To address environmental degradation in Tanzania, this initiative is implementing a locally-led credit-based mechanism which creates an incentive for smallholder farmers to develop agrobiodiversity. Local stakeholders lead the way in action research that is designing and testing this credit system for sustainable resource use with agricultural productivity.
Environmental degradation due to a lack of incentives for good practice
The Mbarali catchment, the Rungwe and Kyela landscapes in Mbeya and the Katuma catchment in Katavi are experiencing declining water quantity, loss of wildlife corridors, overgrazing and degradation of wetlands and forests. These catchment areas are important for downstream communities and are critical to the survival of surrounding ecosystems.
Environmental degradation has been intensified by small-scale agriculture, including rice growing, horticulture and cocoa and coffee cultivation. The expansion of rice growing poses urgent environmental risks, including water overuse, increased soil salinity and fertiliser and chemical runoff. It may also drive farmer encroachment into fragile local wetland and forest ecosystems.
Smallholder farmers are hindered from adopting good practices by a lack of knowledge and limited financial resources. Traditional agri-environmental programmes have seen low participation rates. Farmers need tangible incentives to motivate them to transition to sustainable practices. Banks are exploring options to promote sustainable practices and nature restoration, including enhanced terms and sustainability requirements in loan agreements. However, formal financial institutions often overlook smallholders.
Smallholder farmers are offered incentives to limit environmental degradation
This project is implementing a credit-based incentive mechanism to address environmental degradation. By incentivising smallholder farmers, the project aims to cut water use in target areas by 32-50% and reduce synthetic pesticide use by 50-90%. The project is also promoting more on-farm tree cover, leading to improved local biodiversity habitat and wildlife corridors.
The 'eco-lending' mechanism is being designed and tested by local stakeholders and the pilot is initially targeting 5,000 smallholders, with a planned expansion to 100,000 smallholders over ten years.
The pilot is generating evidence from the incentive uptake and the resulting adoption of more sustainable farming practices.
The locally led approach, incorporating the principles of community microfinance and open-source protocols, will generate new tools and insights on implementing innovative finance mechanisms.
The project is also enhancing the capacity of local non-profit organisation Tanzania Informal Microfinance Association of Practitioners (TIMAP) to lead the design process, implement the mechanism and manage the capitalisation of the fund.