Innovation Lab For Small Scale Irrigation

Innovation Lab For Small Scale Irrigation

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Supporting solar irrigation companies to break down markets and lift up smallholder farmers in Ghana

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byThai Thi Minh, Senior Researcher, and Abena Ofosu, Senior Research Officer, Innovation Scaling, IWMI

In the Upper East region of Ghana, most smallholder farmers still rely on watering cans and buckets for irrigating the tomato, pepper, onion, and other vegetable crops they grow during the dry season. This type of irrigation is both labor intensive and time consuming, while more advanced irrigation technologies, such as motorized pumps, could boost farmers’ incomes, improve their health and resilience, and increase the supply of nutritious foods.

In the past, farmers in this area have used both electric irrigation pumps, running off the electric grid when available, and petrol- and diesel-powered motorized pumps, but both options are costly. Now, solar-powered irrigation pumps are emerging as an attractive, affordable alternative, but these kinds of pumps are not yet readily available in the Upper East region.

Solar-powered irrigation pumps are emerging as an attractive, affordable solution. Photo: Thai Thi Minh/IWMI.

That’s why the International Water Management Institute (IWMI), through the USAID-supported Africa Research in Sustainable Intensification for the Next Generation (Africa RISING) and the Feed the Future Innovation Lab for Small Scale Irrigation (ILSSI), has been supporting irrigation equipment suppliers in Ghana to expand into this new market, including by breaking the market down into distinct segments of farmers that could access and benefit from solar-powered irrigation pumps in different ways.

Market segmentation for solar-powered irrigation pumps

Ghana’s Upper East region offers an attractive market for companies selling solar-powered irrigation pumps, with opportunities for them to establish sales outlets, expand customer bases, and reach and improve profitability by making their products accessible at the doorsteps of farmers.

These opportunities were discussed at the recently held third meeting of a multi-stakeholder dialogue platform in Ghana, established by IWMI and ILSSI to bring together stakeholders from government, research organizations, irrigation equipment suppliers, financial services, and value chain actors to innovate and facilitate the expansion of small scale irrigation.

Stakeholders from government, research organizations, irrigation equipment suppliers, financial services, and value chain actors met to discuss opportunities and challenges. Photo: Thai Thi Minh/IWMI.

Precise market segmentation is key for companies expanding into new markets. It allows them to plan for and use diverse business models to reach different and diverse groups of farmers. However, few solar pump companies have assessed and targeted market segments as they have established operations in Ghana.

IWMI scientists therefore undertook a market segmentation exercise within the Upper East region, basing it on farmers’ access to land, water, irrigation and production arrangements, financial capital and potential, and product preferences. As a result, four market segments were identified, namely resource-rich individual farmers, resource-limited individual farmers, farmer groups, and mobile farmers who during the dry season move from their residential area to irrigate fields close to publicly funded irrigation schemes.

Understanding these segments is useful for companies because each group of potential customers has distinct options and needs, particularly regarding what type of pump is suitable for them, whether they have capital for the investment on hand, and whether their preference is to make a one-time payment or to access some type of financing.

Creating opportunities for companies and farmers

During the meeting, held on held on May 4, 2021, Osman Sahanoom Kulendi, managing director of Pumptech, a distributor of solar-powered irrigation pumps, shared insights into how they have segmented the market for their range of LORENTZ PS2 solar irrigation pumps, which they offer bundled with what they call PAY-OWN financing, a type of asset-based financing that can give farmers access to solar pumps without the usual collateral or credit history required for a loan.

Pumptech’s findings build on IWMI’s initial assessment of the market segments in the region, and have been validated and refined through several events, organizing by IWMI, that brought together agricultural extension agents, farmers, community volunteers, traders, borehole dealers and pump repairers, researchers, and others from within the region.

Kulendi stressed an urgent need to explore the region’s market potential. He mentioned that establishing a sales and distribution network is one way to make solar-powered pumps accessible to farmers:

“We have been trying to set up an office here in the Upper East since last year. We have not done it yet because we had not explored the potential, especially in irrigation. But with the potential that we have explored since we visited places in the region [with IWMI], I bet you by the end of the year, we will have a physical presence here. IWMI has created this opportunity to bring us together to interact with you. We would also like to encourage you to bring more of us together again to realize our potential,” he said.

While smallholder farmers in the Upper East region are potential customers for solar-powered pumps, their interest will depend on the ease of access, user-friendliness of pumps, whether the pumps meet their needs and preferences, and whether they are economically attractive investments. The multi-stakeholder dialogues meetings, which are expected to continue over the coming years, are valuable for private sector companies to interact with each other and others in the sector, to facilitate linkages between actors, strengthen information exchange, and stimulate innovation.

Market segmentation benefits go beyond business

For private sector businesses, market segmentation helps identifying needs and interests of various groups, such as the segments identified above as well as for example women, youth, and persons with disabilities. With better market segmentation, companies can save time, while reducing cost and effort, when attempting to reach new customers in target markets. In this way, market segmentation indirectly contributes to economic growth in the agricultural sector due to the increase in use of mechanized irrigation technologies.

What’s more, market segmentation can help governments, practitioners, and irrigation equipment suppliers design products specifically targeting women. Such gender-sensitive product design might consider the various water-related roles and schedules of women farmers and could imply designing pumps that are portable, light, and easy to use for multiple purposes. Women farmers prefer solar technology that can be used not only for pumping water for irrigation, but also for livestock watering, and domestic and household hygiene activities. A well-segmented market also makes clear the need to design products that are within the income levels of the target groups, such as women.

In this way, segmenting markets to target women specifically could benefit women in various ways. It might, for example, allow women to access solar-powered irrigation pumps that could improve on-farm production and income, contribute to nutrition security within the household, and reduce the time women spend on irrigation.

Finally, market segmentation could help government and non-governmental organizations plan interventions, allocate resources, facilitate impact assessments, promote inclusive development, and obtain insights that can lead to best-fit innovations and better services for all Ghanaians.

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The multi-stakeholder dialogue meeting in Ghana was third in a series of events convening stakeholders from the small scale irrigation sector to discuss challenges and collaborate on collective solutions. It was followed by a similar meeting in Ethiopia, which was held on May 27, 2021, and co-convened by the Ethiopian Ministry of Agriculture, the International Water Management Institute (IWMI), and 2030 Water Resources Group. Reports on both events will be published soon.

The two-faced challenge of the credit constraints limiting smallholder farmers’ irrigation investments

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by Nicole Lefore, Director of Feed the Future Innovation Lab for Small Scale Irrigation (ILSSI), Bedru Balana, Research Fellow at the International Food Policy Research Institute (IFPRI), and Claudia Ringler, Deputy Director of Environment and Production Technology Division at IFPRI

Many smallholder farmers, especially women and other marginalized groups, face difficulty in accessing loans and other forms of credit. Such credit constraints are often considered a key barrier to adoption of mechanized agricultural technologies, such as small scale irrigation equipment.

So how can this challenge be overcome? A new study indicates that the solution might be more complex than previously assumed.

A challenge with two equally important causes

In the past, both research papers and policy guidance documents have advocated for improving the supply of credit to smallholder farmers. The argument is that smallholders face credit constraints on the supply side, meaning that not enough loans or credit schemes are available to them. Therefore, the argument goes, expanding the supply of loans or other forms of finance would unleash investment in irrigation technologies.

Based on this premise, the Feed the Future Innovation Lab for Small Scale Irrigation (ILSSI) has been exploring various affordable and accessible financing options to make loans more available to small scale irrigators, to particularly address these supply-side constraints to credit.

However, a more recent ILSSI study cautions against oversimplifying the solution to credit constraints, when looking to scale irrigation technologies. It has found that demand-side factors, that is, constraints related to the farmers’ own perception and context—such as their risk aversion, bad experiences with past loans, financial illiteracy, perceived high transaction costs, and their household’s labor supply shortages—might play an equally important role, effectively shaping the amount of credit that smallholder farmers are willing to take on, even if they had access.

Complementary solutions required

Using primary data from surveys in Ethiopia and Tanzania, scientists from the International Food Policy Research Institute (IFPRI) working with ILSSI analyzed both demand- and supply-side constraints to credit. The aims of the study were to identify the credit-constraint status of smallholder farmers, that is, whether farmers are unconstrained, supply-side constrained, or demand-side constrained and to assess gender-differentiated credit constraints.

Fig. 1. Supply- and demand-side credit constrained households.

The results showed that demand-side credit constraints are at least as important as supply-side factors. The message is that easing supply-side constraints alone—for example through lowering barriers to entry for credit—will be insufficient if demand-side constraints are not also addressed. Moreover, gendered credit constraints are also on the demand side – and women face additional challenges generating demand for credit as well as accessing credit.

Fig. 2. Supply- and demand-side factors to credit constraints.

These findings open a broader discussion of what it will truly take to improve farmers’ access to and use of credit and other financing mechanisms, which can support their uptake of small scale irrigation and other technologies. As men and women farmers increasingly desire to take on irrigation, credit will continue to be critical.

Scalable solutions in finance for irrigation will require closer understanding of the nature and sources of credit constraints. What is needed is both more targeted finance instruments, from loans to asset-based finance to insurance, and complementary interventions that address demand-side constraints, such as by improving financial literacy and mitigating perceived risks. Finally, gender-sensitive credit instruments and targeted activities are needed that will both increase women’s interest in and access to credit products.

Further reading

Innovating for financial inclusion: Strengthening asset-based financing for women farmers

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by Thai Thi Minh, Senior Researcher, Scaling Innovations, International Water Management Institute, and Nicole Lefore, Director, The Feed the Future Innovation Lab for Small Scale Innovation, Texas A & M.

Providing asset-based financing is considered an innovation that can enable people ‘at the bottom of the pyramid’, including women farmers, to overcome credit barriers. In sub-Saharan Africa, several solar irrigation pump companies are attempting to fill a widespread credit gap by offering asset-based financing, through which they essentially provide farmers with a loan to purchase a pump, for which the pump itself serves as security.

The advantage of asset-based financing is that it can give farmers access to solar pumps without the usual collateral or credit history required for a loan. This enables them to intensify production and increase their incomes. Farmers pay back the loans in installments, as the pump allows them to increase their incomes, in what is known as a pay-as-you-go (PAYGO) approach. PAYGO also sometimes includes follow-up training and regular product servicing during the period of repayment, which also fills the need for information and after-sales services.

Companies are benefitting from asset-based financing by expanding their markets, while farmers benefit from avoiding the usual credit barriers. But, while innovative, the question is whether asset-based financing is also inclusive when it comes to solar irrigation pumps?

Women in sub-Saharan Africa play a critical role in food security, providing as much as half of agricultural labor and playing significant roles in agriculture and livestock sectors. Yet, gender-based constraints to financial resources—such as loans, formal banking services, and ownership over land and other resources—negatively affect women’s ability to invest in productive assets, such as solar pumps.

Recent research by the Feed the Future Innovation Lab for Small Scale Irrigation (ILSSI), published by the International Food Policy Research Institute (IFPRI), highlights that women seeking credit face more significant supply and demand constraints, such as a lack of information, than men.

A group of farmers inspect newly received solar-powered irrigation pumps. Photo: IWMI.

While many development projects focus on improving women’s access to credit through village savings and loans associations or support through micro-finance institutions, such modes are either insufficient, unprofitable, or fail to reach resource-poor women and men farmers wanting to invest in productive assets. That’s why we are exploring how well asset-based financing enables women to invest in irrigation.

Gender gaps in current credit assessment tools

Companies considering providing asset-based financing to clients typically use credit scorecards to determine whether the client is creditworthy.

Such scorecards or assessment tools are used by a company’s credit review officers to assess commercial aspects of financing and to give a potential client a risk score and a consistency rating. If a potential client is assessed as low risk, and therefore qualifies for credit, the results of the assessment can also be used to set the terms of repayment. In short, credit assessments are a critical tool that aims to reduce the risks associated with asset-based financing for both the loan providers and for clients.

Within the ILSSI project, the International Water Management Institute (IWMI) has reviewed credit scorecard criteria and the credit assessment processes being applied by private solar irrigation suppliers in sub-Saharan Africa offering PAYGO or some form of asset-based financing. The initial review suggests women may still be excluded because the scorecard criteria may be inherently biased.

While credit risk assessment tools are to predict the likelihood of repayment, they are not necessarily designed to be gender sensitive. In fact, few of the irrigation equipment companies with which ILSSI has engaged target women farmers as potential clients for solar irrigation pumps.

Few irrigation equipment companies target women farmers as potential customers. This despite women’s essential roles in agriculture. Photo: IWMI.

We found that typical criteria in credit assessments include access to services and amenities, primary income-generating activity and income, household expenses, and water availability and utility, as well as the client’s farm and farming practices, existing credit access, and financial savings. In this way, use of resource ownership and income as criteria to assess the potential risk of agricultural clients marginalizes most women, as they tend to be resource poor.

At the same time, scorecard criteria exclude the factors known to influence women’s ability to achieve investment returns and repay credit, such as off-farm income, livelihood diversification, group membership and social networks, and financial management. Women farmers may not have the level of income or asset ownership to meet a threshold for low-risk financing, but women farmers may still have strong financial management capacity, awareness about availability of various financial services, and financial literacy. Women farmers generally also have diverse on- and off-farm livelihood activities, which a credit scorecard may not account for. We propose that including these income-generating activities would help better estimate the credit worthiness of women farmers.

Moreover, credit assessment criteria appear to miss the significance of group membership and social networks as well as socio-cultural aspects, such as power relations within households, women’s mobility, inheritance systems, and other socio-cultural relations that influence women’s access to resources such as finance, markets and extension, or information sources.

Creating equal opportunities for women farmers

We are now collaborating with private-sector solar irrigation equipment partners to develop gender-sensitive credit scorecard criteria. The gender-sensitive tool focuses on both the criteria components and the process. Criteria currently excluded, but that could influence women farmers’ ability to obtain and maintain PAYGO loans, will be brought into credit assessments. These additional criteria should also help to develop business models for asset-based lending to groups, which would allow women to pool their resources into a joint asset. ILSSI’s private sector partners will test the application of the new criteria in Ghana and Ethiopia.

We will be supporting continued development of the credit assessments in parallel with capacity development innovations. In Ghana, ILSSI is supporting innovation internships that are embedding young and promising researchers into company activities, including fieldwork on business and financing models to reach women farmers. ILSSI activities in Ethiopia include a ‘hack-a-thon initiative’ by IWMI and Bahir Dar University to develop an app-based digital scorecard to ease the data collection and analysis and improve the assessment algorithm.

Asset-based financing is seen as a high potential solution to credit constraints, building on the strengths of the private sector in development, but if poorly designed, this innovation could inadvertently deepen women’s lack of access to credit for productive assets. Reversely, if credit assessment tools are adapted to assess the creditworthiness of women farmers more accurately, there is potential for the approach to benefit both women and men farmers as well as private sector companies in a growing solar irrigation market.

Student interview: Breaking boundaries in scientific modeling for better, more sustainable water management

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Fati Aziz currently works as a Postdoctoral Research Associate at the Texas A&M University in College Station, USA. She completed a PhD in Climate Change and Water Resources in November 2017 at the University of Abomey-Calavi in Benin, based on modeling work completed under the Feed the Future Innovation Lab for Small Scale Irrigation (ILSSI). The PhD was sponsored by the German Federal Ministry of Education and Research through the West African Science Service Center on Climate Change and Adapted Land use (WASCAL).

What was the focus of your work with ILSSI and what were your most important findings?

In June 2015, during my PhD, I joined the Integrated Decision Support System (IDSS) team at the Texas A&M University as a visiting scientist for five months. I received training in the Soil and Water Assessment Tool (SWAT) tool, which can be used to simulate the quality and quantity of surface and groundwater and to predict the environmental impact of land use, land management practices, and climate change.

Then, in February 2016, I participated in an IDSS training organized by ILSSI in Accra, Ghana, and that’s when I finished the calibration and validation of the SWAT model for river discharge and sediment loads in the Black Volta River Basin.

Fati Aziz, Postdoctoral Research Associate at the Texas A&M University.

The Black Volta River Basin is the biggest sub-basin of the Volta River Basin, and it is shared by Burkina Faso, Ghana, Côte d’Ivoire, and Mali. Although its waters support significant economic activities, such as agriculture and energy production, the availability and use of water is threatened by population growth, changes in land use and land cover, and climate change.

Because I wanted to study the impact of climate change, land use and land cover change on the flow and sediment yield of the Black Volta, calibrating and validating the model was a critical step in my research. Proper model calibration and validation reduces errors in simulations and increases users’ confidence in the tool’s ability to make future projections.

When reviewing how well the SWAT model performed in terms of simulating the historical flow and sediment yield of the Black Volta, based on quantitative statistics during monthly calibration and validation, I found that the model simulated the two variables well during most of the calibration and validation periods.

Finally, when using the calibrated and validated model for projections, I found that all the model scenarios I used projected an increase in flow and sediment yield in the basin during the late (2051–2075) and end of the 21st century (2076–2100) periods, relative to the historical period (1981–2010). This was true for both seasonal and annual projections.

For example, the end-of-the-century projections under the RCP 8.5 scenario (the Representative Concentration Pathway 8.5 scenario, which represents one of several greenhouse gas concentration trajectories) showed an increase in flow ranging between +69% and +243% across models. The sediment load increase ranged between +358% and +412%. An increase in streamflow may result in floods in the basin region, while higher sediment load may increase the turbidity of the river and cause loss of reservoir storage. Since most of the population in the basin depend on agriculture for their livelihood, measures to cope with increasing floods and droughts, such as enlarging existing reservoirs to take up extra water for storage and for irrigation purposes, should be explored and developed well ahead of time.

Fati Aziz measures flows in the Black Volta River Basin with an OTT Qliner 2
Fati Aziz measures flows in the Black Volta River Basin with an OTT Qliner 2.

Why did you choose the discipline you work in? What pulled you toward this as a scientist?

Given the rapid increase in global population, urbanization, and climate change, among other challenges, optimum management of natural resources presents one of the most critical challenges of our time. Wanting to contribute to better and sustainable water resource management policies, which are based on sound scientific evidence, made me focus on this field.

What are your experiences as a woman scientist in modeling, which tends to be dominated by men, and would you encourage other women to work in this discipline?

My experience in this field is mostly positive. The male-dominated nature of the field is a great source of inspiration to me as it pushes me to work harder. Fortunately, my male colleagues are very receptive and respect my perspectives. Currently, as the only woman in my IDSS research group at Texas A&M University, I receive enormous support and encouragement from my male colleagues.

My dear woman, if scientific modeling is something you’re interested in, I strongly encourage you to go for it. Trust me, there’s real joy in “breaking boundaries” doing what you love.

What is your current focus of study and what changes do you hope will come from it?

I am currently assessing land suitability for cocoa cultivation in Ghana and Côte d’Ivoire using a multi-criteria evaluation technique based on geographical information systems (GIS). My study is part of a bigger research effort that aims to assess the use of supplemental irrigation to improve the production of cocoa and other cash crops in West African countries. My findings may assist stakeholders in developing better crop management strategies that improve yield and environmental sustainability. We hope that using supplementary irrigation for vegetables and cocoa seedlings will lead to increased food production, household income, and nutrition in the West African region.

Internship with PEG Africa: Trialing solar pumps on cocoa farms

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Irrigation equipment markets: Potential finance and business models in the cocoa value chain

Background and focus

Irrigation systems provide farmers with an opportunity to improve crop and water productivity, maximizing crop yields and quality, while carefully managing scarce water resources. However, most small-scale irrigators lack information on technologies and practices for improved water management. These irrigators are also located in remote areas with under-developed irrigation equipment supply chains. In addition, some value chains have not yet introduced irrigation; some crops continue to be considered rainfed despite increasing dry spells and changing weather patterns. Overall, farmers lack easy access to irrigation equipment, services and information, and these conditions are further exacerbated by high transaction costs in accessing other agriculture input markets (e.g. seeds, fertilizers, post-harvest processing) and output distribution channels. Such on-farm and off-farm agronomic and market challenges ultimately hinder adoption of environmentally suitable and sustainable agricultural production. Across Ghana, many gaps will need to be addressed to contribute to improvements in agriculturally-based livelihoods and agriculture-based economic growth.

One value chain that could benefit from supplemental irrigation is cocoa. While cocoa has been and continues to be important to Ghana’s economy, production is being negatively affected by climate change. Predictions suggest that cocoa will become increasingly less viable over the next couple of decades if production methods do not change. Irrigation provides one climate mitigation strategy for cocoa production, in both replacing cocoa seedlings on farms and in improving yields and quality, particularly in secondary seasons. In addition, irrigation can be used to inter-crop cocoa with high value vegetables. Through these approaches, irrigation could improve cocoa farmers’ income. Moreover, through an income pathway, there is potential to strengthen nutritional security for members of cocoa producing households.

Cocoa producers in Ghana rely almost entirely on rainfed production across all seasons. Therefore, very little information is available to assess the economic and environmental viability of irrigated cocoa at multiple scales. More data is needed to conduct cost-benefit assessments and to develop irrigated cocoa business models at farm level.

This internship would focus on assessing the farm level, financial feasibility for irrigated cocoa production. Under supervision of an irrigation equipment supplier, the intern would collect data on Solar Powered Irrigation System (SPIS) pilot farms and contribute to analysis of the data from a marketing perspective. The resulting information would help to identify potential business models and/or finance models for a strategy to market irrigation equipment in the cocoa value chain.

Supervision arrangements and resources: The intern would work directly with PEG Africa (interface of marketing and water) and in collaboration with the International Water Management Institute (IWMI), under the Feed the Future Innovation Lab for Small Scale Irrigation. The intern will be based with PEG Africa Ghana and hold periodic meetings with IWMI regarding the data collection and analysis, as well as participate in occasional workshops and related mentoring activities. The position offers an intern the opportunity to develop data collection and real-world business skills, while also gaining access to professional networks and mentorship. A small stipend and field costs are covered to enable the intern to carry out expected tasks. The period of the internship is expected to be for one year.

Intern roles and activities

  • Support identification of cocoa farm(s) to trial solar pumps.
  • Collect baseline and seasonal data from experimental and control farms including yields, farm characteristics (e.g. soil composition, production activities etc.) and socio-economic indicators (including revenue and income) to help with ex-ante analysis; Data includes cocoa and inter- cropped high value crops.
  • Contribute to analysis of data toward designing financial products and payment plans for SPIS.
  • Contribute to data collection and analysis of farmer payment trends for SPIS noting on- and off-farm factors impacting farmers’ ability to pay.
  • Contribute to cost-benefit analysis and marketing analysis as an input to development of workable business and finance models that will enable development of irrigation supply chains in the cocoa sector.

Requirements

  • Relevant degree in business, agricultural economics, crop science, sociology or related social science, and/or marketing. Degree level should be MSc, MPhil or MBA. Preference will be given to those having recently completed the degree (within the past 24 months).
  • Academic or work experience with agriculture, cocoa agronomy, agro-value chains, agri- business is preferred, but not required. Applicants without a related degree or work experience must have evidence of a strong desire to transfer skills into the agriculture sector.
  • Work experience in the cocoa sector post-bachelor degree may be substituted for MSc or MBA degree.

How to apply

Your application must include one A4 page cover letter that explains why you are interested in applying and what you can offer, a copy of your curriculum vitae and a list of two professional referees and their contact information who may be contacted if you are shortlisted for the position.

The application materials must be submitted in one PDF file to Ms. Abena Ofosu (IWMI Ghana) via email: A.Ofosu@cgiar.org

The deadline for submission is 17:00 GMT on April 10, 2021. Please indicate in the subject of the email: ‘Application for internship with PEG Africa – Cocoa value chain’’.

This is a nationally recruited intern position, and only candidates who are eligible to work in Ghana will be considered. Please note that only shortlisted candidates will be contacted.

Texas A&M University System Member