Solar Irrigation Rwanda – Developing a new Market for smallholder farmers

Energy4Impact

The Solar Irrigation Rwanda (SIR) market development programme completed in November 2020 makes a compelling case for solar-powered irrigation as a means of increasing agricultural productivity and profitability in sub-Saharan Africa. Smallholder farmers adopting the new technology in the programme achieved yields around a third higher and many were able to grow crops in the dry season for the first time. Yet while solar irrigation can have a potentially transformative impact on the growth and poverty reduction strategies of African economies reliant on subsistence farming, there are many barriers to adoption. From the start, SIR was designed to tackle many of these challenges, and this article details how they were addressed and the lessons learned for those wishing to expand the solar irrigation sector further.

Agriculture employs nearly 70% of the population in Rwanda and is vital to the country’s economic growth and poverty reduction strategies. However, most agricultural workers are small-scale subsistence farmers dependent on rainwater for irrigation. In 2017, only 2% used machine-powered irrigation and nearly all of that was fuelled by diesel. Increasing productivity in the agriculture sector is widely recognised as a key accelerator of socio-economic development in Rwanda and machine-powered irrigation is critical for improving yields, reducing vulnerability to droughts and changing rainfall patterns, enabling multiple cropping practices, and thereby increasing food security for the entire region.

However, solar-based irrigation solutions require market-building efforts to exploit their full potential. Creating a sustainable and equitable market for new farming technologies in rural off-grid regions requires concerted efforts across a number of fronts:

  • Raising farmer awareness of the potential of solar irrigation;
  • Addressing system affordability through subsidies and third-party financing;
  • Building the capacity of farmers to use solar irrigation systems;
  • Working with suppliers to identify best-performing systems;
  • Creating new distribution channels and delivery models;
  • Strengthening links between farmers and offtakers;
  • Improving the accessibility of government subsidy schemes;
  • Creating favourable policy and regulatory frameworks; and
  • Ensuring the participation of women agricultural workers

The SIR programme was implemented to that end by Energy 4 Impact between February 2018 and November 2020 and was funded by a $1 million grant from the OPEC Fund for International Development (OPEC Fund). SIR worked in 10 districts of Rwanda – six in Eastern Province and four in Southern Province. The programme supported solar irrigation projects fed by mobile and stationary solar water pumping systems: the portable systems used trolleys, while the stationary ones used fixed structures and elevated reservoirs. Each solar irrigation system comprised a pump, solar panels, a power controller and piping. The systems were designed for irrigating 1 to 10 hectares of farmland by pumping surface water from rivers and lakes, and the targeted beneficiaries were maize and horticulture crop growers organized into groups of 4 to 50 farmers. Altogether 1,450 farmers adopted solar irrigation systems through SIR.

Benefits of solar irrigation

Solar irrigation offers clear benefits in terms of increased crop production and farmer incomes. Data from SIR shows farmers adopting solar irrigation achieved on average 32% higher yields in the two main growing seasons compared to non-adopters. Many adopters were also able to add a third growing season because they could grow crops in the dry season for the first time. During the 2020 dry season, the average net income of a SIR adopter was just under $650 – roughly the same as the average annual farming income of a smallholder in Rwanda.

There were significant differences in profitability for adopters growing staple crops such as maize and beans versus those growing cash crops such as watermelons, green beans and chili peppers. According to data from SIR, the revenue generated from staple crops ranged from $130 to $270 per hectare, while for cash crops it ranged from $1.5K to $4K per hectare.

The production and income gains described above imply a comparatively short payback on the pump investment. Results show that the payback is likely to be between 6 months and 3 years depending on the type of crop and the number of seasons cultivated. This compares to an average design life for the pumps of 10 years. Other factors affecting the payback period include the quality of inputs and the knowledge and experience of the farmers. SIR contributed to this knowledge by providing agronomic advice to farmer adopters and also worked with government programmes that provided seeds, fertilisers and training to farmers.

Overcoming the challenges to adoption of solar irrigation

Creating a market for solar irrigation for smallholder farmers presented significant challenges for the SIR team. From the outset it was decided that the best way to address the challenges was to engage with multiple stakeholders, including farmers, manufacturers, distributors, local banks, offtakers, the government, other NGOs and donors. Some of the challenges faced – such as awareness-raising, lack of affordability, and supply chain problems – were factored into the design of the programme. Others – such as the instability of farmer groups, flooding, theft and vandalism – were more difficult to anticipate. SIR also faced delays due to movement restrictions introduced because of the Covid-19 pandemic, but these were less serious than expected because many of the programme partners were classed as “essential workers” and therefore exempt from the restrictions.

The rest of this article examines the various challenges in turn, highlighting the results achieved by the team and recommendations (in italics) on how to scale up the solar irrigation sector.

Awareness

The first major challenge was a lack of awareness of solar irrigation and its associated benefits. SIR sought to raise awareness amongst farmer groups and other stakeholders, including district agronomists, local politicians and local branches of banks, in four distinct ways. First, the team set up demonstration projects in 8 districts, allowing farmers to come and see how solar irrigation worked under local conditions. Second, they set up meetings with farmer groups to train them on the technology. Third, the team organized district education days in which anyone interested in the technology could participate. Finally, they ran four radio shows. By the end of the programme, SIR had reached nearly 10,000 farmers through the group meetings and education days, and around 50,000 from the radio shows. These awareness-raising activities enabled the SIR team to meet and recruit many of the smallholders that would later become adopters of the technology.

Awareness raising should target multiple stakeholders, ideally starting with demonstration sites, followed by small meetings with farmers, larger education events, and radio shows.

Affordability

The next major challenge was the high upfront cost of the solar irrigation systems. SIR’s preferred system was the Ennos Sunlight, which has a landed cost in Rwanda of around $2,000 for a group of 4 farmers, which is well beyond the purchasing power of most farmers – a typical smallholder farmer with a plot of 0.5 hectare earns between $600 and $750 a year (excluding non-farming income).

The affordability challenge was met with a mix of subsides and loans. A high level of subsidy was important in helping farmers build confidence in the new technology and to adopt it with minimal financial risk. This was particularly critical at the start of the programme, when SIR provided 100% grant funding for the demo sites. Once these were in place, SIR worked closely with the government’s own irrigation subsidy scheme, which covered 50% to 75% of the cost of the equipment. SIR helped distributors to get accredited for the scheme and also pre-paid the subsidies to the distributors to avoid them having cashflow issues. By the end of SIR, some district governments were providing legal guarantees on the timing of subsidy disbursements, allowing SIR to stop making pre-payments. SIR meanwhile topped up the government subsidies with a 20% grant to make the systems affordable. The government also offered financial support on inputs and agronomic training to complement SIR’s own training in agricultural best practice. As farmers become more aware of the benefits of solar irrigation and the costs of the systems fall, the need for subsidies will reduce, although it is likely that some subsidies will continue to be needed for the poorest farmers.

Subsidies are important for encouraging adoption of solar irrigation, particularly in the early stages of a market and for those serving poorer farmers. Any donor programme should aim to work closely with existing government financial support schemes and complement them as required. Careful consideration should be given both to the overall level of subsidies required to make systems affordable and the speed in which those subsidies are disbursed to avoid cash-constrained distributors facing liquidity issues.

Local banks in Rwanda have a limited appetite for lending to smallholders due to the seasonality and uncertainty of their incomes. SIR therefore reached out to banks with a history of agricultural lending to encourage them to offer loans based on a three-pronged strategy. First, the high level of subsidies and agronomic advice given to farmers helped reduce the financial risk for potential lenders. Second, support was provided to several banks to design new loan products allowing repayments by farmers after the harvest. Third, SIR managed to persuade one bank to accept solar irrigation equipment as collateral for their loans. Despite its best efforts, most farmers still preferred to borrow from family and friends rather than the banks, and only five banks were prepared to offer loans. In the end, loans were disbursed to five farmer groups representing 45 farmers, equivalent to only about 3% of the farmers supported through SIR.

It cannot be assumed that smallholder farmers will necessarily want to borrow from local banks. Even if the banks can be persuaded to lend, the terms on which they lend – for example high interest and fees, tough collateral requirements and monthly repayment terms – will often be unattractive to farmers. In some countries such as Rwanda, there is also a culture of not taking on lots of debt. It is therefore important to engage with local banks to build their understanding of solar irrigation technology and help them tailor loan products that fit with the cashflow profile of farmers.

Pay-as-you-grow (PAYG) is sometimes suggested as another potential solution to bridge the affordability gap. In this model, farmers make a down payment for say 30% of a pumping system and then pay the balance off in instalments, usually with mobile money. The pump can be deactivated remotely if farmers do not keep up with their payments.

SIR initiated discussions with one distributor to develop a PAYG solution and also tested one PAYG-enabled pump, but for various commercial and technical reasons these plans did not reach fruition. The PAYG business model is still unproven and faces many challenges, including the seasonality of farmer incomes and the threat to a farmer’s business if a pump is deactivated remotely. Further research is needed to understand how much farmers can afford to pay both upfront and through instalments, and whether those instalments can be paid on a regular monthly basis or need to be timed for after the harvest.

Availability of technologies

Another challenge for SIR was the limited choice of suitable solar water pumps and the mixed quality of the distributors. Rwanda is a small landlocked country and the range of pumps available for sale is lower than in neighbouring East African countries. Some pump manufacturers are not interested in entering such a nascent market, while others such as Ennos, Lorentz, SunCulture, and Sunpump are there, but the landed costs of their pumps are much higher than in neighbouring countries.

The quality of local distributors encountered during SIR varied enormously, with many cash-constrained and lacking the resources and experience to support a new technology. Some distributors over-specified the irrigation system required for sites, while others quoted multiples of the list price of pumps. One installed a faulty system and did not get it repaired. Another lacked the financial capacity and ended up selling their business.

Some of the better distributors were not initially accredited for the government subsidy scheme. SIR met 13 accredited distributors near the start of the programme, but concluded that only three were ready to install solar water pumps. Ignite Power, a major solar home system distributor which ended up being the preferred solar water pump distributor for most sites, was not even accredited for the government subsidy scheme until July 2019. SIR supported Ignite to gain accreditation for their pump and this, together with the subsidies from SIR, was instrumental in them being able to offer affordable pumps to farmers. It will be interesting to see how many pumps Ignite are able to sell now that the SIR subsidies have ended and how many other new distributors get involved as the market grows.

Support for distributors, both financial and technical, is critical for any solar irrigation donor programme. Many distributors are cash- and resource-constrained and are unlikely to be able or willing to distribute a new technology without significant support or visibility on the scalability of the market. Therefore it is important to build this support into any programme from the outset.

Quality of equipment

The next big challenge for SIR was the lack of operational track record for the solar water pumps. The demonstration sites enabled the team to test six different models, including two portable surface pumps and four submersible pumps. Having different pumps on the ground allowed the team to see how they worked under local conditions, to find out which models performed best, and to identify common faults. In reality, it is still too early to draw concrete conclusions on the pumps – most have a design life of 10 years, but SIR is not aware of any pumps in Rwanda that have been on the ground for more than 4 years.

The most popular model for SIR was the portable Ennos Sunlight pump. Farmers liked them because they were relatively affordable and provided the required discharge and lift. They were also reliable and could be safely stored in people’s homes. The performance of the submersible pumps was affected by the high level of silt in the rivers. One of the pumps on the demonstration sites wore out in 4 months due to the silt in the river. In contrast, the pumps used in lakes performed much better due to the lower levels of silt.

The Ennos Sunlight pumps hit a ‘sweet spot’ for farmers in terms of size, affordability and technical performance and nearly all SIR’s market findings were based on these systems. The team also worked with USAID’s Hinga Weze on the installation of larger systems serving 10 hectare sites for groups of 50 farmers, However, there is currently no data on these systems because they were installed in the last few months of SIR.

SIR only managed to gather data on a limited range of pumps over a 12 month period. Further analysis of the performance and reliability of different pumps over a longer period will be important for future programmes. The team would also encourage studies looking at the economics of smaller solar irrigation systems versus larger ones.

Routes to market

In more developed agricultural markets, farmers often have established relationships with crop buyers (also called offtakers) that agree to purchase their harvests in advance and therefore provide some revenue certainty. However, most smallholder farmers in Rwanda have not forged such relationships with offtakers and are therefore heavily exposed to market forces. SIR was therefore keen to test the appetite of local offtakers to commit upfront to buying produce from farmers and to see if they were also willing to provide free agronomic advice, pre-finance inputs such as seeds and fertiliser plus pay for a small portion of the solar irrigation equipment costs.

Only five of the 20 offtakers contacted were willing to commit upfront to purchase produce from the SIR farmers. These commitments related purely to purchasing the next harvest at the prevailing market price, but not future harvests. In some cases, the market prices offered by the offtakers were unattractive because they had no information on the origin and certification of the inputs. No offtaker was interested in pre-funding any inputs, let alone the much higher cost of the solar irrigation equipment. There were several reasons for this. One was the weak financial capacity of the offtakers. Another was the risk that farmers could sell their produce to another buyer at a higher price rather than the offtaker that pre-funded them. Offtakers were also concerned about the limited experience of farmers in using solar irrigation and the stability of the farmer groups.

Contract farming is likely to remain a challenge for smallholders for the foreseeable future. If offtakers continue to be unwilling to fund inputs and provide agronomic advice, it will be difficult for the farmers to guarantee the quality of their inputs, lower their production costs and achieve higher prices.

Fostering a trusting working relationship between offtakers and smallholder farmers is likely to prove important. However, any future programme should be aware that it could take several years for farmers to build a track record of quality output and for offtakers to develop the financial capacity to pre-fund inputs and contribute to capital expenditure on solar irrigation systems. 

Farmer groups

Organising smallholder farmers into groups makes it easier for them to access finance and expand their knowledge and networks. In Rwanda, most farmer groups are created because the government and NGOs prefer to work with groups rather than individual farmers in order to support more people at the same time. Putting it another way, the groups tend to be set up to access subsidies and public resources rather than because the farmers involved particularly want to work together.

This leads to two often understated challenges, namely the risk of group disputes and frequent changes in group membership. There is always a risk of the groups becoming dysfunctional or breaking apart and this happened several times during SIR.

The basic idea of a farmer group in Rwanda is that the ownership and benefits of using the land are shared between all group members. This includes all crops produced and revenues generated. Each group typically has a leader, who coordinates activities on behalf of the other group members, including the purchase of inputs and equipment and applications for subsidies. Some members of the group are more active in farming or making use of the irrigation equipment than others. It is quite common for larger farmer groups to divide themselves into small groups and the membership of these smaller groups can change from year to year.

Farmer groups play a key role in helping smallholders access funds. However, the potential for disputes and changes in membership is high and, even if one has a good understanding of the internal dynamics of the group, it is often difficult to plan much beyond a year. Future programmes should devote resources to helping farmers work out how they want their groups to be run and how they want to farm together.

Gender balance

Participation by women has always been a challenge for government or donor programmes in Rwanda. This is particularly true for programmes like SIR that involve the introduction of new technologies and related training and consumer awareness events. Such events tend to be attended more by men, while the women stay at home and manage the household tasks.

SIR achieved mixed results on gender participation. Women led 1 in 3 of the farmer groups that got solar irrigation systems through SIR and made up more than 2 out of 5 of the members of those groups. The proportion of women participating in individual agricultural trainings was quite high (over 50%) because the team had direct control over the choice of participants. In contrast, the proportion of women attending the district-level education days was much lower (around 20%) because, apart from campaigns to market the events, SIR had no direct control over who attended.

Female participation should be treated as a priority in the development of solar irrigation. One option is to offer slightly higher subsidies or financial support for projects led by women. This was not an option during SIR because the level of adoption among all farmers – including both men and women – only picked up towards the end of the programme.

Conclusion

SIR has played an important role in kickstarting the market for solar irrigation for smallholders in Rwanda. It has begun to address the challenges of consumer awareness and lack of equipment affordability while also starting to tackle some inefficiencies in the supply chain. The programme has also demonstrated that irrigation cannot be looked at in isolation and should be part of a broader support programme for farmers that includes high quality seeds, fertilisers, agronomic advice and other agricultural services such as post-harvest cold storage.

Further data will be needed to assess the long-term impact of solar irrigation on the productivity and incomes of farmers. It will be interesting to see if farmers’ incomes increase as they gain more experience of the technology and improve their agronomic practices. It will also be important to monitor the investment returns on different crops. While cash crops are more profitable than staple crops, they tend to be less resilient and further research will be required to understand the spoilage rates in different crops and the business case for post-harvest cold storage.

Peter Weston, Director of Programmes at Energy 4 Impact, says: “The encouraging results from SIR show increases in uptake of solar irrigation by farmers and farmer incomes. However, many challenges remain and there is still a long way to go in terms of scaling up the market.”

Walid Mehalaine, Head of Grants and Technical Assistance at the OPEC Fund, also welcomes the results of the programme: “Farmer-led irrigation initiatives are key to effecting inclusive change and improving the lives of small-scale farmers.  Achieving sustainable results also depends on creating awareness, building capacity and adopting technologies.  We are very proud of the positive impact that SIR has had on smallholder farmers in Rwanda and hope that the lessons learnt in this pioneering programme can spur others on to take the market to the next level.”

Source: Energy4Impact. Read original article.

 


 

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