Agricultural and Rural Development Notes

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This series on commodity risk management aims to disseminate the results of World Bank research that describes the feasibility of developing countries’ ability to utilize market-based tools to mitigate risks associated with commodity price volatility and weather.

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Empowerment and Poverty Reduction through Infrastructure and Service Provision in Rural Pakistan

2010-01, Isa, Qazi Asmat, Ahmed, Naila, Larson, Gunnar

Poverty in Pakistan is overwhelmingly rural. Some two-thirds of Pakistan's population, and over 60 percent of the country's poor, live in rural areas. In 2005, average per capita expenditures in rural areas were 31 percent lower than in urban areas. This inequality between urban and rural areas is re-enforced by inequality within and between rural areas. Owing to uneven access to land and useable water, most of the increased income that results from agricultural production accrues to higher income farmers-who typically spend a disproportionate amount of their income on urban goods and services. This inequality seriously limits the impacts of agricultural growth on rural poverty, and is a major cause of sustained poverty and low productivity among small farmers and rural nonfarm households. It also points to the importance of effectively targeting the poor in contexts in which resources intended for them are likely to be captured by more privileged groups.

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Financial Services for Developing Small-Scale Irrigation in Sub-Saharan Africa

2008-09, Larson, Gunnar

Food insecurity and income poverty are rampant in Sub-Saharan Africa. Thirty-one percent of children under the age of five are malnourished and some 72 percent of the population lives on less than US$2 day. Forty-one percent lives on less than US$1 day. The impoverished and hungry are concentrated disproportionately in rural areas and rely mainly on the consumption and sale of agricultural produce for their food and income. Africa has experienced increasing dependency on food imports that its countries cannot afford. Yet an estimated 700,000 hectares of arable land in Africa remains uncultivated. It is land that could become productive through small-scale irrigation using basic technology to draw on small-water resources, such as tube wells, and dambos. The technologies can be applied to cultivate smallholder plots of up to five hectares. Employing them will enable up to 4 million low-income households to intensify agricultural production and increase productivity. Small-scale irrigation can increase agricultural productivity and production, thus contributing to economic growth in rural areas and increased well-being among small holder farmers. Its potential to increase and stabilize food supply is especially important in light of the ongoing food crisis, and especially in Africa. Expanding the use of small-scale irrigation requires farmers to have access to financial services. The many constraints and obstacles that rural financial institutions in Africa confront must be purposefully navigated if financial services are to fulfill this role. Effectively tailoring financial services and products to support irrigation in different settings and among different client groups will be essential to success. Carefully targeting grant funding to the very poorest subsistence farmers and clearly separating it from lending will be likewise be critical to the sustainability of these financial services.

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Cameroon - Debt Relief Grant under the Enhanced Heavily Indebted Poor Countries (HIPC) Debt Initiative

2008-02, Mastri, Lawrence

The objective of debt relief grant operation was to provide Cameroon the assistance required by IDA under the enhanced HIPC Debt Initiative upon Cameroon reaching the completion point, thus contributing to improving Cameroon's overall debt sustainability and supporting the government's implementation of its poverty reduction strategy through increased spending from the fiscal savings. The policy areas supported by the program are those linked to the conditions for reaching the completion point under the enhanced HIPC debt initiative, namely: (i) preparation of a poverty reduction strategy paper (PRSP), and satisfactory implementation for at least one year; (ii) the maintenance of a stable macroeconomic framework and continued satisfactory performance under the IMF's Poverty Reduction and Growth Facility (PRGF) program; (iii) use of budgetary savings from the interim debt service relief; (iv) the satisfactorily implementation of the structural reforms supported by the Third Structural Adjustment Credit (SAC III) financed by IDA; (v) implementation of governance and anti-corruption measures in the areas of judicial reform, budget execution, procurement reform, and the creation of regulatory agencies; and (vi) implementation of key social reforms, including combating malaria and HIV/AIDS. Some of the lessons are as follows: (i) formulate a realistic timeframe for the government to meet the triggers of the completion point; and (ii) ensure that the government puts in place a strong focal point/unit to coordinate and monitor the implementation of the completion point triggers and facilitate related post completion point actions.

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Innovating to Reduce Risk : The Case of Livestock Insurance in Mongolia

2007-10, Belete, Nathan, Larson, Gunnar

The Mongolia Index Based Livestock Insurance Project (P088816) is piloting insurance plans in three provinces, Bayankhongor, Uvs, and Khenti. It consists of five components. The first provides the mechanism to pilot two index-based livestock insurance (IBLI) products. The second component of the project entails a variety of targeted promotional and public awareness activities to foster awareness and inform stakeholders about the details of the two products and the IBLI pilot. The third component supports the institutional framework and capacity necessary to expand the availability of the insurance products once the viability of IBLI instruments has been established. The fourth component monitors a variety of stakeholders during the IBLI pilot in tracking access by different social groups, monitoring how the two products are received, and in determining whether herders modify their behavior in response and, if so, how their behavior changes. The project's fifth component supports the project implementation unit in its management functions. The lessons learned also suggest themselves as potentially replicable by other project teams, and as warranting the attention of other governments that seek to manage the risks faced by livestock-dependent communities.

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Foreign Investment in Agricultural Production : Opportunities and Challenges

2009-01, Songwe, Vera, Deininger, Klaus

The recent surge in food and fuel prices has prompted countries with high dependence on food imports to try and lock in future food supplies through direct investment in agricultural production in other countries. The price surges also led to a wave of proposals to invest in biofuels investments in agricultural land. While such investment can provide large benefits, it also carries considerable risks both to investors and citizens in the locality of the investment. To ensure that investments provide broad benefits and effectively contribute to larger development outcomes, enforceable property rights and contractual agreements in many developing countries need to be strengthened. This note considers how development partners can help countries create the pre-conditions for investment and proposes a governance framework to establish minimum standards for it.

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Assessing the Investment Climate for Rural Enterprises

2008-05, Larson, Gunnar, Lamb, John, VanDer Meer, Cornelis

The 2008 World Development Report identifies competition as an important variable of the rural investment climate. Competition triggers innovation and the productivity gains that drive economic growth, and with it the creation of jobs. Employment is generally the principal pathway that people have out of poverty. Fostering such competitive environments entails inducing the entry of local, mainly small-and-medium enterprises as well as the development of agribusinesses that enable small farmers, entrepreneurs, and investors to participate in expanding markets. The barriers to entry confronting prospective small rural enterprises include all the risks and costs and market failures characteristic of many rural economies, in addition to poor access to financial and public services, weak business skills, and extremely limited or non-existent information about what demand consists of in the non-local markets they hope to sell to. Improving the opportunities and incentives for rural firms to invest productively, expand, and bring on new workers should be a policy priority for governments, particularly given the prominence of policy, regulations, and enforcement in rural investors' perception of risk. Providing a sound, enabling policy environment is a vital role of the government and public sector and includes setting food quality and safety grades and standards and reliable contract enforcement. Such stable policy environments go very far in relieving investors' uncertainty over what governments will do next, what policies will be formulated, and how policies and regulations will be interpreted and enforced. This is a pressing concern among investors. Making policy formulation and enforcement more predictable can dramatically encourage investment (World Bank 2005).

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Kyrgyz Republic : Benefits of Securing and Registering Land for Development

2008-02, Cook, Edward

The project initially focused on building upon the 1998 Registration Law to develop registration procedures, and on getting the Legislative Reform Office (LROs) up and running. Cost, affordability, and quality of services were important considerations. The Project benefited from the country's high education levels and relatively low labor costs. Since independence in 1991, the Government of the Kyrgyz Republic has sought to promote market reform. An important part of this reform is a program to privatize land and secure property rights in land and other immovable property. Prior to independence, all land was state property, with use rights granted to occupants. Most commercial buildings and structures were, likewise, state property. Rights to residential properties were presumed to be held by occupants, but there was no clear legal support or guarantee to these rights. The large majority of agricultural land was farmed collectively. Workers on these state and collective farms were allocated small household plots for their own production. The most essential success factor for the Project has been the continuity and strength of government commitment. Without the strength of leadership in the implementing agency, as well as the quality and extent of skills brought to oversee project implementation, none of the successes that have been achieved would have been possible.

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Managing Drought Risk for Food Security in Africa : An Innovative Solution in Malawi

2009-01, Syroka, Joanna, Bunte, Kara

Malawi periodically experiences drought leading to shortages of grain on the domestic market and a sharp increase in consumer prices. Consumers, including many of the poorest farmers in the country, experience difficulty obtaining enough grain to meet their family requirements. One method to reduce the risks of grain shortfalls is to improve the capacity of farmers to produce enough grain even when drought occurs, for example, through input subsidies and efforts to improve water use efficiency. An additional measure is to finance the establishment and distribution of strategic grain stocks. However, in the occasional year when drought is most extreme, supplementary assistance will still be needed in the form of expensive food imports and, possibly, food aid.

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A New Model of Public-Private Partnership for Land Access and Rural Enterprise Formation

2008-02, Childress, Malcom D, Korczowski, Tom

The Honduras Land Access Pilot Project (PACTA) from 2001-2006 supported the acquisition of land and the formation of sustainable farm enterprises by self-organized landless and land-poor peasant families. The Government is now scaling up and diversifying the pilot into a national program far more inclusive than the current model. The SDR 6.2 million pilot project proved the viability of a public-private partnership strategy, with the private sector lending for land purchase and public sector funds being used for complementary investments and services to improve productivity and build capacity for independent development. The program was broadly aimed at the rural population with no access to land or precarious access to small parcels for subsistence production. Of the 1,226 families that took part in the program, 991 were part of this group day laborers, sharecroppers, or other kinds of subsistence producer. The rest were poor families with access to municipal forestland (two sub-projects) or communal land (one sub-project). These sub-projects were implemented at the end of the pilot phase. In addition, the sub-projects supported by PACTA in forest communities and afro-Honduran communities are promising for the diversification of economic activities in areas like tourism, crafts, fishing, sustainable timber harvest and wood processing, and environmental services. From this point of view, the achievements and lessons learned in the pilot project could be meaningful in the design of similar processes, not necessarily involving land purchase

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Armenia : Title Registration Project

2008-02, Adlington, Gavin, Saxen, Anu

This approach resulted in the fragmentation of agricultural holdings, with families owning noncontiguous plots. Land use was inefficient, owing in part to the low rate of use of agricultural machinery. Making land use and farming more efficient will require the establishment of a functioning land market. Granting farmers the right to sell, exchange, and lease their land will enable them to use it as collateral and to consolidate family plots. The overall aim of the Armenia Title Registration Project was to promote private sector development by implementing a transparent, parcel-based, easily accessible, and reliable registration system for land and other immovable property. The system was to provide a chronological record of property owners and their rights and obligations. The availability of this information was expected to reduce the transaction costs of title transfers and mortgage financing and lead to more secure property rights for parcels registered in the system. This in turn was expected to lead to higher land and real estate value, increased productivity, and the consolidation of fragmented rural land ownership. Increased use of property as collateral was expected to bring about general improvement in the efficiency of rural and urban real estate markets. The project was also intended to promote least-cost registration procedures by building on existing property information databases (adding only market-relevant information to these databases), and by contracting private surveyors.