ETHIOPIA Country Technical Paper Framework for EC Food Security Thematic Program Innovative Approaches Annual Work Program Allocation to NGOs

Transcription

1 ETHIOPIA Country Technical Paper Framework for EC Food Security Thematic Program Innovative Approaches Annual Work Program Allocation to NGOs 1 Justification for the intervention Significant parts of Ethiopia are characterized by persistent food insecurity. While droughts and other disasters (such as floods) are significant triggers, more important are the factors which create and/or increase vulnerability to these shocks and which have undermined livelihoods. These factors include land degradation, limited household assets, low levels of farm technology, lack of employment opportunities and population pressure. Between 2005 and 2009, Government of Ethiopia and donors designed and engaged into a Food Security Programme (FSP), scaling up their level of intervention in the food security sector and incorporating and combining two main components: a large Productive Safety Net Programme (PSNP) and a set of developmental interventions under the component "Other Food Security Programme" (OFSP). This shift from the emergency system to a more predictable transfer system allowed, between 2005 and 2009, that more than seven million people have received PSNP transfers enabling them to meet consumption needs, reducing the risks they faced and providing them with alternative options to selling productive assets. In addition, about 1 million households (about 5 million people) received credit financed by the Government s Federal Food Security Budget Line and from the donor financed Food Security Project, for asset building. There is evidence that the combination of the two programmes is having an impact. Particularly in areas where programmes were properly combined and well implemented (indicated by a high level of transfers and adequate households targeting and coverage) household asset holdings have increased and crop production as well as livestock holding and income source, appear to have improved 1. The new phase of the FSP to be implemented between 2010 and 2014 has been designed taking stock from the lessons learnt in the first phase 2. In particular in the new Households Asset Building Component, an innovative approach for Ethiopia has been incorporated representing a significant effort to increase and extend the provision of technical services through the Agricultural Extension Department and the involvement of Micro-Finance Institutions (MFI) and Rural Saving And Credit Cooperatives (RUSACCOs) in the provision of sustainable financial services and products in chronically food insecure areas/woredas 3. In March 2010, decision has been made by the European Commission in the framework of the Annual Action Programme 2010 for Food Security to be financed under Article and Article of the general budget of the European Union, for the allocation of EUR 2,200,000 to Ethiopia, aiming, among others, providing a special allocation for chronically food-insecure countries transition to longer-term assistance. In Ethiopia, the EU already significantly supports the PSNP as one component of the FSP. HABP is the second component partially supported by donors in capacity building aspects. With 1 Gilligan et al An Impact Evaluation of Ethiopia s Productive Safety Nets Program IFPRI 2 Among them: in order to substantially increase food insecure households income and build their assets, households must be empowered to choose among a wide choice of options which respond to the various technical and entrepreneurial capacities and interests of the households; the extension approach must become more demand driven; the credit component lacked operational guidelines for implementers and faced challenges as funds were channelled through institutions that were not designed for financial service provision; financial products provided were restricted to credit for acquiring the inputs required for the technical packages, without saving facilities; very poor households were reluctant to take large credit, as were female headed households; off-farm investment and employment opportunities were not sufficiently promoted. 3 In the phase of the FSP, donors supporting the PSNP are: CIDA, DFID, EU, Irish Aid, RNE, SIDA, USAID, WB, WFP. Donors supporting HABP are: CIDA, Irish Aid, WB. 1

2 the present Call for Proposal the EU aims to provide discrete areas of support to the implementation of the innovative initiative represented by the HABP, through providing PSNP beneficiaries with alternative and accelerated pathways towards graduation, thus improving livelihoods of chronically food insecure households. 1.1 Background in the micro finance and extension services provision For much of the 1990s and early 2000s, the Extension Service was mobilized to implement a strategy based on supply-side constraints to agricultural growth, including the distribution of credit packages and inputs, and collection of credit at the end of the season. The strategy was implemented by a centralized promotion of technological packages mainly combining fertilizer, seed and technical advice. Distribution of fertilizers and improved seeds to farmers on credit basis and ultimately collection of credits was mainly carried out by Government structures, particularly by Development Agents (DAs), the latter often contradicting with the core tasks of the DAs, i.e. provision of extension services. At the same time, very limited extension promotion existed in pastoral livelihood areas. This experience has also showed significant gaps in the capacity of the key stakeholders that must be addressed if this radical change in direction is to be achieved. The RDPS policy document in particular, states that the use of government agencies to provide loans is not sustainable and highlights the urgency of developing proper rural finance mechanisms. It recognises that appropriate and timely rural finance is the critical missing element in rural development. Providing adequate, appropriate and timely credit is considered one of the means to break the poverty cycle and bring about sustainable development. Whilst there was a modest growth in food supply, it was increasingly recognized there was a need for generating more diversified, efficient and sustainable baskets of farm investment and income generating opportunities, as well as a stronger focus on the demand side through rural markets. Government is now placing emphasis on supporting producers to be successful decision-makers, to improve incentives to market produce and to make production investments and to reduce unmanaged risks and shocks such as drought. This change in course has been articulated in the second Poverty Reduction Strategy (PASDEP). The Growth and Transformation Plan (GTP) for the period , the next generation of PASDEP, places a high importance on the need to ensure food security for the majority of the PSNP beneficiaries at the end of the Plan. It further emphasizes that for beneficiaries who are assumed to participant in asset building (HABP), support will be given in business planning, training, supply of technology, loan and extension services which help them become successful. Other elements of Government's policies and strategies that are the most highly relevant to the sector are: Rural finance policy Cooperative proclamation Pastoral policy Women and youth-related policies The Household Asset Building Component of the Food Security Programme 4 will build on the implementation experience of the World Bank-funded RCB 5, the CIDA-funded IPMS and the USAID supported PSNP Plus projects and the lessons learnt from the implementation of the Other Food Security Programme. These experiences clearly demonstrate the success of adopting a demand driven and market oriented approach to extension and micro enterprise development 4 FSP, HABP and PSNP programme documents have to be considered reference ones when designing the proposal for this Call. 5 RCB = Rural Capacity Building. IPMS = Improving the Productivity and Market Success of Ethiopian Farmers 2

3 that empowers and builds rural households' confidence to embark on investments and income generating enterprises appropriate to their needs and capacity. These experiences have also clearly demonstrated the necessity of linking production to markets, increasing value addition and accessing a diversified range of inputs sources and distributors as well as promoting grassroots financial institutions, ensuring diversity of financial products and encouraging repeated loans. There is now an increasing realization that investments on on-farm income generating and asset building alone will be insufficient for many poor rural families to achieve food security. The expansion of opportunities in both agricultural and non-agricultural off-farm investment and income generating opportunities is an essential element of the HABP. This requires implementers and coordinators of the programme to establish linkages with ongoing Small Medium Enterprises (SME) development programmes that hitherto have largely focused on urban households. However, past experience has also identified significant gaps in the capacity of the key stakeholders that must be addressed if this radical change in direction is to be achieved. Whilst there has been a dramatic increase in the number of DAs and functioning Farmers Training Centres (FTCs), there remains a need for a comprehensive capacity building programme to address woreda experts and DAs gaps in technical skills, facilitation skills and management capacity. Rural financial service provision is also an area which requires significant investment. 1.2 Part played by Non Governmental Organisations (NGOs) NGOs have had significant involvement both in strengthening the Government extension system in introducing innovation and promoting rural financial systems. For instance, the local NGOs in Amhara and Tigray regions are pioneer in introducing and promoting innovative technologies (water harvesting structure and efficient technologies, on-and off-farm based income generating activities-e. g. bee keeping). Other recent and current examples include the Participatory Forest Management approach implemented by Farm Africa and SOS Sahel; the Integrated Pest Management/Farmers Field School methodology employed by Save the Children UK and a variety of livestock related activities in pastoral areas conducted by Save the Children USA, CARE International, ACDI/VOCA and a number of local NGOs. Furthermore, EU is currently funding a number of food security interventions implemented by NGOs through integration with and complementing other food security initiatives including the PSNP. These projects are contributing to effective implementation of the food security initiatives including the PSNP in the respective intervention woredas such as: Support to the woredas and kebele partners for effective design, planning and implementation of the public works under the PSNP; Support to the establishment of local and woreda level information systems including household food economy survey, woreda and households profiles and database; Integration of some labour-based PSNP activities with catchments treatment; Promotion of income diversification opportunities targeting PSNP beneficiaries to facilitate their graduation. 2. Food security support programmes 2.1 Summary of main food security interventions Government food security strategy The Federal Food Security Strategy rests on three pillars, which are: (1) Increase supply or availability of food; (2) Improve access/entitlement to food; (3) Strengthening emergency response capabilities. The detailed aspects of the strategy are highlighted as follows: 3

4 With regard to agricultural production in mixed farming systems, the aim is to enhance supply or availability of food through increasing domestic food production where soil moisture availability is relatively better. Subsistence farming has to be transformed into small-scale commercial agriculture. Household based integrated and market oriented extension packages would be employed. In chronically food insecure areas, however, where there is severe moisture stress, soil degradation and farmland scarcity, it will be a difficult task to ensure household access to food only through own production. Accordingly a set of comprehensive asset building mechanisms should be in place to augment production-based entitlement. As stipulated in the Food Security Strategy (FSS) the government will do everything in its capacity to promote micro and small-scale enterprises. The government will assist the growth of micro and small-scale enterprises through initiating industrial extension services, development of the necessary infrastructure, encouraging competitive marketing of inputs and Outputs and utilizing tax incentives for selected commodities to shift the consumption patterns. The Food Security Strategy instead targeted food insecure households providing extension packages aimed at diversifying rural livelihoods (often referred to as household packages), which included packages for livestock fattening, small scale irrigation, honey production, etc. This was still part of a rigid set of technologies not always related to local market conditions and households capacities. The credit component was often delivered outside the extension service and only in a few cases through MFIs under a special financing window. Extension, on the other hand, was very heavily involved in the supply of inputs. As a direct result of the fact that most institutions engaged in credit delivery were not financial institutions, credit were subsidized in a disharmonized way through time and space, and there were limited products offered to farmers and inadequate attention to collection of mature loans.the Growth and Transformation Plan foresees that the PSNP will be implemented in connection with household asset building activities, and will be realized in a way that it will alleviate the problem of environmental degradation which is the major cause of food insecurity. It is planned that PSNP PW beneficiaries of the program will graduate in the coming five-year plan. Furthermore, the GTP stipulates that for beneficiaries who participate in the HABP component different food security interventions will be developed which include appropriate packages for low moisture areas, water harvesting, and realizing best practices that can be successful with minimum water supply. Regarding landless families, particularly the young and women, they will involve in other incoming earning activities by identifying the types of jobs and providing the required skills and leadership trainings in an organized way so that they will secure loan services and alternative markets. In this way, they will be given all the necessary support so that they will be food secured The European Commission and EU member states The European Commission is one of the main financiers of food security and food aid programmes to Ethiopia including in pastoralist areas. Programmes funded are consistent with the food security sector approach outlined in the EC Country Strategy Paper. The EC under its Food Security and Food Aid Program has funded, since 1997, around 56 NGO development projects for a total amount of around 49 millions Euro, that have benefited an estimated total of about 3.6 million people living in Amhara, Beneshangul Gumuz, Gambella, Oromia, SNNPRS, Somali, and Tigray National Regional States. The EC Country Strategy Paper for the period also places continued importance on rural development and food security identifying it as one of the focal sectors for EU Ethiopia development cooperation during this period. Harmonization among donors and between donors and Government has been a central feature of all the interventions where the EC has been involving, fully in line with the Paris Declaration and with EU commitments on aid effectiveness agenda. For the FSP in particular, this has 4

5 progressively brought to a common vision and strategy of the donors as a group and to a more shared comprehension of the programme with the Government. The Donors Coordination Group and the Joint Coordination Committee, as well as a number of joint technical working groups have ensured the achievement of a high level of partnership which has led, among others, to the joint exercises of reviewing the first phase and designing the new phase of the FSP between 2008 and In this framework, donors have agreed to fully support the new PSNP and some of them have engaged 6 in particular in the support of the HABP through a comprehensive and specific capacity building component designed to support both the extension and financial service providers. While the PSNP can be considered as a strategic cornerstone of the EC interventions in the sector 7, it is complemented by several other EC funded programmes implemented through ECHO, UNICEF, FAO as well as several NGOs funded through the Food Security Budget Line and other facilities 8. A small pilot project in the micro finance sector is also supported through Consultative Group to Assist the Poor (CGAP) in a PSNP woreda of Tigray Region in Ethiopia. The proposed intervention is conceived to complement the above mentioned EC interventions and the donors supported capacity building component of the HABP, providing specifically targeted support to MFIs and RUSACCOs in selected PSNP chronically food insecure woredas Other donor interventions Different programs and projects have been designed and implemented by government and donors such as World Bank, SIDA, CIDA, FAO, EU, GTZ in order to support the implementation of the food security strategy. While the HABP has already been referred to as the reference programme for this Action, other programmes have been funded and implemented in the past years in the same sector. They are briefly described in this section. The Government Other Food Security Programmes OFSP was a national initiative which emerged from the government's own Food Security Strategy (2002). The government financed OFSP took asset depletion as one of the principal causes of food insecurity. Thus, the program focused on two levels of asset building interventions: i) household level asset building interventions to be implemented through credit, and ii) community level asset building interventions to be implemented through government s investment in rural infrastructure targeted at food insecure communities. The OFSP was designed to benefit about 15 million food insecure people. The household interventions were designed to attain household food security over the program period and to build household assets through on-farm and off-farm activities. To achieve this, a menu of packages was developed and credit facilities were arranged from the annual food security budget. The packages were developed based on the specific agro-ecology of the areas (e.g. livestock, beehives, etc). The beneficiaries of the program have been provided with credit which they should pay back, both the principal and interest. On the basis of the vulnerability of the regions, the federal government allocated 2 billion Birr every year to implement the household food security package program. In the process of designing the Food Security Programme, there was an assumption that the PSNP resources would focus on community asset buildings, while the larger share of the government financed OFSP resources would be channelled to the household credit packages and off-farm activities as well as resettlement program. The donors financed Food Security Project FSP 9 used the existing substantial situation analyses that had been undertaken by the government for the first Food Security Strategy in 1996 and the revisions that culminated in the revised strategy in It also relied on the analysis that had been undertaken for the first Povertry Reduction Strategy Paper (PRSP) 6 WB, Canadian CIDA, Irish Cooperation so far. 7 So far, through EDF 9 and EDF 10, about 120 M Euro have been committed to PSNP, while further support has been provided from the Budget Line (20 M Euro) and the EDF B Envelope (40, 23 M Euro). 8 Water Facility, Food Facility 9 The donors OFSP was financed by the World Bank, CIDA and Italian Cooperation 5

6 published in 2002 and for the government's rural development strategy published in March FSP was designed so that food insecure communities would seek their own solutions to food insecurity and most choose to help their poorest members to access micro credit in order to rebuild their livelihoods. The project was structured around different components the first of which provided asset and income increasing funds to communities/kebeles. The objectives of this component were to increase community and household asset and incomes. It was envisaged that a number of strategies would be employed to achieve these objectives, including: i) better management of rain fed agriculture, ii) investment in small scale irrigation, iii) better natural resource management, iv) development of off farm enterprises, v) investment in training and development. The Rural Capacity Building Project (RCBP) has been a key initiative working to strengthen the Ethiopian extension system and implementers would be expected to take note of the benefits and lessons from this programme in their implementation. Support to agricultural extension (including livestock-related extension) consists of capacity building for subject matter specialists, support to Farmers Training Centres, a farmer innovation fund and extensionresearch-farmer linkage. The project is transforming some of the Agricultural Technical and Vocational Education Training (ATVETs) into business-oriented institutions, whereby they train DAs on cost sharing and also do other short term training for other clients. The project aims to transform FTCs into well equipped and furnished centres of learning and information sharing for community members. These FTCs will then be used as focal points for extension provision. The project s support to farmer innovation is very much in line with the HABP principle of demand driven extension. Farmers around the FTCs are trained to turn their ideas into proposals which are then funded by the project. Thus the project creates demand for innovative technologies from the farmers side and mobilises research centres, private traders, universities, cooperatives and unions and associations (youth and women) to respond to the demand. Improving the Productivity and Market Success of Ethiopian Farmers (IPMS). IPMS aims to achieve improved and sustainable rural livelihoods by contributing to improved agricultural productivity and production through market-oriented agricultural development. The project is operational in 10 pilot woredas in Amhara, Oromiya, Tigray, and SNNP Regions. The project is implemented by IFPRI in collaboration with MoA. Experience from this project informed the design of the HABP. PSNP-Plus (Total project cost: US$12.0 million; USAID grant: US$12.0 million; Timeframe: October 2008-September 2011). PSNP-Plus assists households graduate from food insecurity by improving the resilience and livelihood assets of 42,414 households. To this end, the project increases the access of households to financial products and services and promotes their engagement in markets. The project is implemented through NGOs. The Support to Productive Safety Net Program (SPSNP). In line with the OFSP, the primary objective of SPSNP was to build upon the anticipated impacts of the PSNP (protection of household assets development of community assets), to develop a sustainable system that would protect, build, and diversify household assets, such that the resiliency to manage through shocks could be achieved. Livelihoods Integration Unit (LIU) project financed by USAID that is part of the Early Warning and Response Directorate within the Disaster Risk Management and Food Security Sector. The main goal of the LIU is to improve the accuracy and objectiveness of seasonal and annual needs assessments in Ethiopia. The LIU has created a countrywide, standardized, quantified, and comparable livelihood baseline and continues to build capacity of federal and regional staff to gather and analyze baseline data and monitor performance. The Rural Financial Intermediation Program (RUFIP). The program established and strengthened rural savings and credit cooperatives with the aim of improving access to financial services for 2 million poor rural households. In part, this is done by establishing about 3,400 6

7 saving and credit cooperatives owned and managed by members, and training poor rural people to use financial services. 2.2 Evaluation of the results and lessons learned Globally, a number of lessons learned can be identified from the Government's OFSP and from the donors funded FSP: 1. According to the findings of the modelling exercise, those households who engaged in multiple component packages were able to generate more benefit in terms of income and to paying loan within given time, when compared to those households that participated in single component package. The aggregate analysis shows that households who adopted three or four components packages would achieve incremental incomes which can multiply by 3 to 4 those obtained with single component packages. Most packages which were found unsuccessful are single component packages. This showed the advantage of focusing on multiple components household packages in order to support graduation. 2. Households need repeated loans, whereby they start with a small loan that allows them to rebuild their farming systems and then move on to more innovative IGAs with larger loans and greater risk as their capacity grows. 3. The relevance for the community as well as beneficiary households to participate in the planning, implementation, monitoring and evaluation processes of their business plan. Through training and discussion they were properly informed about implementation modalities and procedures. This has empowered communities and households. 4. Some of the packages offered to households failed to address the capacity or wishes of the targeted beneficiaries. In most regions available packages were not supported by practical training in FTCs nor supplied by other complementary services such as veterinary services for livestock. 5. Participation of food security offices in the design of packages is generally low. It was found that that the extension departments design the normal technologies without due consideration to the needs of chronic food insecure households. 3 Proposals for intervention 3.1 Intervention logic: justification and nature of required assistance Rationale for intervention It is believed that financing interventions to strengthening the provision of technical and financial services to farmers will contribute to improving delivery of these services at community level through innovative approaches and by improving the technical and operational capacity of the local government institutions, of MFIs and other actors involved. Interventions under this Call for Proposal are specifically expected to: i) support chronically food insecure households to access viable market-driven on and off-farm income generating opportunities as well as to access sustainable financial services and to develop knowledge, skills and confidence adequate to manage and implement their business plans; ii) build technical capacity within a variety of offices in Woreda administrations, marketing groups, the private sector and the 25 national Agricultural and Vocational Education and Training (ATVET) Colleges, focusing on sustainable input sourcing, production, value chain and market analysis, marketing access to product markets that meet the needs and capacities of food insecure households. 7

8 iii) support micro finance institutions in improving and expand their capacity to deliver appropriate financial services and products, particularly targeted to PSNP households. iv) extensively document evidence based experiences, lessons learnt, approaches and best practices accumulated during the project, ensuring publications and effective distribution and easy availability to public. Moving along a pathway out of food insecurity requires that households invest in improving existing production systems and/or developing new income generating enterprises, or that they gain better earnings from wage employment. Yet food insecure households face limited opportunities in this regard, because they operate in risky environments, their resource base is low and therefore their investment capability is weak, and also because their access to services (particularly credit) and markets tend to be very limited. While the specific needs of individual households differ, they all require support in identifying viable investments (including seeking wage employment) and understanding returns and risks for different types of investments. They then need support in developing viable and appropriate business plans to implement the investments, as well as advice on new technologies, improved production practices and credit management (if loans are used to finance the investments). The public extension system and the micro and small enterprise development programmes provide some support to rural households in the areas outlined above. Indeed, they will continue to provide the bulk of the support in this area. However, significant investment is needed to strengthen on going reforms and reorient these interventions to ensure that they are able to better respond to the needs of food insecure households in particular and thereby help improve food insecure households access to investment/income generating activities (IGA) opportunities. While the HABP is designed to build the capacity of the extension system to achieve this, the present Action is aimed to support Woreda level Administration, MFIs, RUSACCOs and local Peasants Associations in efficiently implementing the HABP and strengthening the graduation process. It is relevant to note that market opportunities tend to be less well researched than agricultural or livestock production opportunities, and there are few skills within Woreda institutions to conduct market assessments and value chain analyses. Yet in order for food insecure households businesses to be profitable, advice from woreda administrations must be embedded in an understanding of market trends and opportunities. It is therefore imperative that market assessments be undertaken at the woreda level for livelihood zones and be updated regularly. These market assessments should cover (but not be limited to) market share, recent market trends, local and more distant market opportunities, competition, supporting market services, value chains (e.g. processing, local input production), market enabling environment (wet and dry season road access, financial infrastructure and standardised weights and measures). The assessment will include the capacity of local markets to absorb additional marketable surplus. This Action will therefore contribute to build woreda level capacity in market and value chain analysis. There have been considerable improvements from the days when only three agro ecologies were considered by the extension system: dega, woina-dega and kola (highland, mid-land and lowland). Today the MoA recognizes the many livelihood zones referred to in the Livelihoods Integration Unit (LIU), housed in MoA/DRMFSS. The analysis behind these Livelihood Zones, based on the Household Economy Approach, have the potential for development programming. It is expected that the implementers of this Action play particular attention to livelihood zoning, data within the Unit and the benefits of the LIU modelling work that could complement the marketing, inputs and production components of this Action 10. This Action should facilitate that market and value chain analysis is done also following LIU criteria, for example grouping woredas in one livelihood zone as defined by data from the Livelihoods Integration Unit 10 Sources for information on the livelihoods system:

9 (LIU) and facilitating a collaborative process. This is intended to help to ensure that the activities identified are tailored to livelihood types not only pastoral/agricultural, but distinctions based on cash crops, food crops, livestock and milk sales, labour, etc. Whilst there is experience within the Extension Office in the identification and development of on-farm investment and IGA opportunities, this is not the case for off-farm income opportunities. Where such experience does not yet exist, the woreda s have established Off- Farm Case Teams. These teams will coordinate with the Small and Medium Enterprise Offices at Regional level and strengthen collaboration between these institutions and the extension service, to conduct assessments of viable off-farm activities and the absorptive capacity of local markets for non-agricultural services or products. Support to these processes is expected through this Action. It is expected that covering both on- and off-farm enterprises will be comprised of the following elements: Assessing the production potential related to the specific agro-ecological zone, traditional skills of the population, etc. This will entail a process of resource mapping. Undertaking feasibility studies for various types of enterprise. Developing technological options for production and processing. Considering cross cutting issues such as gender, the environment. Although government policy clearly defines a role for the private sector in the provision of agricultural extension services, there has been little private sector involvement to date. However, the role of the private sector in providing inputs and other areas of market facilitation is critically important to the success of any support to household asset building. In fact, assisting CFI household producers will require support to the entire value chain for the selected asset or enterprise, from input supply to production, to value addition to the various phases of marketing. The agriculture extension system is responsible for demand-driven extension services related to the implementation of the Household Asset Building component. In particular, Development Agents central to the Ethiopian extension system are critical for HABP implementation. At present the Government has reached its target of three Development Agents per kebele in the majority of woredas, making a total of 69,000 DAs in the Ethiopian extension system. These DAs are trained at one of the 25 Agricultural and Vocational Education and Training (ATVET) Colleges throughout the country. They are also supported by woreda-level experts (subject matter specialists) who provide advice on technical issues. DAs are specialized, with each kebele having one crop science DA, one animal husbandry DA and one natural resources management DA. These DAs disseminate technology packages developed by experts in the extension system, providing technical advice on farm as well as in Farmer Training Centres (FTCs) in each kebele. However, the quality of FTC facilities and the degree of their utilisation varies from one kebele to another. Yet the agricultural/pastoral extension system faces considerable challenges particularly in chronically food insecure (CFI) areas. The present Action is aimed to improve the effectiveness of the capacity building process both in its content and in its method. This Action will have a significant capacity building component to ensure that DAs and other Woreda officials are able to effectively facilitate timely access to high-quality, appropriate inputs. Facilitating rather than providing linkages to input suppliers will help to ensure that households have a way to access additional assets and inputs on a continual basis, thereby strengthening linkages within the value chain. For all marketing training and support, linkages between the extension service and other departments particularly the Agricultural Marketing Department and the Cooperative Promotion Offices will be critical. For instance, DAs may be linked to cooperative promotion officers for additional support, as these often have a stronger understanding of marketing. The successful implementation of this Action will therefore require a substantial investment in capacity building along the following principles: 9

10 High-quality training methodologies. It is expected that all programme trainers and providers of technical assistance be specialists not only in their respective fields e.g. crop production, animal production, animal health, cooperative development, input sourcing, production and distribution, market development and value chain analysis and that the training curricula include new and effective extension techniques consistent with the proposed transformation of approach. Demand-driven approach. Understanding the characteristics and requirements of chronically food insecure households is a challenging task, but one which is necessary for effective technical assistance. The shift to demand-driven extension is already underway in the Extension Service, but the capacity to implement it is largely lacking. This Action will therefore undertake sensitization and training activities to reorient the way in which extension services are developed and provided in order to respond to farmers demands matched with sound market analyses. While studies suggest that ensuring that the first step input supply is adequately supported is critically important in Ethiopia at this time, assessing market and linking household producers with fair and reliable buyers of their products is equally important to ensure that the all value chain is fully and adequately exploited. Access to high-quality, appropriate inputs is critical to promoting innovation as well as opening new market channels and linkages with the private sector and thereby transforming the livelihoods of food insecure households. The Government has traditionally been very much involved in input supply in Ethiopia, but the lack of coverage underscores the need for increased involvement of the private sector in both the production and the distribution of inputs. Although input distribution is officially liberalized, the private sector has traditionally been crowded out as a result of the in-kind credit system established by Regional governments. This system was developed to ensure that rural households would gain access to the necessary seed and fertilizer for each production season. Inputs were provided on credit through agricultural cooperatives at the beginning of the season, and paid back in cash after the harvest. However, low repayment rates have led Regional governments to begin requiring that farmers pay cash for seed and fertiliser, reserving the credit provision for only the neediest households. This development is effectively de-linking input supply with credit provision, thereby opening up space for the private sector to enter the input markets. Seed and fertiliser are not the only inputs required by poor rural households. In order for them to diversify their incomes and increase their asset bases, they require access to larger, more expensive inputs such as irrigation equipment, processing technology or livestock. Procuring these inputs is often difficult in remote woredas where private suppliers are few and far between. To address this problem, government and NGOs have typically undertaken the task of procuring, transporting and distributing productive assets to food insecure households. This mechanism entails several significant risks and disadvantages such as that the items procured may not be appropriate to clients needs, or that, more fundamentally, no contact is established between buyer and seller, thereby limiting any opportunity for repeat purchases, technical advice or maintenance from the supplier, or other transactions. Such a system ultimately limits the profitability and sustainability of the asset or input. This Action aims to link suppliers (of products as well as services) to markets. It will help input suppliers understand their market (producers) by linking them with programme participants through input fairs. Where appropriate, sales contracts and/or out grower schemes will be explored. Particular emphasis should be placed in supporting non-farm enterprises and labour opportunities through facilitation of the flow of information between labour surplus and deficit areas. Support to the development of curricula and participatory training modalities with significant input from the private sector on these subjects, will also be part of the Action. In the area of Financial Service providers support and improvement of services delivery, a number of aspects should be paid attention to. Training financial service providers to provide the appropriate services and products is a critical element of the credit activity. The development of a comprehensive training plan and training 10

11 packages to build staff capacity to review the business plans and assess the creditworthiness of CFI households and to provide the appropriate financial products should be a key element of any proposal under this Action. Training should focus on the delivery of appropriate credit and other financial services as well as risk management techniques. Attention should be paid to optimizing cost effectiveness of the skill-up grading activities without hampering the quality. Within rural areas, the use of appropriate media (rural radios) may be advisable to insuring long distance dissemination of information, large outreach and cost effectiveness. While Government policy calls for one SACCO per kebele, this Action is intended to contribute to simultaneously implement a variety of interventions designed to increase financial service coverage in the target areas. These can include expanding MFI coverage and creating new grassroots financial service providers, such as VSLAs and RUSACCOs. In order to prepare communities to receive and manage credit, financial literacy campaigns aiming to educate clients on the importance of savings, on how to manage finance (savings and loans) and cash flows, etc. should be promoted. Relevant stakeholders are the Association of Ethiopian Micro- Finance Institutions (AEMFI), the Federal Cooperative Agency (FCA), including regulators (National Bank of Ethiopia), finance providers, the media, educators and extension agents. A key area of this Action is to support the identification and set up of a range of financial services to be made available to clients, including savings services and differentiated credit products that meet the needs of food insecure households according to their business plans. Priority areas should be working with MFIs to ensure that loan sizes, eligibility criteria, terms and repayment schedules are appropriate to households capacity and selected asset/enterprise. This should include group guarantee mechanisms for CFI households without collateral, as is currently practiced by most MFIs, and possibly individual mechanisms if appropriate alternative guarantees can be developed. It is also recommended that financial products are appropriate to each cultural context. This will include loan products without interest but with appropriate mechanisms of service charge for Muslim communities. Another relevant aspect is that the majority of households will likely start with relatively small loans, building up to larger loans as they increase their business capacity and improve their creditworthiness. Working with financial institutions particularly MFIs should ensure that 2 nd and 3 rd cycle loans are available to households in order to enable effective asset building. Group loans for the financing of joint business plans should be explored. Currently, no mechanism exists for such groups to obtain collective financing unless they register as a cooperative. It is of importance to support these groups in obtaining financing for the plans, and work with financial service providers (especially MFIs) to develop appropriate credit product that match the needs of groups while being financially sustainable and contractually sound. To expand the provision of micro-financial services to under-served rural areas in a sustainable manner the establishment of satellite services falling under the control of an existing office of the applicant or of one of its partners may be required. This Action would support expanding into those areas if their strategic importance is justified. Initiatives that penetrate areas that have little or no financial services will be considered as priority, provided that the potential impact is clearly demonstrated in terms of positive effects on agriculture production and marketing. The targeted final beneficiaries of the Action should be the rural populations in general and, in particular, chronically food insecure households and PSNP clients. Extensively document evidence based experiences, lessons learnt, approaches and best practices accumulated during the project will be a relevant part of this Action. Their publications and effective distribution should be ensured through any effective mean able to prepare and facilitate the continuation and diffusion on the positive experiences of the Action. Documents will be translated in local languages when appropriate, to facilitate and increase diffusion and further adoption of promising results and practices. 11

12 3.2 Geographical, social and thematic concentration Geographical concentration The most appropriate intervention unit will be the Woreda. However, relevant interventions at regional/zonal level shall also be considered. Based on the experience of PSNP implementation since 2005 and considering the lack of MFI coverage at present, proposals under this Call are strongly encouraged to concentrate in SNNP Region where the need for the creation of new financial service providers or branches is particularly high. In principle, areas of intervention should not be already covered by any other similar intervention in order to avoid overlapping and confusion between different approaches. Nevertheless, proposed Actions can complement existing EC-funded or other programmes and, in particular, the Government initiatives linked to the promotion of rural finance. If that is the case, a strong justification should be provided demonstrating the added value of synergies and complementarities between this Action and the other interventions Target beneficiaries Final beneficiaries of the action PSNP household with agricultural production capacity who haven't been benefiting (or little) of other micro finance services because of lack of asset bases and knowledge PSNP household potentially able to involve in off farm productive activities PSNP household already members of VSLA and RUSACCOs who can expand their access to formal financial products and services Following HABP definitions, the target groups of this Action can be described as following: "chronically food insecure households, with few productive assets, low and insecure income sources; have little ability or self confidence to take on the responsibilities of loan conditionalities and, in all likelihood have no credit history so that commercial credit providers are unwilling to lend to them; and, who depend on transfers for a significant proportion of their food needs." Chronically food insecure households, with a better asset base and confidence to take on a loan, but rely on transfers to meet the household s food needs and who may not have a credit history or sufficient savings to generate confidence among commercial credit providers. Food insecure households who have some productive assets, more substantial and secure income sources and have the capacity and self-confidence to take on investment loans, but nevertheless have fragile livelihoods and are therefore not very attractive customers for commercial credit providers. For such households to move towards food security requires the transformation of fragile production systems involving both asset accumulation and innovation. Although poor, food insecure households have knowledge, skills and potential to transform their livelihoods, they need confidence building support. Clearly, households in all three categories require support to understand returns to investments, to develop viable and appropriate business plans and to receive advice on new technologies, improved practices and managing credit. In this way they will be able to identify investment and income generating opportunities that will place them on a pathway to food security. The content of the support will differ according to the type of household. Although male and female-headed chronically food insecure households will have equal opportunities to participate in this Action, the specific needs of women and female-headed 12

13 households will be taken into special account. Women will be key participants in the stakeholder consultations from the inception of the Action. Direct support clients will not be excluded from participation in the Action. Their participation will be encouraged and facilitated tailoring business plans to each DS household s capacity, and increasing the focus on off-farm activities such as petty trading, service provision and others. In this way, even labour-poor households will have opportunities to gradually build their household assets and move toward food security. All PSNP beneficiaries in a target Kebele/VSLA should be targeted/assisted. Support to isolated household should be avoided. However, the participation of non-psnp household/individuals as final beneficiary of this Action can be seen as an element of continuity, important in order not to disrupt the already existing association mechanisms and the social relationships in the group. Anyway, this has to be duly justified. PSNP beneficiaries already receiving support through the HABP should be in principle excluded. Direct beneficiaries of the action Microfinance Institutions MFIs are present in many CFI woredas with the notable exception of pastoral areas but their outreach to chronically food insecure households is often poor. This is due to two primary factors: the lack of available loan capital and the increased risk of lending to CFI households. MFIs are better placed to mobilize external funds and provide credit on a larger scale. They can also provide money transfer services for migrant labour. Woreda administrations Woreda administrations across CFI woredas have various offices within the administration. For the purposes of this Action, important offices include Agricultural Extension Office, the Agricultural Inputs and Marketing Office, the Trade and Industry office (including where possible the Small and Micro Enterprise Agency), and Food Security Offices. All of these offices are, or have the potential to be, the main interlocutors with PSNP households for the purposes of achieving the objectives of the HABP and of this Action. All require significant capacity building support in the areas of training. Thus, the Extension Service and cooperative promoters are targeted in order to increase their knowledge of market dynamics and key market players such as brokers, middlemen, wholesalers and retailers, as well as labour opportunities such as those offered by commercial farms or large construction and maintenance programmes. Building these skills will be a core part of the market facilitation training curriculum given to extension staff, cooperative promoters, and woreda level SMEA experts. Marketing groups A significant number of households may be interested in collective investments, either to support their existing household business plan (to add value to their product) or to add another revenue stream from service provision. The Action will contribute to provide technical assistance to groups in the preparation of joint business plans so that they can access financing from MFIs, with complementary support to MFIs for the development of products tailored for such groups. These plans may include investment in processing technologies or construction of storage facilities. The Action will then provide training to marketing groups in order to help them understand the markets for their products in terms of quality requirements, timing, prices, etc. Where appropriate, improved marketing technologies (such as the use of scales for weightbased marketing) will be promoted. Therefore, for households that have chosen similar investments, the Action will provide support for the creation of marketing groups or cooperatives where appropriate, supporting the Extension Office as well as the Regional Cooperative Promotion Bureaus, whose agents will provide technical assistance in cooperative principles such as member ownership as well as 13

14 important business management and accounting skills. Attention should be paid to strengthen linkages between the Extension and Cooperative Promotion departments. Agricultural and Vocational Education and Training (ATVET) Colleges The Action should contribute to identify gaps in woreda experts and DAs understanding of markets and business skills and support the development of a curriculum to address these gaps through ATVETs and other institutions. This training will then be institutionalised and provided to woreda experts and DAs on a regular basis through a refresher programme. Particular attention should be given to the adjustments to the curricula of the Agricultural Technical and Vocational Training (ATVET) centres and to incorporate them into a long-term training programme for all specialists involved in the Asset Building Programme. Curricula and participatory training should emphasize skills-based learning rather than theory, thereby complementing the theoretical training that is the background of most DAs. The training should enable woreda experts and DAs to identify and analyse capacity requirements to strengthen critical parts of value-added chains. These requirements will be based on market demands in terms of products, quality and timing of delivery, and market segments (local/regional, urban/rural, bulk/niche, etc.). Trainings should address DAs and woreda specialists to improve their understanding of market opportunities, to enhance their analytical/consultation/ facilitation skills and deepen their technical know-how. Some of this training for some woredas has already been designed by the Rural Capacity Building Program, and co-ordination with that program is required for scaling up Thematic concentration In line with the EC Decision Nbr C(2010)2552, in the framework of the 2010 Annual Action Plan implementing the Food Security Thematic Programme "Innovative approaches to food insecurity", the actions for Ethiopia under this CfP shall focus on providing PSNP beneficiaries with alternative and accelerated pathways towards graduation, thus improving livelihoods of chronically food insecure households. The graduation model is a unique sequencing of safety-net interventions integrated by technical and microfinance services provision aimed to create and support pathways for the poorest out of extreme poverty. It progressively introduces entrepreneurial activity through training, asset grants and savings services. The objective of this intervention is to link PSNP beneficiaries to market-led livelihood options (including off farms opportunities) and financial services, increase households' assets and thus support the graduation process towards permanent food security. Figure 1 below illustrates the sequential nature of these interventions. For the first group of households ( ultra-poor in the diagram), safety net transfers, savings and micro-credit with intensive support and tailored products are seen as prerequisites to enable them to gain a foothold on the pathway to food security. Such households will need to focus on rebuilding their productive systems and are unlikely to assume large risks, adopt new technologies or diversify into unfamiliar activities. As they rebuild their asset base, they will start generating a surplus that will allow them to take on more innovative investments at a later stage. Small appropriate and well-planned and supported loans as well as the discipline of saving will allow them to build a credit history for more formal engagement in credit markets. The second group of households ( Chronically Food Insecure ) would continue to require safety net transfers, but they would be likely to have larger and more innovative/sophisticated business plans. The third group of households (food insecure, including graduates from PSNP) would not/no longer require safety net transfers and would be in a position to take credit on commercial terms but would be looking for support in market development and investment opportunities. 14

15 Figure 1 Another important element in helping food insecure households embark on a pathway whereby they gradually develop a capacity to generate sufficient and sustained incomes that cover basic food needs and resist shocks, is the development of market linkages both for input supply and sale of outputs and/or delivery of services. The latter is especially important for the relatively better off households and those diversifying into non-farm activities. Taking into account the above Figure and the MoA adoption of the Livelihood Integration Unit, the approach in this Action is to develop a model of interventions to be tested in the field through the above named Beneficiaries. Rigorous documentation will be required in order to provide evidence that the approach and the processes involved are effective, and/or contribute to best practices. 4. Project design The funds under this CfP intend to support properly designed and feasible priority interventions. In general terms, the outputs resulting from interventions funded under this Call are expected to result first in the improvement of access to financial and technical support and services for PSNP beneficiary clients in particular. Innovative approaches aimed at strengthening, expanding and improving capacity and performances of local MFIs, woreda administration, RUSACCOs and local PAs will be particularly considered. Bearing in mind that even small interventions in the rural financial sector can significantly change production and market dynamics, any proposed intervention should be supported by a detailed and prospective analysis of how those dynamics are likely to be affected by the intervention itself, in particular when supporting the value chain from input supply to production and value addition through marketing. The overall design of proposed actions should be based on detailed technical and socioeconomic analysis for the feasibility of initiatives and ensuring their continuity, scaling-up and institutionalization. It is very important that proposed initiatives critically consider: Lessons drawn from the past experiences including the practical constraints that were encountered in the implementation process. 15