WATER P-NOTES ISSUE 26 JANUARY 2009 47314 Poverty Analysis in Agricultural Water Operations of the World Bank A gricultural water has been seen as a prime and water rights must be specified for water develop- mechanism for fostering rural economic growth ment; incentive frameworks allow higher value pro- and reducing rural poverty. But agricultural duction; public investment should provide support for water has encountered problems of performance, small farms; improved technology includes improved profitability and sustainability. This resulted in a water management and associated improvements in reduction in investments from governments and high-yielding varieties and intensive husbandry pat- lending from development organizations like the terns; investments in irrigation, drainage, and flood World Bank up to early 2000s. control reduce risks for smallholders and allow in- vestment in intensive production strategies. Agricultural water development and Until recently, studies were localized and spo- poverty linkages radic but recent empirical work (ADB/IWMI study, 2005) provided a body of evidence on the poverty Raising the incomes of poor farmers is one of the reduction impact of agricultural water. These studies most important components of poverty reduction have shown that incidence of poverty is lower in irri- strategies--the majority of the world's poor are in gated areas than rainfed, and access to agricultural rural areas and in agriculture. Empirical evidence water reduces incidence and severity of poverty. on poverty reduction in 14 countries in the 1990s Indeed, agricultural water enables households to showed five interventions important in raising agri- improve crop productivity, grow high-value crops, cultural earnings of poor households: generate high incomes and employment, and earn a higher implicit wage rate (up to a 50 percent dif- · Improving market access and lowering transac- ferential in higher employment and wage rates for tion costs irrigated areas.) · Strengthening land property rights Agricultural water reduces poverty through three · Creating an incentive support system benefiting direct effects: increased food output, higher oppor- all farmers tunities for employment, and higher real incomes. Indirect effects are even stronger: Agricultural · Expanding technology available to smallholders water has a multiplier effect driving an increase in · Helping poorer, smaller producers deal with nonfarm rural output and employment as levels of risks rural spending rise. There is also an "investment multiplier" effect: public sector investments in canal Well-designed agricultural water investment has irrigation attract private investment in both irrigated the potential to contribute to these five aspects. Land agriculture and in the local economy. Agricultural Excerpted from Poverty Analysis in Agricultural Water Operations: A Review of Projects Financed by the World Bank, by Salah Darghouth, Christopher Ward, Price Gittinger, Julienne Roux and Animesh Srivas- tava, World Bank Water Working Note 16, May 2008. The full report may be downloaded in PDF format from: www.worldbank.org/water. WATER P-NOTES water has also been linked to social benefits such Agricultural water can have a direct negative as reduced seasonal rural out-migration and girls' impact on the poor, for example where waterborne attendance at school. diseases (malaria, schistosomiasis) increase due to The paradigm for agricultural water develop- inadequate drainage. There may also be other anti- ment now links improvements in physical infrastruc- poor impacts as higher profitability increases land, ture to institutional development, building social rent, and product prices. capital of communities and organizations. Partici- Finally, agricultural water may not always be the patory Irrigation Management (PIM) and Irrigation most efficient poverty reduction strategy (others in- Management Transfer (IMT) have been the focus of clude roads, education, research and development, many interventions since the early 1990s. and rural finance.) Agricultural water has the most poverty-reduc- ing impact where: Poverty analysis in Bank-financed · Schemes are well managed and users are agricultural water projects involved in management · Water allocation and distribution practices are As part of this work, analysis of poverty aspects has equitable been made for a sample of Bank funded opera- tions, and thus at the macro and sectoral, project · Infrastructure and management are designed and farm levels. Poverty Reduction Strategy Papers with the needs of the poor in mind (e.g. equi- (PRSPs) or Country Assistance Strategies (CAS), table governance systems through water user Country Water Resources Assistances Strategies associations ­ WUAs) (CWRAS) and Economic and Sector Work (ESW) are · There is equity in land distribution macro and sectoral-level studies that can be uti- lized. Also Poverty and Social Impact Analysis (PSIA) · Production technology, cropping patterns and and Poverty Assessments can be conducted. crop diversification are available It was found that economic and financial analy- · Support services such as input supply, output sis, technical analysis, and social analysis, together markets and roads are in place with use of the Results Framework, were used for · Needs of landless and of women are taken into setting poverty reduction results and indicators. account Growth impacts and risks, distributional impacts and employment impacts were assessed in many Attention to which income classes get what studies. Use of these analyses and indicators varied share of net benefits creates higher poverty reducing widely from study to study, as did financial analysis impacts. Larger poverty impacts can be realized by of cost sharing and subsidies. integrating investments in irrigation infrastructure, management, and service delivery. Social assessments and social analyses were car- ried out for almost all of the dedicated agricultural water projects reviewed, including discussion of par- Risks and limitations to agricultural ticipation and decentralization, targeting the margin- alized, reducing conflict, and building social capital. water as a poverty reducing investment A Results Framework is now included in World Bank Project Appraisal Documents (PADs) and lists Poverty levels impact social groups differently, and Project Development Objectives and related results are highest in marginal areas, downstream sites, indicators, "intermediate results per component" and areas where canal water is in short supply or and related results indicators. groundwater quality is poor. Poverty most afflicts Few projects set specific poverty indicators, in- the agriculture-dependent landless and households stead quoting poverty reduction as `higher level ob- where the sole breadwinner is a woman. In the jects' to which the project would contribute. Some ADB/IWMI study, 38 percent of households in irri- projects do set intermediate results and indicators gated agricultural systems were still poor, with levels such as income increases, employment increases, as high as 65 percent in Pakistan. equity, and access to land. 2 ISSUE 26 · JANUARY 2009 Poverty reduction in Bank-financed tionship to poverty reduction were not clear. Risk agricultural water projects was not fully considered, and questioning whether agricultural water was the best poverty reducing investment available was not discussed. Poverty Projects varied in clarity of definition of the nature targets, intermediate results and monitoring sys- of poverty problems. In some cases, low productiv- tems were not adequately addressed in the Results ity of water drives the poverty of irrigated farmers. Framework. Employment aspects were often not In some cases, larger farmers benefited more; in considered. others, the landless were expected to benefit most; in others, exact numbers of people expected to Four causes of the above problems are sug- emerge from poverty were predicted. gested: In most cases, social capital from WUAs was · Lack of clarity about agricultural water as a expected to have multiplier effects on poverty re- means of poverty reduction duction; other mechanisms mentioned are policy · The weak links between country poverty reduc- reforms, service delivery, and investment in infra- tion strategy and the agricultural water sector structure and institutions. · The weakness of project appraisal tools in pov- Pro-poor technical design (such as treadle erty analysis pumps, retention ponds, and small irrigation and drainage infrastructure) and institutional design · The lack of incentives for task teams to inte- (administrative and fiscal decentralization, farmer grate poverty reduction into project design and empowerment, and self-financing farmer-managed results monitoring. schemes in contexts of secure property rights and "Pro-poor" interventions where net benefits free markets) were important in some cases. accrue more to the poor than to the non-poor Some projects included specific targeting of could be improved. Designing pro-poor projects the poorest groups: "tail-enders," smaller irrigation requires consideration at the sectoral, scheme, units, targeting poorest areas of a country, using and farm levels, and looking at policies, technol- appropriate technology, targeting an upper water- ogy and farming systems, institutions and man- shed, using ceilings on hectarage and sliding scales agement, indirect impacts, and externalities (box of subsidies, and targeting women. 1). Intermediate targets and indicators need to be set, related to increasing incomes or improved The most common approaches to captur- distribution of benefits. Increased reliability and ing income and distributional results were socio- equitable distribution of water, inclusion of the vul- economic baseline surveys and impact monitoring; nerable in WUAs, increases in agricultural output participatory monitoring and evaluation (M&E); and incomes, distribution of income increases, institutional audits of, e.g. WUA's; specific gender increases in employment opportunities, can all be monitoring; and crop surveys. part of the causal chain leading to poverty reduc- tion. The challenge Poverty reduction impacts in Bank-financed agricultural water projects can be improved Despite the poverty-reducing impacts of many proj- through better analysis and design, and can be ects reviewed, and although quality of pro-poor demonstrated if poverty-related targets and in- design and results monitoring has improved, many dicators are more systematically included in the projects were not clear in their poverty-reducing Results Framework. Improvements can be made to design and results measurement. the poverty reduction performance of agricultural water projects by a clearer understanding of how Agricultural water projects were rarely part agricultural water contributes to poverty reduction, of a poverty reduction strategy and did not show by sharper strategic focus, by better analytical links to Poverty Assessments. Financial analysis techniques, or by better use of existing techniques. stopped short of distributional analysis. Technical These improvements require task teams to have design rarely considered pro-poor options. Social the knowledge and incentives to work in an inte- assessment and institutional design and the rela- grated fashion on pro-poor design. 3 WATER P-NOTES A sourcebook on improving poverty reduc- sign and implement agricultural water operations tion performance of agricultural water investments maximizing poverty reduction impacts, and to mea- should be prepared to help task teams assess the sure results more effectively. poverty reduction role of agricultural water, to de- Box 1. A checklist for improving the pro-poor impact of agricultural water projects Pro-poor policies · Does the project change land tenure or water rights, and if so does it do so in a pro-poor way? · Do expected increases in yields, marketable surplus, and incomes accrue fairly to poor farmers? · Does the project try to minimize displacement and resettlement of poor communities, e.g., by opting for smaller scale infrastructure? · Are other possible income-generating uses of irrigation water (for example, aquaculture, livestock) enhanced by the project? · Are domestic water supply and sanitation in rural areas included as specific objectives of the agricultural water project? · Are complementary services (credit, education, extension, for instance) included in the project and do they particularly target the poor? Pro-poor technologies · Do investment and operation costs of the proposed technologies allow access to poor people? · Have all available technologies for smallholders been considered in the selection process? · Are there arrangements for pro-poor research and technology transfer? · Is drainage needed, especially in poorer areas subject to waterlogging and salinity? Pro-poor water management · Are the voices of poor men and women adequately heard in water resources allocation decisions--and in selection of the project area, project design, development, and operation? · Are there in-place mechanisms to help poor farmers strengthen their cooperative negotiation power and make their access to water rights and other complementary services (micro-finance, for example) easier? · Is adequate technical and administrative support provided to water-users associations, and especially to poor men and women? · Do cost-recovery arrangements (water pricing) and incentive policies adequately protect the poor (perhaps through block tariffs to protect base water consumption)? · Are distributional issues, for example, head-ender and tail-ender conflicts, dealt with in an equitable way? Direct and indirect impacts on the poor · Does the project generate significant additional employment, both during construction and during subsequent operations? · Are environmental impacts that may affect the sustainability of the livelihoods of the poor adequately assessed and dealt with? · Is water quality management adequately considered (by safe disposal of drainage water), especially when water is used for drinking purposes? · Are health impacts (for example, malaria and bilharzias) considered and mitigated to the extent possible by the project? Source: Adapted from World Bank 2002 and from Lipton and Litchfield 2003 in World Bank 2006. The Water Sector Board Practitioner Notes (P-Notes) series is published by the Water Sector Board of the Sustainable Development Network of the World Bank Group. P-Notes are available online at www.worldbank.org/water. P-Notes are a synopsis of larger World Bank documents in the water sector. 4 THE WORLD BANK | 1818 H Street, NW | Washington, DC 20433 www.worldbank.org/water | whelpdesk@worldbank.org