Agro-vets as agents. Since awareness of microinsurance has increased, there is more demand from all areas. Thus, premiums from other areas are making up for M-RED s risky areas. The office in Kailali noted only 5% damage to insured crops thus far which, in the end, is not very risky. NIC opened a new branch in Dadeldhura this year. MERCY CORPS Nepal M-RED: Case Study A 15

16 Capacities for Resilience Absorptive Capacity: The ability to minimize sensitivity to shocks and stresses. In addition to the nexus DRR interventions (sugarcane on riverbanks and fodder on slopes), communities have also been supported to implement traditional mitigation projects (gabions, bio-engineered bamboo walls, etc.) and early warning systems where appropriate, and have been trained in disaster preparedness and response. Households have insured their crops and livestock. Disaster Management Committees have been formed. Each CDMC has established a Community Emergency Fund from the income generated from nexus products. Adaptive Capacity: The ability to proactively modify conditions and practices in anticipation of, or as a reaction to, shocks and stresses. Farmers now have knowledge of better agricultural practices through the Farmer Field School. For example, farmers now have the knowledge of cattle breeds and have financial capability to purchase breeds that meet their needs and environment. They are also more conservation minded, and many communities are now actively restricting open grazing of livestock to limit degradation of their landscapes. Farmers now have the knowledge, capacity, and relationships to make strategic decisions related to their production (not limited to nexus products) and finances. Households have diversified their livelihoods through different agricultural practices suitable for the changing climatic conditions, such as river bed farming; banana cultivation; intercropping of lentil and mustard with sugarcane; and intercropping of other vegetables with banana (peanut, sweet potato, turmeric, etc.). Farmers in both types of nexus communities have also experimented with different growing seasons and new agricultural methods to cope with unpredictable seasonal changes. Households and communities have higher aspirations and confidence, thus making them more adaptive in risky situations. Transformative Capacity: Creates the conditions to facilitate systemic change and a positive environment in which people are willing and able to invest and innovate, while managing risks. Transformative capacity addresses the underlying cultural, institutional, and learning dynamics within the system, enabling communities to absorb and adapt over the long term. Social capital between stakeholders of the nexus programs has increased; particularly among members of the DMCs and FFS. Linking the government and private sector has bolstered mutual investment. For example, the Chilling Center in Dadeldhura is receiving investments and equipment support from Khaptad Dairy, the government, and the communities. Informal and formal safety nets now exist for the communities. For example, micro-insurance services through Agro-vets (formal) and Community Emergency Fund by households (informal). M-RED communities are now integrated in the government s development priority plans and are MERCY CORPS Nepal M-RED: Case Study A 16

17 connected with district and community-level government officers. The communities are now aware of their rights and opportunities available from the government. Civic engagement, in the case of the SPFWP Committee, has also enabled sugarcane farmers to recognize their rights and has given them a voice. Communities have increased access to the market, and to input supplies and services. More than financial gains, I have gained skills and knowledge that will remain with me for a lifetime, - Mandhir Singh Bohara, Agro-vet Rigzom Wangchuk / Mercy Corps MERCY CORPS Nepal M-RED: Case Study A 17

18 Lessons Learned INTEGRATED APPROACH CAN WORK TO MAKE DRR INTERVENTIONS SUSTAINABLE WITH MARKET- BASED ECONOMIC INCENTIVES. BUT, IT IS NOT A QUICK FIX. There are limitations to the selected nexus sub-sectors. As seen in the case of the dairy sub-sector, fodder alone is not enough to mitigate the impacts of landslides. Even in the case of the sugarcane nexus, sugarcane embankments had to be enforced by bamboo walls and gabions. Sugarcane is not the best or only solution for every community impacted by flooding in the Terai, and fodder alone is not a sufficient solution for landslide prone communities. But both tested nexus solutions show promise, and will be better able to demonstrate effectiveness at mitigating disaster impacts if a typical Monsoon seasons occurs within the next couple of years. Ensuring joint DRR and income-generation results requires more than one solution; communities have varied contexts and livelihood profiles. However, with limited time, financial and human resources, one program cannot possibly tackle a multitude of nexus solutions. Expertise in multiple economic sub-sectors and additional DRR support would be required, in addition to investment of further time for community and market actor facilitation. It is therefore important to identify the most viable options for the majority of beneficiaries as a starting place; as M-RED did in this first 3.5 years of programming. DIRECT INCENTIVES ARE THE BEST APPROACH. Direct incentives give traction more quickly, as noted by the faster up-take of sugarcane plantation. Indirect incentives require more time and close follow-up to ensure that the market development aspect does not overshadow the ultimate aim (DRR in the case of M-RED). This was the challenge M-RED staff faced in implementing the indirect nexus, as dairy farmers were oriented primarily towards the income-generation incentives by increasing milk production and access to market. Even though nutritious fodder was one of many components to increase production, not enough beneficiary attention was given to the DRR benefits. Neither the economic nor the DRR benefits have been fully realized in the case of the indirect nexus intervention. While direct incentives are better at ensuring that both outcomes are achieved at community level, direct incentive options can be harder to come by. There are more products and techniques that can indirectly link disaster risk reduction to income or livelihood gains; while those that directly address both risk reduction and generate income are far harder to identify. WORKING WITH WELL ESTABLISHED MARKET ACTORS HELPS. If a well-established market chain already exists, such as the sugarcane market in the Terai (existing functional sugar mill in place when program started), the market is able to more quickly absorb new areas of production with relatively less effort on facilitation needed by the program. However, in more rural and hilly areas with very thin market (such as Baitadi District) where dairy market actors were not operational when the program started, it required much more time for facilitation and tracking opportunities for desired market linkages. BUILDING AN ENABLING ENVIRONMENT IS KEY. To build a value chain that can sustain DRR at community level, fostering an enabling environment for market actors is crucial. There are inherent constraints in the local markets that can limit overall effectiveness. A good approach needs to consider social capital; priorities and concerns of all stakeholders; and access to finance and micro-insurance, among other inputs and services. MERCY CORPS Nepal M-RED: Case Study A 18

19 IT S THE HOW YOU DO, NOT WHAT YOU DO. It takes both a significant investment of time and effort to change perceptions and behavior. Process is thus equally as important to numerical results. Taking the facilitative approach to improve linkages (social capital) among stakeholders is what made the interventions successful. Recommendations INTERVENTIONS SHOULD BE CONTEXT SPECIFIC As mentioned in the first lesson learned, there is not a single remedy for specific types of environments. M-RED s innovative success was a result of a series of detailed consultation processes (PDRA, VCA, market assessment, and the PMM) prior to selection of the sub-sectors for each target area. The program was also flexible to iteration as more information became available and contexts changed. ALIGN INTERVENTIONS WITH PRIORITIES AND INCENTIVES OF STAKEHOLDERS Markets should be assessed not only in terms of demand and supply, but also on priorities of private sector actors and government. M-RED was able to leverage engagement and investment from both the private sector and government by involving them early in the assessment and planning phases; and by ensuring alignment of M-RED s selected nexus interventions with growth sub-sectors prioritized by local government. HIGH LEVEL OF FACILITATION IS REQUIRED AT THE BEGINNING M-RED spent a lot of time and effort convening and facilitating meetings between stakeholders at the earliest stage of the program. Pivotal relationships and understandings have emerged from these meetings over time. Examples include the MOU among sugarcane stakeholders and joint support to improve market access in the case of the dairy sub-sector. However, the success of facilitation may depend on the context, and on the skill level of staff to facilitate linkages with actors in entirely new technical areas. Female farmers learning to prepare bamboo shoot cuttings to create a nursery in Kanchanpur. Deepak Aryal / Mercy Corps MERCY CORPS Nepal M-RED: Case Study A 19