Enabling poor rural peopleto overcome poverty

YEARS IN NEPAL35

IFAD Nepal2

Prepared by :

Bashu Aryal, Country Programme Officer for Nepal, Lorina Sthapit and Kaushal Shrestha

Front Cover: © IFAD, Lorina SthapitBack Cover: © IFAD, Kaushal Shrestha

© 2013 by the International Fund for Agricultural Development (IFAD)January 2013

Message from the Joint Secretary of Ministry of Finance 2

Message from the Country Programme Manager 3

IFAD | Enabling Poor Rural People to Overcome Poverty 7

Why does IFAD intervene in Nepal? 8

IFAD's strategy in Nepal 11

Country Strategic Opportunities Programme 12

IFAD Nepal | History of Cooperation 16

Ongoing Projects 17

Agricultural Development Strategy 30

Completed Projects 31

Monitoring and Evaluation 41

IFAD’s Financing 44

Disbursement 44

Beneficiaries 45

Contacts 46

Table of Contents

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Message from the Joint Secretary of Ministry of Finance

I am pleased to note that the International Fund for Agricultural Development (IFAD) has completed 35 years of operation in Nepal. It is a great pleasure for me that the IFAD Country Office in Nepal is planning to publish a booklet on this occasion.

Nepal was one of the first countries to benefit from IFAD. Since 1977, IFAD has made tremendous efforts to help the poor in rural areas of Nepal to overcome poverty for which we pay our sincere gratitude.

During these 35 years, IFAD has provided a total of US$152.8 million in loans and US$36 million in grants for a total of 16 projects across Nepal, benefitting more than 800,000 households. This booklet highlights the successful partnership between the Government of Nepal and IFAD.

Recently, IFAD extended a loan and grant of US$39 million to Nepal for a new seven-year project, Kisankalagi Unnat Biu-Bijan Karyakram (Improved Seeds for Farmers Programme) with the goal of promoting inclusive, competitive and sustainable agricultural growth. This project opens more avenues to improve lives of the rural poor in Nepal.

With about 76% of Nepal’s population depending on agriculture for their livelihoods, there has been little progress in reducing rural poverty through the development of agriculture. Together, IFAD and Nepal are striving towards alleviating poverty in the country through sustainable development policies and programmes in the agricultural sector of Nepal.

We express sincere appreciation for IFAD’s support and hope to continue this cooperation in the future towards agricultural development in Nepal.

Mr. Madhu Kumar MarasiniJoint Secretary,Ministry of Finance

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Message from the Country Programme Manager

With this New Year 2013, we are commemorating 35 years of cooperation and successful partnership between IFAD and the Government of Nepal.

This booklet is the opportunity to take stock of our activities in favour of the most vulnerable rural people, before entering a new strategic phase of 6 years with the new COSOP 2013-2018 under formulation.

IFAD is the only international development institution established exclusively to help reduce poverty and food insecurity in rural areas of developing countries. Our goal is to empower the rural poor - men and women, youth and vulnerable groups - to help them increase their incomes and improve their food security. We believe that it is possible to overcome rural poverty, but this requires finding long-term solutions, including: appropriate policies at national and international level, increasing investment in small family farms, strengthening the capacity of the rural poor and their organizations. IFAD supports Governments, small farmers organizations and other development partners to work hand in hand to transform rural economies and create opportunities to improve sustainably the living conditions of rural communities.

You will read in the following pages the achievements of 5 on-going IFAD funded projects as well as past projects in Nepal. IFAD and the Government are committed to strengthen grass root level organisations (WUPAP and PAF projects), make value chains more profitable to smallholders (HVAP) and develop leasehold forestry (LFLP) and seeds and livestock (IFSP). Grant portfolio and policy dialogue are also important activities going on various innovative topics regarding agriculture development.

IFAD is fully aligned with international aid effectiveness agenda by structure and by processes, within our dual mandate as an International Finance Institution and as a specialized United Nations agency. In 2013 we will continue to strengthen fiduciary systems and continue using strengthened government systems.

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The evaluation of the IFAD portfolio in 2012 ranked the programme 4 on scale of 6 (moderately satisfactory). The challenge for the years ahead are to improve performance of the projects at grassroots level, measure appropriately their impact on the livelihoods of the poor households and give life to the country programme concept. This will be done through enhanced team building and participatory approach with development partners from public and private sector and civil society organisations.

We wish you a good reading and if interested, do not hesitate to contact IFAD funded projects and IFAD office in Nepal for more information or cooperation.

Benoit THIERRYCountry Program Manager

© IFAD, Lorina Sthapit

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The International Fund for Agricultural Development (IFAD), a specialized agency of the United Nations based in Rome, was established as an international financial institution in 1977 following the 1974 World Food Conference. It is a unique partnership of 168 members of the Organisation of the Petroleum Exporting Countries (OPEC), other developing countries and the Organisation for Economic Cooperation and Development (OECD).

IFAD's goal is to enable poor rural people of developing countries to improve their food security and nutrition, raise their incomes and strengthen their resilience. Working with poor rural people, organisations, governments, donors, non-governmental institutions and many other partners, IFAD focuses on country-specific solutions, which can involve increasing poor rural people’s access to financial services, markets, technology, land and other natural resources. Through low-interest loans and grants, IFAD works to develop and finance programmes and projects that enable rural poor people to overcome poverty themselves.

IFAD tackles poverty not only as a lender, but also as an advocate for rural poor people. Its multilateral base provides a natural global platform on agriculture to discuss important policy issues that influence the lives of rural poor people, as well as to draw attention to the centrality of rural development to meeting the Millennium Development Goals (MDG).

Since starting operations in 1978, IFAD has invested about US$13.9 billion in grants and low-interest loans to 100 developing countries through projects empowering about 400 million people to break out of poverty, thereby helping to strengthen vibrant rural communities.

IFAD Enabling Poor Rural People to Overcome Poverty

© IFAD, Suraj Ratna Shakya

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Nepal is one of the least developed countries in the world, with a population of 26.6 million and a per capita gross domestic product (GDP) of about $630 (World Bank 2011). Approximately 83% of the population live in rural areas, and nearly one fourth of the total population live below the national poverty line. Nepal’s economy is dominated by agriculture, which accounts for one third of the GDP and employs more than two thirds of the total population.

Landlocked between India and China, Nepal has a total area of 147,181 square kilometres, and altitude ranging from below 100 to above 8800 meters. Nepal is rich in biodiversity, and has a huge potential for niche agricultural products, with abundant natural resources, and various agro-climatic conditions favourable for the development of food as well as cash crops. However, the physical isolation and rugged terrain in Nepal’s hilly and mountainous regions makes it difficult to promote economic activities and deliver services.

Political instability has been another major concern to developmental efforts in Nepal in the recent years. Following the Comprehensive Peace Agreement signed between the Government and the Maoists in 2006, Nepal is currently transitioning from a decade-long conflict fuelled by the inherent inequalities within Nepali society. Political uncertainty, however, remains high in 2012 with no agreement in relation to the key issue of the governance structure and the formation of the new constitution.

Despite of these obstacles, Nepal has achieved notable gains in poverty reduction, from a poverty incidence of 42% in 1996 to 31% in 2006, and to 25% in 2010. In addition to the expansion of road and communication networks in the country, this gain was mainly supported by the significant increase in remittances. Inadequate economic opportunities and the recent conflict resulted in migration of the youths from villages to cities, neighbouring countries and abroad, in search of alternative livelihoods. With about 1000 men travelling abroad for work everyday, remittances now constitute a significant proportion of Nepal’s GDP (23% in 2011).

Why does IFAD intervene in Nepal?

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Pink buckwheat fields found across the hilly regions of Nepal.© IFAD, Kaushal Shrestha

Nepal has exceptional agricultural potential to be developed, with abundant natural resources, various agro-climatic conditions favourable for the development of food as well as cash crops, including non-timber products, and medicinal and aromatic plants.

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However, poverty remains severe, with serious problems of food security and malnutrition, especially in the hilly and mountainous regions. And the poor performance of the agricultural sector is a major cause. Poor farmers in rural areas have little access to agricultural equipment, financing, social and economic infrastructures, resulting in production systems that are mainly subsistence oriented. Furthermore, the growing migration of youths is leading to the feminization of agriculture in Nepal. Constituting more than 60% of the agricultural labour force today, women are sustaining the rural economy, but have little access to land, production technology and training.

IFAD’s support is concentrated on these very villages and communities, where agriculture provides sufficient food and money to feed the family for less than three to nine months of the year.

Humla is among the most physically and economically isolated regions of Nepal.© IFAD, Suraj Ratna Shakya

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In the present context of conflict resolution, IFAD's strategy in Nepal is focused on supporting the development policies and programmes of the government and other partners, especially in relation to peace building, reconciliation, reconstruction and economic recovery. More than ever, IFAD's interventions in Nepal underscore these efforts by addressing the issues of poverty, inequality and social marginalization that lie at the heart of the conflict. In particular IFAD continues to direct its support towards the hill and mountain areas, where poverty levels are very high and access to infrastructure, services and markets is extremely limited.

Interventions are designed to:• Help provide infrastructure and services

• Target the most marginalized ethnic and social groups

• Improve income-generating opportunities

• Promote good governance and peace-building

• Support interventions that promote community cohesion and resilience

IFAD's Strategy in Nepal

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Country Strategic Opportunities Programme (COSOP)

A country strategic opportunities programme (COSOP) is a framework for making strategic choices about IFAD operations in a country, identifying opportunities for IFAD financing and related partnerships, and facilitating management for results.

Designed with respect to the country's poverty reduction strategy and planning framework, the document reviews the specific rural poverty situation as a basis for determining geographic sites where IFAD will operate. It also highlights the innovation that IFAD intends to promote in the country programme.

Furthermore, the COSOP includes an overview of IFAD's previous operations and the lessons learned, particularly from evaluation studies, and integrates these lessons into future operational directions.

COSOP I (2001-2006)

The first COSOP for Nepal was implemented for a period of six years from 2001 to 2006. Prepared and approved by the IFAD Executive Board in 2000, this COSOP was formulated on the basis of the Government’s 9th Plan and the Agricultural Perspective Plan. The strategic thrust of this COSOP was sustainable livelihoods and social justice through a programme focused on remote, isolated and disadvantaged areas of the Mid- and Far-Western Hills and Mountain regions. The projects targeted dalits, janajatis, women and the poorest sections of the society.

During this COSOP period, two projects, Hills Leasehold Forestry and Forage Development Project and Poverty Alleviation Project in Western Terai, were under implementation, and subsequently completed. Two new loan projects, Western Uplands Poverty Alleviation Project (2003) and Leasehold Forestry and Livestock Programme (2005), were also designed and initiated during the COSOP period.

The projects implemented during this COSOP had three major components:

• Provision of access to natural resources in the form of 40-year leasehold forest land allocation

• Rural financial services using three different modes of delivery • Community infrastructure

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With her daughter perched behind, a woman plucks fresh spinach for dinner.© IFAD, Kaushal Shrestha

Women constitute more than 60% of the agricultural labour force today, but have little access to land, production technology and training, resulting in production systems that are mainly subsistence oriented.

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According to the country portfolio review (CPR), undertaken in May-June 2006 to inform the second COSOP process, IFAD operations during COSOP I were successful in terms of effectiveness, with significant positive impact on the physical assets and productivity of the target groups.

In addition, the review identified farmers’ organizations, research and extension services, accountability and transparency in rural areas, access to markets, and access to land and water as specific focus areas for future IFAD operations.

COSOP II (2007-2012)

Approved by the IFAD Executive Board in December 2006, the second COSOP provided opportunities for IFAD’s contribution to poverty reduction, reconciliation and post-conflict reconstruction over six years (2007-2012) fully aligning with the Poverty Reduction Strategy (PSR) of the government.

Reflecting on the CPR 2006, the second COSOP focused on improving access to infrastructure, services and markets to tackle acute rural poverty in the hill and mountain areas.

COSOP II had three strategic objectives that correspond to the Poverty Reduction Strategy (PRS) Pillars of the Government of Nepal, as presented below:

PRS Pillars COSOP Strategic Objectives

I. High and broad- based economic growth

I. Increased access to economic opportunities by poor farmers and producers in hill and mountain areas

II. Social sector developmentII. Improved community infrastructure and services in hill and mountain areas

III. Social inclusion and targeted programmes

III. A reduction in gender-, ethnic- and caste-related disparities through greater inclusion of disadvantaged groups in development

IV. Good governanceCross-cutting theme: Support improvements in local governance and peace-building

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Pinara Khola Micro Hydro Power, built with support from IFAD’s Western Uplands Poverty Alleviation Project, can generate up to 11 KMW of electricity for 135 houses in Kharpunath, Humla.

© IFAD, Suraj Ratna Shakya

A country programme evaluation (CPE), implemented in 2012 by the Independent Office of Evaluation of IFAD, concluded on the fair performance of the country programme, giving it a score of 4 on a scale of 6.

Marking the end of COSOP II in December 2012, consultations have already started with the Government of Nepal in formulating the third COSOP (2013-2018). The new COSOP is being designed based on CPE conclusions and Government of Nepal strategic orientations. A Country Programme Management Team was created involving 35 representatives of farmer associations, indegeneous people’s organizations, civil society organisations, ministries and donors to discuss the key topics of the new COSOP.

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IFAD Nepal | History of Cooperation

Nepal became a member of IFAD in 1978 and was among the first countries to benefit from IFAD. The main strategic thrusts of the IFAD financed projects in Nepal are poverty alleviation and improvement of household food and income security of the rural poor, especially women, landless, indigenous groups and small and marginal farmers from the disadvantaged areas of the country.

Integrated Rural Development Project (Sagarmatha Zone), effective from November 1979 with a loan amount of US$ 11.5 million, was the starting point of the cooperation between Nepal and IFAD. Since then, IFAD has provided US$152.8 million in loans and US$36 million in grants for a total of 16 projects, benefitting 809,853 households in rural Nepal.

Ongoing• Kisankalagi Unnat Biu-Bijan Karyakram (ISFP, 2012-2019)

• High-Value Agriculture Project in Hill and Mountain Areas (HVAP, 2010-2017)

• Leasehold Forestry and Livestock Programme (LFLP, 2005-2013)

• Poverty Alleviation Fund Phase II (PAF, 2008-2012)

• Western Uplands Poverty Alleviation Project (WUPAP, 2003-2014)

Completed• Skill Enhancement for Employment Project (SEEP, 2008-2011)

• Local Livelihood Programme (LLP, 2006-2010)

• Poverty Alleviation Project in Western Terai (PAPWT, 1997-2005)

• Groundwater Irrigation and Flood Rehabilitation Project (GIFRP, 1994-2000)

• Hills Leasehold Forestry and Forage Development Project (HLFFDP, 1989-2003)

• Production Credit for Rural Women Project (PCRWP, 1987-1997)

• Aquaculture Development Project (ADP, 1986-1991)

• Second Small Farmer Development Project (SSFDP, 1986-1991)

• Command Area Development Project (CADP, 1981-1989)

• Small Farmer Development Project (SFDP, 1980-1987)

• Integrated Rural Development Project (IRDP, 1978-1988)

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The designations employed and the presentation of the material in this map do not imply the expression of any opinion whatsoever on the part of IFAD concerning the delimitation of the frontiers or boundaries, or the authorities thereof.

Map compiled by IFAD

ONGOING PROJECTS

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Kisankalagi Unnat Biu-Bijan Karyakram Improved Seeds for Farmers Programme (ISFP), 2012-2019

Kisankalagi Unnat Biu-Bijan Karyakram (Improved Seeds for Farmers Programme- ISFP) is a seven year project funded by IFAD to support accelerated agricultural growth. Building on an approach already tested in the IFAD-financed HVAP and LFLP, the project intends to improve formal seed and smallholder livestock by developing partnership between farmer organizations and the private sector with a sustainable approach in line with the IFAD COSOP 2006-2012. The Project was approved by the Executive Board of IFAD on September 2012, signed on December 2012 and is being implemented under Ministry of Agriculture Development.

The goal of the programme is to promote competitive, sustainable and inclusive agricultural growth in the target area in order to contribute to overall economic development. It seeks to improve productivity through market-led demand for improved seeds and livestock, with focus toward testing and scaling up a model of growth led by agriculture as proposed by the national Agriculture Development Strategy (ADS).

The programme covers four districts from Mid Western Region and two from Western Region with possible expansion over a few other districts after the Mid-Term Review. All targeted districts are in hill areas, some with poverty levels that are considerably above national rural averages. The target group comprises nearly 150,000 households.

The programme has three components:

• Support for expansion of the formal seed sector (cereals and vegetables)

• Smallholder livestock commercialization (goats and dairy)

• Local institutional and entrepreneurial development

Total cost: US$59.7 million IFAD loan: US$19.5 million DSF grant: US$19.5 million Directly benefiting: 150,000 households Cofinancing: Heifer International (US$2.5 million)

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The first component is dedicated to extension of the formal seed sectors by introducing improved ‘Truthfully Labeled’ seed products to replace poor quality seeds for cereals and vegetables and will be implemented by the Project Management Office (PMO) with support from District Agriculture Development Office, Regional Seed Testing Laboratories and the private seed companies.

The second component deals with the smallholder livestock commercialization targeting improvements in goat breed and expanding dairy production and will be implemented by Heifer International with support from District Livestock Services Offices.

The third component aims to develop sustainable private sector enterprises including institutional growth, improved access to and control over non-financial sectors such as agro-vets and increased outreach of microfinance institutions. PMO will implement the third component with support from selected service provider and Sana Kisan Bikas Bank (Small Farmer Development Bank) together with National Agriculture Central Cooperatives Federation.

The Project is in the early stage of start-up phase and is expected to be fully operational in a few months.

© IFAD, Suraj Ratna Shakya

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High-Value Agriculture Project in Hill and Mountain Areas (HVAP) 2010-2017

Total cost: US$18.9 million Approved IFAD loan: US$7.6 million Approved DSF grant: US$7.6 million Directly benefiting: 15,300 households Cofinancing: SNV (US$0.7 million)

Economic isolation is a major cause of poverty and social disharmony in the hill and mountain areas of Nepal. The High Value Agriculture Project in Hill and Mountain Areas aims to integrate poor rural people into the local rural economy to improve their living standards. The project supports poor farmers respond to the private sector’s demand for high-value crops, such as vegetables, fruits, non-timber forest products, medicinal and aromatic plants, by facilitating mutually beneficial and profitable arrangements with the buyers.

The project focuses on socially excluded and vulnerable people such as Dalits, indigenous groups (Janajatis) and women, and helps them to:

• Develop strong commercial links with traders to sustainably raise their incomes• Receive training and support in production and post-harvest techniques• Get better access to technical services, finances, farm supplies and market

information

Based on the construction of three major road corridors in Mid-Western Nepal (Chhinchu-Jajarkot, Surkhet-Dailekh, and Surkhet-Jumla), the project aims to cover 10 Mid-Western districts in two phases; 7 districts in the first phase, namely Surkhet, Salyan, Jajarkot, Dailekh, Kalikot, Jumla and Achham (far-west) and will expand to Mugu, Dolpa and Humla along with the development of roads in these districts.

The Project was built on the success and lessons learned from a pilot ‘Local Livelihood Programme’ incorporating the concept of Value Chain Development. It was further refined with the concept of Inclusive Business Approach successfully tested in Latin America by SNV – the Netherlands Development Organization and works together with the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) through its specialized arm, the Agro-enterprise Center (AEC).

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Major achievements of the Project as of July 2012, including but not limited to, are the following:

• Supported 1451 households through providing production inputs and technical services in value chain initiatives

• Provided skill oriented trainings to 159 farmers on apple orchard management and vegetable and turmeric production

• Established value chain analysis of the seven commodities (apple, vegetable seeds, off-season vegetables, ginger, turmeric, goat meat, and timur (Xantho/toothache tree)

• Development of fund guidelines viz. value chain fund guidelines, and production and post-harvest support fund guidelines sustainable pro-poor value chain development

High Value Crops refer to non-traditional food crops that have higher market values, such as vegetables, fruits, spices, non-timber forest products, and medicinal and aromatic plants.

© IFAD, Rocky Prajapati

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In Nepal, ethnic minorities, lower caste communities and women lag behind in terms of income, assets and numerous human development indicators. The Poverty Alleviation Fund aims to improve living conditions, livelihoods and empowerment among these communities, marginalized for reasons of gender, ethnicity, caste and location.

The project was created with the declaration of a special act (Poverty Alleviation Fund Act, 2063) and a commitment to address the interrelated problems of rural poverty and social exclusion throughout the country. While the first phase of the project was implemented in 25 districts, the second phase increased project coverage annually and will be operating in all 75 districts by the end of 2013.

Jointly funded by the World Bank under the debt sustainability framework (DSF), the second phase of the project is designed to introduce rapid development changes in remote Nepal through community-based interventions. The project has a number of components, ranging from income-generating activities and capacity building of local grassroots organizations, to infrastructure development at the community level, such as small-scale irrigation, roads and bridges, water supply, schools and health posts.

Major achievements of the Project as of July 2012, including but not limited to, are the following:

• Establishment of 17,898 community organizations (Cos) to implement 19,615 sub-projects

• PAF supported COs are currently pursuing 16,576 Income Generation and 3039 Infrastructure related sub-projects

• PAF projects have helped to increase the average income of individual household by 82.5%

Poverty Alleviation Fund (PAF) Phase II2006-2012

Total cost: US$124.0 million Approved DSF grant: US$4.0 million Directly benefiting: 200,000 households Supplementary financing: US$10.0 million (2012)Cofinancing: World Bank: IDA (US$100.0 million)

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Dil Kumari Pun of Libang, Rolpa, had to rely entirely on her husband’s income before joining one of PAF’s income generating activities. Today, she earns her living by selling milk from the buffalo she bought using the US$215 project loan. In 2012, she also sold a calf and a heifer from the same buffalo for a total of US$225, repaying her loan fully.

“I feel independent now that I have my own source of income”, she says, with a strong sense of confidence.

But perhaps most of all, Dil Kumari values being able to pay for her children’s education. She feels proud to send her daughter to college, a big achievement in her village.

© IFAD, Lorina Sthapit

According to the independent impact evaluation (IE), executed in partnership by the PAF Secretariat, Tribhuvan University and the World Bank, the project has had a significant positive impact on household level welfare. The results further indicate that the program is an effective tool for targeting the population considered most vulnerable in terms of caste and ethnicity as well as most food insecure.

In addition to positive growths in per capita consumption and food security, especially among marginalized groups, the project has significantly reduced the incidence of underweight children under the age of 5, and has also increased the rate of school enrolment among 6-15 year old children.

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Leasehold Forestry and Livestock Programme (LFLP) 2005-2013

Total cost: US$16.3 million IFAD loan: US$10.5 million IFAD grant: US$1.2 million Supplementary financing: US$ 3 million (April 2012)Directly benefiting: 44,300 households

Leasehold Forestry and Livestock Programme is a community-based forest management project through which poor and food insecure households are provided degraded forestland on a 40-year renewable lease to generate income from forest products and livestock. The programme covers 22 mid-hill districts across the country where a large percentage of the population lives below the national poverty line.

The project is implemented by the Department of Forests under the Ministry of Forest and Soil Conservation with support from Department of Livestock Services and selected service providers. The Food and Agricultural Organization is supporting the programme by providing Technical Assistance Support to Leasehold Forestry and Livestock Programme from 2009 for a period of four years with financial support from the Government of Finland. The total amount of support for this technical assistance is US $ 3.5 million.

Specifically, the programme’s objectives are to: i) improve household forage and tree crop production; ii) improve household production of livestock, especially goats, iii) provide access to microfinance services, and iv) support the government's capacity to implement leasehold forestry in a gender sensitive way.

The Programme has four components: i) Leasehold Forestry and Group Formation – (group formation, social mobilization, land and forest development and post handover support); ii) Livestock Development – (fodder, forage and livestock development related activities, especially the Goats development); iii) Rural Finance – (issues associated with the microfinance to the leasehold forestry groups); and iv) Project Management and Coordination – (overall management of the project and coordination among various departments, donors and development agencies at the national and regional level).

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Ram Piyari and her younger son, Bibek, with the goats they received as part of the Leasehold Forestry and Livestock Programme to improve household income in Devitaar, Kavre.

© IFAD, Kaushal Shrestha

Between 2003 and 2008, a significant increase in household income was observed, that can be directly attributed to the Leasehold Forestry and Livestock Programme. Together with forest products, revenue from the sale of goats accounted for 46% of the income growth.

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Major achievements of the Project as of July 2012, including but not limited to, are the following:

• Establishment of 4080 leasehold forestry user groups (LFUGs)

• Handing over of 19,900 hectares of degraded forest land to LFUGs

• Distribution of 70,000 goats to the LFUGs

An impact study undertaken in March 2009 by the Food and Agricultural Organization indicates significant increase in the average income of households in the LFUGs. While households allocated with leasehold forestry plots were earning NRs 25,589 before joining the LFUG, they now earn NRs 43,768.

Compared to respective poverty lines of 2003 and 2008, the poverty gap thus was reduced from 55.4% to 74.8%, a 35% improvement in the poverty situation. The increase in household income resulted from strong growth in revenue from the sale of goats, forest products and labour income. Together, the first two sources accounted for 46% of the income growth that can be directly attributed to the project.

LFLP group meeting in Dailekh

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Western Uplands Poverty Alleviation Project (WUPAP) 2003-2014

Total cost: US$32.6 million IFAD loan: US$19.9 million IFAD grant: US$550,000 Directly benefiting: 115,000 households Cofinancing: World Food Programme (US$4.0 million)

The hill and mountain districts of Far and Mid Western Nepal are the most isolated and economically impoverished regions of the country. Due to poor access to markets, these districts suffer from high food prices and limited economic opportunities. The unsustainable extraction of natural resources, mainly from forests, further exacerbates the level of food deficit and food insecurity in the region. The Western Uplands Poverty Alleviation Project aims to strengthen the livelihood systems of the rural poor in these regions in a sustainable manner. The Project has been operational since January 2003 under a Flexible Lending Mechanism. The Project graduated into second phase in 2007 and into third phase in 2012 after achieving the triggers set forth the graduation from one phase into another.

The first phase covered Humla and Jumla from mid-western region, Bajhang and Bajura from far-western region whereas the second phase covered seven more districts namely, Mugu, Dolpa, Kalikot, Jajarkot, Dailekh, Rukum and Rolpa from mid-western region.

A restructuring took place during the design of the third phase reducing the number of districts from 11 to 8 (withdrawing from Mugu, Dolpa and Jumla), reducing number of components from five (labour intensive infrastructure, leasehold forestry and non-timber forest product, crop and livestock, rural finance and marketing, and institutional support) to three (community empowerment, service delivery improvement and project management) and changing the management structure at district level. Ministry of Federal Affairs and Local Development was the implementing agency for the first and second phase of the Project and Ministry of Cooperative and Poverty Alleviation for the third phase.

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Sunita Thapa Magar’s life has taken a turn after she received Dhaka1 weaving skill from WUPAP’s income generating project, along with nine other women in Dailekh. When her first husband left her, Sunita was stranded with no home, no work and no skill to earn a living. “I carried cement and salt working as a porter. People looked down on me, but I did not give up,” she revealed.

But Sunita was determined to make her life better. Today with the help of the project she is able to earn a living by selling shawls, caps, ties, handkerchiefs and bags made of Dhaka.

In addition, Sunita has developed a deep friendship with the women she weaves side by side with. But above all, she values the independence that comes with mastering a skill and is looking forward to training more women herself.

© IFAD, Lorina Sthapit

1. A traditional Nepalese cotton fabric

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The project focuses on landless, small or marginal farmers with particular emphasis on women, youths, and other socially and economically disadvantaged groups. The Project seeks to promote resilient livelihoods in these communities by supporting the formation of grassroots organizations that can mobilize their own resources, natural, physical, and financial, in order to obtain social justice.

Major achievements of the Project as of July 2012, including but not limited to, are the following:

• Establishment of 2670 community groups

• Construction of 610 community-based small-scale infrastructures – irrigating 1019.24 hectares of land, supplying drinking water to 9453 households, lighting 35,824 households by micro-hydro (448 KW), constructing 117 community buildings (school, health posts and others), 18 wooden bridges, and improving 14 trails

• Establishment of 859 leasehold forestry user groups, handover of 10 710.4 hectares of forest land with a secure tenure of 40 years, domestication/cultivation of non-timber forest product (NTFP) and medicinal and aromatic plants in 856.75

• Training of 132 Village Agricultural Workers and Village Animal Health Workers, 36 Village Nutrition Workers

• Established value chains, technical support and marketing for various products (hand-made paper, vegetables, fruits and others)

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Agricultural Development Strategy (ADS)1995-2015

Agricultural Development Strategy is a 20-year vision and a 10-year planning horizon to create an agriculture sector in Nepal that is more resilient to climate change. With Technical Assistance (TA) worth US$ 0.5 million, IFAD is one of the 11 donor agencies supporting the Government of Nepal in the preparation of ADS.

The scope of the ADS includes:

• Food security, agricultural productivity, connectivity and resilience

• Sustainable production and resource management through climate change mitigation

• Adaptation and improved land and water management and water allocation

• Increased private sector development (including cooperative sector), delivering fair reward to all stakeholders in the value chain

• Policies, institutions, and investments

The approach of the TA provided by IFAD is based on the combination of

• Broad view of the agricultural sector

• External peer reviews

• Effective communication and broad consultations.

The TA has been implemented over the course of 4 phases:

Phase 1 – Assessment, April 2011 to September 2011

Phase 2 – Vision, October 2011 to November 2011

Phase 3 – Policy Options, December 2011 to March 2012

Phase 4 – Road Map and Action Plan, April 2012 to December 2012

© IFAD, Suraj Ratna Shakya

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Completed Projects

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Skill Enhancement for Employment Project (SEEP, 2008-2011)Total cost: US$ 916,000IFAD grant: US$ 870,000Directly benefiting: 1225 youths and their families

Local Livelihood Programme (LLP, 2006-2010)Total cost: US$ 0.6 millionIFAD grant: US$ 0.48 millionDirectly benefiting: 5134 households

Skill Enhancement for Employment Project was executed with the goal of increasing livelihood opportunities for the youth in the far western districts through improved employment opportunities. The target age group ranged between 16 and 35 years with special focus on youths who were conflict affected, internally displaced and socio-economically disadvantaged groups and women.The project was implemented in five districts of Far Wester region nemaly, Bajhang, Darchula, Baitadi, Dadeldhura and Kanchanpur by the International Labour Organization (ILO).

In three years time, the project provided 39 different skill trainings to a total of 1225 youths. Within six months of training completion, 72.3 % of the trainees were engaged in gainful employment and on-the job training. Altogether five saving and credit cooperatives comprising of about 200 trained youth were established in the project districts. Further, approximately 250 project beneficiaries interested in starting their own businesses were provided entrepreneurship and enterprise development training.

The overall goal of the Local Livelihood Programme was to contribute to sustainable rural poverty reduction by operationalizing and piloting the North-South corridor development approach introduced in the Tenth plan/PRSP. The project was successfully implemented by the Centre for Environment and Agricultural Policy Research, Extension and Development (CEAPRED), covering two north-south road corridors - Surkhet-Jumla and Chhinchu-Jajarkot. The districts covered by the project were Surkhet, Dailekh, Kalikot, Salyan and Jajarkot.

The Programme covered 5134 households through 230 groups (female-28, male-7 and mixed 195) by the end of June 2008. Information on production and sale from 3,433 households indicated an increased average income of NRs. 7,693/household, with the highest increase of NRs. 150,000 and the lowest of NRs. 100/household. Increased income thus resulted into increased food security of 2161 households to 3-4 months, 827 households to 4-5 months and 50 households to 6-9 months.

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Poverty Alleviation Project in Western Terai (PAPWT, 1997-2005)Total cost: US$9.7 million IFAD loan: US$8.9 million Directly benefiting: 21,563 households

Groundwater Irrigation and Flood Rehabilitation Project (GIFRP, 1994-2000)Total cost: US$13.2 million IFAD loan: US$9.9 millionDirectly benefiting: 25,000 households

Poverty in the Western Plains of Terai is widespread and on the increase. Economic opportunities are limited and population growth is very high. The poor in this region are either landless or have very small plots of land to cultivate. Therefore, the Poverty Alleviation Project in Western Terai was implemented in eight districts of Nawalparasi, Rupandehi, Kapilvastu, Dang, Banke, Bardiya, Kailali and Kanchanpur with a goal of increasing the incomes and improving the welfare of small farmers, and landless people, particularly women.

The project encouraged local people to form small groups to manage credit, receive skills training and organize community development activities. The project also strengthened institutional support for the groups and improved access to water resources.

The Terai region has good potential for agricultural development and a reasonably robust marketing and communications network. This project’s aims were to raise crop yields, improve farmer’s incomes and increase food security for the poor by providing irrigation systems. It also set out to repair damage to existing irrigation systems that were hit by the floods of July and August 1993, and to restore livelihoods to people living in the flooded areas.

The project offered an opportunity to research and test possible technical and institutional options for efficient and equitable development of groundwater irrigation. The project benefitted a total of 10,300 beneficiaries by drilling 715 shallow tube-wells in 4850 hectares of area. 2307 villagers were given irrigation related trainings and 12,7799 villagers were given agriculture-related trainings during the project period.

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The objective of the project was to reduce poverty and restore degraded environments in the middle hills by leasing small sections of public forest land to groups of rural poor people who would then manage the land for their own use, and thus help regenerate it. A total of 1773 leasehold forestry groups were formed and 7457 hectares of degraded forestland were handed over to rural poor people.

Evaluations carried out by IFAD (Interim, 2003) of the original Hills Leasehold Forestry and Forage Development Project (HLFFDP, 1989-2003) indicated that the approach was able to achieve twin objectives of poverty reduction as well as reforestation. The results proved the project effective in improving levels of food security, increasing biodiversity, and empowering women. The project showed that transferring sections of degraded forest to the very poor on renewable 40-year leases is an effective means of reducing poverty and reforesting the land. Annual household incomes increased from US$270 to US$405, and this in turn resulted in greater food security and improved nutrition. Environmental degradation was reversed at most sites and biodiversity increased significantly.

Hills Leasehold Forestry and Forage Development Project (HLFFDP, 1990-2003)Total cost: US$20.4 million IFAD loan: US$12.8 millionDirectly benefiting: 51,800 households

© IFAD, Kaushal Shrestha

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Production Credit for Rural Women (PCRW, 1987-1997)Total cost: US$11.3 million IFAD loan: US$6.0 million Directly benefiting: 16,390 households

Rural women across Nepal are held back from improving family living standards by social discrimination. This project was designed to underline the important contribution women can make to family incomes. Ultimately it served as a model for efforts to ensure that women’s interests are reflected in development policies in Nepal. The project covered all ecological zones of the country and all five administrative regions.

The project empowered women and increased their incomes. The delivery of credit to the women’s group was implemented successfully and used for services, agriculture and livestock activities. It demonstrated how they could become more confident, self-reliant and productive. More than 50,000 women were trained, and more than 18,000 women’s credit groups were formed.

The project successfully launched an institutional innovation and demonstrated that associations of resource-poor women can manage their credit needs without links to, or credit from, the formal banking sector, with little default. Initiated as a pilot in 1980 in five districts, expanded to 37 districts with support from IFAD and a parallel funding from UNICEF, the programme covered all 75 districts in the country and is a very good example of sustainability.

Aquaculture Development Project was the second phase of a project begun by the Asian Development Bank. Freshwater aquaculture has great potential for raising the incomes of small producers and landless labourers and for increasing fish exports. Traditionally, fish farming is practiced by the poorest members of the population. Fish farming also helps improve the nation’s diet by making much-needed fish protein more widely available.

Altogether, the project benefited 42,000 people and developed a system for aquaculture that could be replicated elsewhere. It provided credit and training to farmers to strengthen support and extension services in the public sector.

Aquaculture Development Project (ADP, 1986-1991)Total cost: US$23.0 million IFAD loan: US$5.0 million Directly benefiting: 6000 households

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Building on the success of the first Small Farmer Development Project, this project reached 12 additional districts and expanded on work done in the areas already covered by the first project fulfilling its objectives to increase the income and improve the well being of small farmers, landless labourers and the rural poor.

At the end of the Project, the major achievements were recorded as reaching out 276 villages from 43 districts, formation of 11,703 (1 978 women) small farmers groups with 90 287 members, collection of NPR 14.5 million as savings from the groups and establishment of five regional training centers. Production credit covered about 81,000 hectares of land and financed procurement of about 58,000 animals (buffaloes and goats), irrigated 7686 ha and supported 4474 village industries/agro-processing units.

The project started to federate the small farmer groups into a sizeable number of farmers considering its institutional and economic viability so as to transform the federation into a cooperative in 1988 with technical assistance from GIZ. This emerged as a very innovative model and Asian Development Bank financed the third phase of the Project. As of December 2012, a total of 267 such cooperatives at village level, and a national federation of all these cooperatives at national level have been established. A separate bank, Small Farmer Development Bank, is also established at national level to support these cooperatives. IFAD-UNICEF funded PCRW also adopted this model in 1990 and a similar number of women cooperatives are promoted in the country. This project is one of the very innovative and successful programmes in the country achieving full sustainability.

Small Farmer Development Project II (SFDP II, 1986-1991) Total cost: US$24.5 million IFAD loan: US$14.5 million IFAD grant: US$100,000Others (GTZ, UNICEF, UNFPA): 4.0 millionGovernment: 4.0 millionDirectly benefiting: 50,000 households

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Command Area Development Project (CADP, 1981-1989)Total cost: US$29.1 million IFAD loan: US$11.2 million ADB loan: US $ 13.5 millionUNDP grant: US$ 1.2 millionDirectly benefiting: 14,500 households

The Project was implemented in three districts of Kapilvastu (Banganga) and Nawal Parasi (West Gandaki) in Western Terai and Sarlahi (Manusmara) in Central Terai where irrigation facilities existed but were under-utilized because of the lack of water distribution systems. The project aimed to increase food production, raise farm incomes and provide rural employment opportunities by improving irrigation facilities and the distribution of water to farms. The project also gave farmers the equipment and training to maintain the improved irrigation facilities.

The objectives of the project were to: i) increase the production of food grains, ii) increase farm income, iii) provide rural employment opportunities, and iv) improve the standard of living of the rural poor living in the area. These objectives were to achieve through rehabilitation of existing irrigation canals, construction of new canal and farm ditch systems, creation of drainage and flood control systems and strengthening of agricultural support services including inputs.

By improving irrigation facilities and the distribution of water to farms, the project increased food production, raised farm incomes and provided rural employment opportunities to about 14,500 households. The project also supplied equipment to the farmers and trained them to maintain the improved irrigation facilities.

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The Small Farmer Development Project evolved from an approach devised under the Asian Survey for Agrarian Reform and Rural Development (ASARRD) in 1973. A Field Action and Research Pilot Project was started from two villages in Nepal in September 1975. The Mission recommended IFAD to expand the on-going pilot initiative.

The objectives of the project were to: i) build an institutional base supporting the creation of small farmer groups (10-15 members), ii) provide supervised credit to enable these groups pursuing diversified range of income-generating activities, iii) adapt local delivery systems to the needs of rural poor people, and iv) provide training and technical assistance.

The Project covered 138 Village Development Committees from 31 (19 hill and 12 Terai) districts and was successful in improving the level of income, employment and production rates, and developed ways to involve the poorest and most marginalized families. About 4667 small farmer groups were formed involving 42,345 members

Small Farmer Development Project (SFDP, 1980-1987)Total cost: US$16.1 million IFAD loan: US$12.5 million IFAD grant: US$1.0 million Directly benefiting: 50,000 households

© IFAD, Irshad Khan

IFAD Nepal 39

excluding 532 exclusively women groups and 4271 members. Irrigation facility was provided to 1659 hectors, 49 improved water mill (some with generating small amount of electricity) installed, 2703 loans extended, 1345 cottage industry units and 416 other enterprises supported. Family income of participating farmers increased by an estimated 20 to 30%. Most importantly, the farmers were able to break out of the cycle of debt. The successful implementation of this Project led for a second loan from IFAD to Nepal.

Integrated Rural Development Project (Sagarmatha Zone, IRDP, 1978-1988)Total cost: US$37.2 million IFAD loan: US$13.0 million ADB Loan: US$ 14.0 millionEEC Grant: US$ 3.75 millionGovernment: US$ 6.45 millionDirectly benefiting: 50,000 households

The project was the first Integrated Rural Development Project in Nepal. The Project covered three districts from Sagarmatha Zone namely, Siraha, Saptari and Udayapur including both the Terai lowlands, with its gentle slopes, and the steeper hill areas.

The objectives of the Project were to: i) increase production and employment, ii) strengthen the income generating base in the rural economy of the project districts, and iii) improve the living conditions of the people living in the project area through broad-based economic development.

The project addressed the root causes of poor agricultural productivity in the area and worked to improve incomes and living standards for the poor directly benefiting to about 50,000 households. The major achievements of the Project, among others, include construction of six major link (gravel) roads, 110 kilometers in total, to the East West Highway, installation of 2843 Shallow Tube Wells, 15 Deep Wells and 12 Tube Wells, construction of 40 irrigation schemes with a command area of 27,004 hectares of land, establishment of 27 each agriculture and livestock rural service centers, establishment of 10 milk collection centers, one chilling centre and 20 rural markets.

The Project triggered the concept of integrated rural development in the country with funding from various donors including Canada, Switzerland, United Kingdom, United States, World Bank and Asian Development Bank.

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Monitoring and Evaluation Officer for WUPAP with the farmers of Kharpunath during their morning meeting

© IFAD, Suraj Ratna Shakya

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Monitoring and Evaluation (M&E)

Starting from 2012, the IFAD country programme in Nepal has taken important steps towards improved Monitoring and Evaluation systems in the IFAD funded projects within the country. The new and refined system is providing basis for better knowledge management and improvement of the overall performance of the country portfolio.

Until 2012, the Nepal country programme of IFAD had been underperforming with respect to establishing and operating effective M&E systems and knowledge management processes. There was limited generation of data beyond input and activity levels, and what data and information was generated, was not effectively utilized for project management purposes. There were also limitations in effectively capturing and disseminating knowledge and lessons learned.

Acknowledging these concerns, an improved M&E and knowledge management system is in place to monitor the performance of the new COSOP. In order to manage better for results there is a need to learn from previous experiences and use the existing knowledge to improve performance in the future. Therefore, the new M&E system adopts the value-chain approach towards knowledge building. As illustrated below, the system works to improve dissemination of the knowledge acquired among all the stakeholders involved at the various stages and levels of the IFAD projects and programmes towards effectively achieving the poverty reduction objectives.

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IFAD Nepal will also make use of the knowledge pyramid, illustrated below. Similar to the value-chain approach, the knowledge pyramid also works to ensure effective collection and flow of information in order to stimulate better design and policy dialogue. All projects funded by IFAD have their own knowledge pyramids that feed into the knowledge pyramid of the Country Programme of IFAD in Nepal.

For a more efficient and effective knowledge management system, it will be ensured that all projects have carefully identified COSOP indicators. The IFAD Results and Impact Management System (RIMS) will be also further strengthened at project level and integrated to the project M&E systems to aid progress reports.

A standardized spreadsheet has been developed as a simple tool for projects to better report on their progress against the targets set and fulfilling Government and IFAD requirements. Through workshops and ongoing support from the country office it will be ensured that the projects will adopt and use the spreadsheet to report on the COSOP and RIMS indicators..

In addition, IFAD Nepal country office will set up a simple website under IFAD Asia platform that will host documents and various analysis produced by the country programme. The COSOP and RIMS data will be annually analysed at the country programme level and presented in the IFAD Nepal website as well.

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Below the picture illustrates how the IFAD country level M&E system will look like once it is established and functioning.

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IFAD’s Financing

Disbursement

Since the establishment of IFAD Nepal in 1978, a total of 16 projects have been approved for a total cost of US$435 million. With US$152.8 million in loans and US$36 million in grants from IFAD, these projects have directly benefitted 809,853 households in rural Nepal to improve their living conditions.

The loans IFAD provides to Nepal are highly concessional and have particularly favorable conditions for repayment. These loans are interest-free, match with service commission of 0.75% per annum, a repayment term of 40 years and a grace period of 10 years. Further, within the Debt Sustainability Framework, Nepal benefits special conditions as all new IFAD financing are split into 50% loan and 50% grant.

IFAD disbursements in Nepal have been growing over time, from around US$1.7million in 2007 to over US$7.7million in 2012. The disbursement of fund was low during 2000’s decade reflecting the unstable political situation in the country when many development activities came to a halt. After 2007, however, the size of the country portfolio and its delivery has been growing significantly.

During the 2007-2012 COSOP, WUPAP and LFLP received the largest amount of disbursements. While IFAD disbursed US$3.7 million to PAF, it is to be noted that the project receives most of its funding from the World Bank, amounting to US$100 million, making it a good example of inter-agencies cooperation.

Project 2007 2008 2009 2010 2011 2012 TOTAL USD

LFLP 694 240 1 382 271 1 201 463 2 945 261 1 612 159 1 789 703 9 625 097

WUPAP 837 385 891 070 2 039 142 878 333 2 846 373 4 657 363 12 149 666

PAF II 750 000 717 231 2 247 701 285 068 4 000 000

HVAP 600 000 1 009 409 1 609 409

SEEP 28 175 463 375 491 550

LLP 163 047 198 216 47 940 409 203

Total 1 694 672 2 499 732 4 038 545 5 004 200 7 306 233 7 741 543 28 284 925

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Beneficiaries

Project Target at appraisal Outreach by end of 2010/2011

Outreach during 2010/2011

WUPAP 610 000 228 309 174 064

LFLP 264 471 229 463 3 827

PAF II 2 209 000 1 619 206 345 892

HVAP-IB 6 580 6 580 -

HVAP 245 810 0 0

Total 3 335 861 2 083 558 523 783

As illustrated in the table below, the total outreach of the Nepal country programme during the fiscal year 2010/2011 was about 524,000 households. Without taking into account the PAF beneficiaries (as PAF is for the main part funded by the World Bank) this number would decrease to 178,000 households. LFLP and WUPAP have both reached close to 230,000 cumulative beneficiaries during the implementation of the current phases of the projects. Altogether, the total number of beneficiaries reached by the ongoing IFAD projects in Nepal is more than 2 million people. This accounts to approximately 8% of the rural population in the country.

This number will increase by 150 000 households (700 000 people) with the start up of the new seed and breed project (ISFP).

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High-Value Agriculture Project in Hill and Mountain Areas

Rajendra Prasad BhariProject ManagerProject Management Unit Birendranagar, SurkhetTel and Fax: +977 1 525 403E-mail: bhari_rp@yahoo.comwww.hvap.gov.np

Contacts

Bashu Aryal

Country Programme OfficerWFP Office Complex, Patan Dhoka Road Lalitpur, NepalTel: +977 1 5542607 4144 Fax: +977 1 5524101b.aryal@ifad.org

Benoît Thierry

Country Programme ManagerVia Paolo Di Dono, 44Rome, ItalyTel: +39 0654592234Fax: +39 0654593234b.thierry@ifad.org

IFAD Ministry of Finance

Kailash Pokharel

Under Secretary, Ministry of Financekpokharel@mof.gov.npFax (+977 1) 4211165Office 4211372

Projects

Kisankalagi Unnat Biu-Bijan Karyakram

Suryal Prasad Poudel Project ManagerProject Liaison Office Kumaripati, LalitpurTel and Fax: +977 1 5552977Email: suryapaudel@ymail.com

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Poverty Alleviation Fund

Raj Babu Shrestha, Executive DirectorPoverty Alleviation Fund Nepal Tahachal, KathmanduTel: +977 1 4030700Fax: +977 1 4030701E-mail: rbshrestha@pafnepal.org.npwww.pafnepal.org.np

Leasehold Forestry and Livestock Programme

Bala Ram AdhikariProgramme Coordinator, Leasehold Forestry SectionDepartment of Forest, Babar Mahal, KathmanduTel and Fax: +977 1 4257870E-mail: lflp@wlink.com.npwww.lflp.gov.np

Western Uplands Poverty Alleviation Project

Uttam Prasad NagilaProject CoordinatorProject Coordination UnitRanjha, NepalgunjTel: +977 81 565043/565232Fax: +977 81 565042E-mail: uttamngl@yahoo.comwww.wupap.gov.np

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IFAD Nepal50

Via Paolo di Dono, 44 00142 Rome, Italy Tel: 39-0654591 , Fax +39-065043463 E-mail ifad@ifad.orgwww.ifad.org, www.ruralpovertyportal.org

Enabling poor rural peopleto overcome poverty