Investing in rural people in Rwanda - International Fund for ...

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Investing in rural people in Rwanda Rural poverty in Rwanda Rwanda is a small, landlocked, resource-poor country with a population of more than 10.5 million. The population density has more than doubled since 1978 from 183 inhabitants per square kilometre (km2) to 415 inhabitants/km2 in 2012. Population density in the country is the highest in Africa. The annual demographic growth rate is 2.6 per cent and the population is expected to increase to about 14.6 million by 2025. From a tragically low starting point in 1994 following the genocide against Tutsi, in two decades Rwanda has achieved impressive economic results. Gross domestic product (GDP) has rebounded with an average annual growth of 7 to 8 per cent in the past ten years while inflation has been reduced to single digits. This successful performance was driven by stable macro-economic and market-oriented policies, improved regulatory frameworks and relatively transparent interactions between government and private sector. A strong anti-corruption policy has increased business confidence. While there has been a decline in poverty over the past few years, Rwanda still remains a low-income country with annual per capita income of US$644 in 2012, and more than 45 per cent of the population lives below the national poverty line. Despite Rwanda’s fertile ecosystem, food production often does not keep pace with

demand, requiring food imports. Rwanda is ranked 167th out of 186 countries in the United Nations Development Programme’s 2013 Human Development Index and 76th out of 148 countries in the Gender Inequality Index (GII).1 About one in four rural households lives in extreme poverty. The poverty rate is highest in rural areas, where 83.5 per cent of the country’s population lives. The percentage of people living in poverty in rural areas is 49 per cent compared with 22 per cent in urban areas. Poverty is highest (76.6 per cent) among households (often landless) who obtain more than half of their income from working on other people’s farms. Agriculture remains the backbone of the economy, accounting for one third of GDP in 2012 and generating about 80 per cent of total employment. Although a great part of GDP growth of the past ten years can be attributed to improved performance in agriculture, the sector still remains very fragile. Production units are very small, agriculture techniques are still based on rain-fed production systems with less than 6 per cent of cultivated land currently irrigated, and agricultural production is still largely for subsistence only. The main food crops include sorghum, banana, beans, sweet potatoes and cassava but, over the past decade, maize, rice, Irish potatoes and fruits and vegetables have emerged as important crops grown by smallholders. Tea and coffee represent by far the main traditional export crops, providing about 70 per cent of agricultural export earnings. Smallholders hold an average of four to five plots that make up an average land size of 0.59 hectares, thus restricting the ability of rural populations to escape poverty. Family farms are continuously subdivided into increasingly smaller plots, fields are overcropped and marginal lands and pasturelands are converted to arable lands. In 2005 the land law was instituted to resolve the issue of land fragmentation, replacing the customary tenure system with registered titles that can be used as collateral. The genocide against Tutsi starting in 1994 had a devastating social and economic effect on the country. It led to a change in the country’s demographic structure: women today account for about 54 per cent of the Rwandan population, and many households are headed by women and orphans. Households headed by women (29 per cent of the total rural population), households headed by children and households affected by HIV/AIDS are also affected by poverty or are at risk of falling into poverty. Women provide the bulk of labour in the crop sector, but function mainly at subsistence level with insufficient skills, access to markets and control over land and other agricultural services. The Comprehensive Food Security and Vulnerability Analysis conducted in 2012 by the World Food Programme, in close collaboration with the Rwanda National Institute of Statistics, indicated that one in five Rwandan households had inadequate food consumption and could be considered to be food insecure. In addition, the prevalence of chronic malnutrition (stunting) among children under 5 remains very high (43 per cent) and has been constant over the past 20 years. Sustained growth of the agricultural sector has been driven by important public investments in land use consolidation, irrigation, land improvement, soil and water conservation, facilitating access to inputs, increasing livestock herds, and social capital-building through support to cooperative development. The intensification of production systems to improve productivity is now becoming a government priority, together with the generation of off-farm employment in order to create alternative livelihood opportunities and economic mobility away from primary production, thus releasing land to increase the size of farming units to a more viable scale for high-value intensification and sustainable management of the limited natural resource base.

1 The Gender Inequality Index (GII) reflects gender-based inequalities in three dimensions – reproductive health, empowerment and economic activity. The GII replaced the previous Gender-related Development Index and Gender Empowerment Index. The GII shows the loss in human development due to inequality between female and male achievements in the three GII dimensions.

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©IFAD/Susan Beccio

Furthermore, Rwanda is trying to overcome the limitations of its small, landlocked economy by leveraging regional trade. The country joined the East African Community and is aligning its budget, trade and immigration policies with its regional partners. The government has embraced an expansionary fiscal policy to reduce poverty by improving education, infrastructure, and foreign and domestic investment and pursuing market-oriented reforms. Energy shortages, instability in neighbouring states, and lack of adequate transportation linkages to other countries continue to handicap privatesector growth. The Rwandan Government is seeking to become a regional leader in information and communication technologies. While productivity has increased, average farm sizes are declining in the face of steady population growth, putting pressure on household farm incomes. While marketable surpluses have increased, the long-standing problem of production being consumed mainly on the farm continues. Based on recent studies by the Associates for International Resources and Development and the International Food Policy Research Institute, the principal challenges and strategies ahead for the agriculture sector are: • expanding and sustaining increased productivity gains in the short and medium term • increasing and improving food and nutrition security for the rural population • strengthening and deepening value-chain development, including increasing agroprocessing to create non-farm employment, consistent with Rwanda’s competitiveness • increasing commercialization of agriculture production • enhancing the enabling environment to attract the private sector to invest and add value to the productivity and diversification increases.

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©IFAD/Susan Beccio

Eradicating rural poverty in Rwanda The strategy for stimulating rapid and sustainable economic growth and reducing poverty is articulated in Rwanda’s Vision 2020 which is fostering good governance, development of human resources, private-sector-led economy, infrastructure development, market-led agriculture and regional and international economic integration. This vision is further laid out in the second Economic Development and Poverty Reduction Strategy (EDPRS 2), approved by the government in May 2013 and covering the period 2013-2018. It delineates the agriculture sector as a key sector and a significant engine of inclusive growth for the country. EDPRS is being structured around four main themes, namely: accelerated economic growth towards achieving middle-income country status; rural development for sustainable poverty reduction; productivity and youth employment; and improved service delivery and citizen participation in the development process. The main objective is to reduce poverty to 30 per cent and extreme poverty to 9 per cent. As part of EDPRS 2, the Strategic Plan for Agriculture Transformation (PSTA III) is implemented by the Ministry of Agriculture and Animal Resources (MINAGRI). The Government, through MINAGRI, provides policy, coordination and financing leadership for the plan. Its main objective is to transform Rwandan agriculture from a subsistence-based to a knowledge-based, value-creating sector and accelerate agriculture growth to increase rural incomes and reduce poverty. The strategy encompasses four broad programme areas: agriculture and animal resource intensification; research, technology transfer and professionalization of farmers; value-chain development and private-sector investment; and institutional development and agricultural crosscutting issues. Compared with the previous strategic plan, PSTA III puts greater emphasis on value chains and markets, product quality and obtaining premium prices, as well as arrangements for bulking up production in order to ease access to inputs, services and markets. It also aims at 4

increasing exports of tea, coffee and horticultural products and developing the role of the private sector in agricultural production. Furthermore, PSTA III is guided by the Comprehensive Africa Agriculture Development Programme (CAADP). Rwanda was the first country to sign a CAADP Compact and prepare an Agriculture Sector Investment Plan (ASIP) which was fully aligned with CAADP. After fulfilling its first CAADP investment strategy (2008-2013), the country launched the second Rwanda CAADP Agricultural Sector Investment Programme (ASIP) based on PSTA III in June 2014. In addition, nutrition and household vulnerability have been included as a specific line of action in PSTA III and a technical working group has been formed in MINAGRI to better understand how the ministry can directly contribute to improved nutrition. At the subnational level, 30 districts are playing an increased role in the implementation of sectoral programmes, including in agriculture. There is an urgent need to intensify efforts to strengthen district-level capacities for efficient and effective planning, budgeting, implementation, and monitoring and evaluation. MINAGRI has introduced various coordination mechanisms that involve diverse stakeholders, such as the sector-wide approach (SWAp) working group and the supporting agricultural sector working group. MINAGRI plans to continue to use these mechanisms to support the effective implementation of PSTA III, taking a programmatic approach. Various development partners are providing support, including the Department for International Development (United Kingdom), the European Union, the Netherlands and the World Bank.

IFAD’s strategy in Rwanda Since 1981, IFAD has financed 15 rural development programmes and projects in Rwanda, for a total amount of US$239.4 million and directly benefiting about 534,300 rural households. The financing provided by IFAD consists of loans on highly concessional terms; since 2008, full grant funding is based on the Debt Sustainability Framework. The thematic thrusts of IFAD’s interventions are considered highly relevant to national development priorities and sector strategies. The IFAD country programme has contributed significantly to improving incomes and food security in rural areas, particularly through watershed development, increased production in irrigated marshland and hillsides, and development of livestock, export crops and rural enterprise promotion.

Programmes and projects: 15 Total cost: US$437.6 million Total financing from IFAD: US$239.4 million Directly benefiting: 534,300 households

There are currently two generations of IFAD-financed projects. The first, designed during the 1980s and 1990s, included integrated rural development projects. These projects aimed to develop the agriculture sector in specific parts of the country by identifying all related elements and linking them together. Projects of the second generation, in place since the mid-1990s, call for activities that have an impact beyond the local level. They focus on a single aspect of rural development, such as market access or agricultural production, and its relation to government policies or other national initiatives already in place, to promote their replication in the rural environment. The third generation of IFAD support (from 2016 onward, when additional IFAD funds become available for Rwanda) is expected to take the form of programme support for PSTA III. This would also enable IFAD to scale up some of the more successful innovations generated through its past and ongoing investment projects. IFAD’s country programme has piloted a number of innovations, including a rice intensification system (SRI), crop-livestock integration and intensification, support for water users associations, and development of farmers’ managed veterinary pharmacies, which have now been mainstreamed into government programmes. In addition, new technologies such as the flexi biogas low-cost system are providing affordable energy to remote rural areas, while the apprenticeship programme is helping rural youth gain new skills. 5

©IFAD/Susan Beccio

IFAD’s strategy in Rwanda, as documented in its results-based country strategic opportunities programme (COSOP) for 2013-2018, is well aligned with EDPRS 2 and PSTA III, as well as with the IFAD Strategic Framework for 2011-2015. The results-based COSOP builds on the recommendations of the country programme evaluation and agreements reached with the Government on IFAD’s programme for the period 2013-2018.The COSOP’s overall objective is to reduce poverty by empowering poor rural men and women to actively participate in the transformation of the agriculture sector and rural development, and by reducing their vulnerability to climate change. The three interrelated strategic objectives of IFAD’s country programme in Rwanda are: • to sustainably increase agricultural productivity through management of the natural resource base and investments in physical and social capital, including scaled-up agricultural intensification, in order to improve incomes and livelihoods • to develop climate-resilient export value chains, post-harvesting processes and agribusiness to increase market outlets, add value to agricultural produce and generate employment in rural areas • to improve the nutritional status of poor rural people and vulnerable groups included in the process of economic transformation.

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Fast facts about the East and Southern Africa region • The East and Southern Africa (ESA) region has one of the world’s highest concentrations of poverty. • Three out of four people in the region, or some 260 million people, live in rural areas, and more than half of them live in extreme poverty. • About 85 per cent of extremely poor people depend on agriculture, particularly smallholder farming, for their livelihoods. Yet agricultural development is falling behind and the region has suffered a general decline in development assistance and a dramatic decline in investment in agriculture. • With a wealth of human and natural resources, rural areas in the region have enormous potential for growth that would benefit not only rural poor people but also national economies. The potential for improvements in smallholder agriculture offers the most immediate practical opportunity to reduce rural poverty and stimulate broad-based growth. • In 2012, GDP increased by an average 4.9 per cent in East Africa and 4.3 per cent in Southern Africa. Some of the strongest performances were in Angola, Mozambique, Rwanda and Zambia. The GDP in the region is expected to further increase during the coming two years. Approximately 70 per cent of foreign investments in ESA target the mining sector, with major investments directed at Angola, Mozambique and South Africa. • In absolute terms, government expenditure on agriculture has increased in ESA over the past 20 years, but spending on agriculture as a portion of all government expenditures has decreased. • In ESA, agriculture’s contribution to GDP is far lower than the percentage of people engaged in agriculture, reflecting low agricultural productivity. • The Food and Agriculture Organization of the United Nations estimates that in lower and mediumincome countries, farmers invest four times more in agriculture than government, donor and private foreign investment combined. • In the 21 countries in ESA, on average 60 per cent of the active population is engaged in the agriculture sector, but the variation is wide, reflecting the presence or absence of diversified economic opportunity. • 65 per cent of farm work in the region is done by ‘hand’, 25 per cent by draft animal power and 10 per cent by tractors, pumps or other motorized instruments. • The overwhelming dependence on human muscle for farming in sub-Saharan Africa is perhaps the greatest brake on rural economic and social development. It is highly inefficient, taking an average 60 person days per hectare for land preparation, seeding, weeding and harvesting and greatly limiting the amount of land that a farming family can efficiently cultivate. • African exports have tripled in value in the past 14 years, reaching a value of over US$582 billion, as a result of high commodity prices and the rise in demand for oil and minerals, mainly from China. • Trade between African countries lags behind, representing only 12 per cent of total trade. • Under the New Partnership for Africa’s Development (NEPAD), the Comprehensive Africa Agriculture Development Programme (CAADP) was established in 2003 to improve and promote agriculture across Africa. • As a medium-term objective for 2015, African governments expect to: - foster agricultural markets within and between countries - increase the participation of farmers in the market economy - increase agricultural production and sustainable management of natural resources on the continent. In this regard, the main regional economic blocks – the Southern African Development Community and the Common Market for Eastern and Southern Africa – are playing an important role as stakeholders. In ESA, 11 countries have signed the CAADP compact, an instrument that identifies the key areas for investment and shows the governments’ commitment to implementation of the CAADP pillars. The remaining countries have launched CAADP implementation and are working towards signing the compact.

IFAD’s strategy for rural poverty reduction in East and Southern Africa Since starting operations in 1978, IFAD has financed 177 investment programmes and projects in ESA, for a total commitment of US$2.9 billion. IFAD is one of the principal sources of development assistance for rural poverty reduction in the region. IFAD’s regional programme takes the growth potential of the smallholder economy as its starting point. It focuses squarely on new opportunities and challenges associated with the region’s incomplete economic transition, the result of structural 7

adjustment that modified the landscape of economic policy and institutions. It also makes support to women a priority. Women are the least empowered people in rural communities, but they have the potential to make a key contribution to poverty reduction. Working with governments, donors, poor rural people and community-based and nongovernmental organizations, IFAD explores opportunities created by governments through political opening, decentralization and economic liberalization. It supports a wide range of activities through which smallholder farmers develop new relations with the private sector and public services, and a new approach to resource management. The strategy’s objective is to ensure that activities can be replicated and scaled up to reduce poverty. Nine nations in ESA are middle-income countries (MICs). Projects cannot always offer the design and financing options MICs desire, according to the changing global environment for development assistance. MICs, which have access to alternative sources of financing, consider that the non-financial costs and rigidities associated with project lending outweigh the benefits associated with IFAD involvement. On the other hand, agricultural sectors represent a far lower portion of GDP in MICs than in other countries. Government agricultural strategies focus primarily on increasing production through support to large agro-enterprises; as such, there can be a certain disconnect between government sectoral objectives and IFAD’s focus on smallholder agriculture and poverty reduction. Supporting effective government policies to empower the most marginalized people and to improve their access to basic productive assets is an important niche for IFAD in MICs. IFAD designs and implements projects in ESA that reflect its mandate to invest in rural people by: • Ensuring careful targeting, focusing on poor rural people in areas of medium to high potential, without excluding more marginal areas • Investing in empowering poor rural women and men to strengthen their own productivity and assets, and enabling them to assert their influence on government and the private sector • Supporting development of rural poverty reduction policies and establishment of institutions that help give poor people a voice in their future. IFAD’s operations in ESA have a particular focus on: • Promoting efficient and equitable market linkages • Developing rural finance systems • Improving access to and management of land and water • Creating a better knowledge, information and technology system Building up resilience to crises such as the HIV/AIDS epidemic and civil strife is an essential element of IFAD’s strategy. The region is the epicentre of the epidemic, and adult prevalence rates are among the highest in the world. Most of those who suffer the impact of the epidemic are extremely poor people living in rural areas. IFAD’s response is to extend knowledge empowerment at the community level into the realm of HIV/AIDS in order to support prevention – and to work towards establishing livelihood options for the poor, outside high-risk activities.

ESA new business model for decentralization • The IFAD ESA regional division introduces a new approach to project management, moving from country managers to country management teams. • Country programmes are managed jointly by the country management teams, which fosters cross-country linkages and support. • Countries are gathered by a clear set of criteria, the most important of which is accessibility to add value to subregional trade and open up markets beyond borders. • IFAD taps into the mix of skills and competencies among country office staff and sharing of local experiences.

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Ongoing operations Kirehe Community-Based Watershed Management Project Climate-Resilient Post-Harvest and Agribusiness Support Project Project for Rural Income through Exports

Kigali

Climate Resilient Post-Harvest and Agribusiness Support Project The project will alleviate poverty, increase the incomes of smallholders and rural labourers – including women, young people and vulnerable groups – and contribute to overall economic development in Rwanda. The project will demonstrate propoor and climate-resilient approaches to post-harvest activities undertaken amidst increasing climatic uncertainty.

Total cost: US$83.4 million

The target group comprises poor smallholder farmers engaged in production or processing of specific priority crops and dairy products. This group includes poor farmers with some production potential, members of cooperatives who own small land plots, and smallholders who supplement their income through agricultural wage work.

Directly benefiting: 32,400 households

Approved IFAD loan: US$13.5 million IFAD ASAP: US$7.0 million Approved DSF grant: US$13.5 million Duration: 2014-2019

Project components include the following: • Capacity development and business coaching for cooperatives, farmers’ organizations and small businesses and microenterprises involved in delivering produce to market • Support for agribusiness investment in climate-resilient drying, processing, value addition, storage, logistics, distribution and other post-harvest activities that reduce product losses and increase incomes. The project is strengthened through an investment of US$7.0 million from the Adaptation for Smallholder Agriculture Programme (ASAP), launched by IFAD to channel climate and environmental finance to smallholder farmers so that they can increase their resilience.

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©IFAD/Joanne Levitan

Project for Rural Income through Exports (PRICE) This project benefits smallholder farmers, and especially woman-headed households and households with little land, involved in the production of coffee, tea, sericulture and horticulture, which is estimated to amount to about 128,700 households.


The project promotes:

Duration: 2011-2018

• Sustainable increased returns to farmers from key export-driven agricultural value chains, through increased volumes and quality of production, improved marketing and effective farmer organizations

Approved IFAD loan: US$18.7 million Approved DSF grant: US$18.7 million Directly benefiting: 128,700 households Cofinancing: US$10.3 million

• Strengthened producer cooperatives as full-fledged economic partners of the private sector. The cooperative of tea farmers in Nshili-Kivu (COTHENK) is working with a local tea processing factory in which they also own shares to bulk buy, process and sell their tea.

Kirehe Community-based Watershed Management Project (KWAMP) This project promotes the shift from subsistence to intensified market-based agriculture in Kirehe District, a densely populated area threatened by severe soil erosion. The project supports the creation of sound local institutions for the sustainable management of local land and water resources in 18 watersheds. A principal goal of the project is to increase producers’ incomes and food security by increasing the production of crops and livestock for markets. The project also supports the sustainable operation of affordable irrigation facilities by poor and landless farmers in the district, reducing dependence on erratic rains and allowing farmers to shift to crops of higher value in response to market demand. 10

Total cost: US$64.5 million Approved IFAD financing: Initial DSF grant: US$20.4 million Second grant: US$6.3 million Supplementary funding: US$15 million Duration: 2009-2016 Directly benefiting: 40,000 households Cofinancing (World Food Programme): US$0.088 million

Activities emphasize: • creating strong district, watershed and farmer-based institutions capable of sustaining efficient and non-destructive agricultural and livestock production • empowering small-scale and landless farmers to plan and implement sustainable market-led investments jointly with the private sector • developing 2,000 hectares of irrigated land, protecting and intensifying about 20,000 hectares of cultivated catchment area, and providing cattle and goats for animal solidarity chains • rehabilitating feeder roads to improve links between farmers and markets • promoting the special agroforestry technique called embocagement to help farmers protect land against erosion.

Completed operations Support Project for the Strategic Plan for the Transformation of Agriculture (PAPSTA) Total cost: US$31.1 million

Umutara Community Resource and Infrastructure Development Project (PDRCIU)

Approved IFAD loan: US$9.8 million


Approved IFAD grant: US$4.5 million


Duration: 2006-2013

Duration: 2000-2011



Rural Small and Microenterprise Promotion Project – Phase II (PPPMER II)

Rural Small and Microenterprise Promotion Project





Duration: 2004-2013

Duration: 1998-2004



Smallholder Cash and Export Crops Development Project (PDCRE)

Rwanda Returnees Rehabilitation Programme




Approved IFAD grant: US$2.8 million

Duration: 2003-2011

Duration: 1997-2001



Umutara Community Resource and Infrastructure Development Twin Project

Intensified Land Use Management Project in the Buberuka Highlands





Duration: 2002-2007

Duration: 1996-2004



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Gikongoro Agricultural Development Project Total cost: US$31.2 million Approved IFAD loan: US$11.2 million Duration: 1989-2001 Directly benefiting: 42,000 households

Birunga Maize Project Total cost: US$4.3 million Approved IFAD loan: US$3.8 million Duration: 1985-1998 Directly benefiting: 46,100 households

Byumba Agricultural Development Project – Phases I and II Total cost: US$44.1 million Approved IFAD loan: US$ 19.9 million

Building a poverty-free world IFAD invests in rural people, empowering them to reduce poverty, increase food security, improve nutrition and strengthen resilience. Since 1978, we have provided over US$16 billion in grants and low-interest loans to projects that have reached more than 430 million people. IFAD is an international financial institution and a specialized United Nations agency based in Rome – the UN’s food and agriculture hub.

Duration: 1983-2001 Directly benefiting: 54,000 households

Socio-Health Programme Total cost: US$3.8 million Belgian Survival Fund Joint Programme grant: US$3.8 million Duration: 1996

Contacts: Francisco Pichón IFAD Country Programme Manager Ali Hassani Mwinyi Road P.O. Box 2 Dar es Salaam, United Republic of Tanzania Tel: +255 22 2664563, +255 22 2664564 E-mail: [email protected] Aimable Ntukanyagwe Country Programme Officer IFAD Kigali, c/o FAO office P.O. Box 1502 Kigali, Rwanda Tel: +250 252 583733, +250 788 389 898 E-mail: [email protected] For further information on rural poverty in Rwanda, visit the Rural Poverty Portal: http://www.ruralpovertyportal.org

©IFAD/Susan Beccio

International Fund for Agricultural Development Via Paolo di Dono, 44 - 00142 Rome, Italy Tel: +39 06 54591 - Fax: +39 06 5043463 E-mail: [email protected] www.ifad.org www.ruralpovertyportal.org ifad-un.blogspot.com www.facebook.com/ifad instagram.com/ifadnews www.twitter.com/ifadnews www.youtube.com/user/ifadTV October 2014