Fostering sustainable rice production through climate finance

In the Mbeya region, the soil is extremely fertile, and the economy is based on rice production. Farmers in the Usangu Plain contribute 24% of the 2.2 million tonnes of rice produced in Tanzania. They rely on precious water resources, which are threatened by increasing competition between farmers, livestock and wildlife. In fact, they all depend on water from the same river systems.

In its National Rice Development Strategy (NRDS) Phase II, the Tanzanian government has set a target of doubling the area under rice cultivation and doubling on-farm rice productivity by 2030. However, without sustainable and climate-smart rice farming practices, this is likely to double greenhouse gas emissions and increase the risk of biodiversity loss (as a result of clearing new land for lowland rice production) and conflict (over resources such as water).

Through the 'Future-proofing ecosystem and sustainable rice productivity in Tanzania through inclusive finance' project, funded by the Flemish government and in partnership with the Tanzania Agricultural Research Institute (TARI-Ifakara) and Ecosystem Equity, we aim to support the government's wider efforts to conserve critical ecosystems (wetlands and forests), reduce greenhouse gas emissions by 30-35% and thereby meet the NRDS targets.

Smallholder farmers (averaging 1.3 hectares of land) produce 90% of Tanzania's food and have a huge responsibility but little incentive to change their farming practices. They are seen as too risky and most financial institutions are sceptical about investing in them. More generally, although the rice sector is well developed, actors in the value chain have little focus on sustainability due to lack of awareness, lack of understanding of the added value of moving towards sustainability, and low cash flow for investment. As a result, farmers are hampered in adopting good practices by both lack of knowledge and limited financial resources.

Our approach

We will develop, put in place and evaluate a scalable and sustainable financing mechanism to support the transition of small-scale rice farmers from conventional to sustainable rice cultivation practices. More specifically, we will:

Provide farmers with the knowledge and skills to transition to more sustainable and climate-smart farming practices.

• We will promote the use of Good Agricultural Practices (GAPs) based on the SRP Standard, a benchmarking system to assess and monitor progress towards sustainable production. The SRP Standard incorporates climate change adaptation and mitigation into its requirements by promoting practices that reduce greenhouse gas emissions and use water and inputs efficiently. To achieve this, we will work with TARI-Ifakara to support and train 1,750 farmers.
• Extension workers (from the public and private sectors, farmer organisations and credit officers from financial institutions) who provide direct technical assistance to farmers will also be trained in sustainable and resource-efficient farming practices.

Expected results

• 1,750 smallholder farmers will be trained in Good Agricultural Practices (GAP), benchmarked against the SRP standard, to improve profits (through reduced costs and increased yields), enhance environmental sustainability and adapt to climate change.
• Adopting water-efficient management practices with good straw management in the field will lead to a potential reduction of 3,850 tonnes of greenhouse gas emissions. In the long term, within 10 years, 250,000 farmers will adopt sustainable rice-growing practices, reducing greenhouse gas emissions from Tanzania's rice sector by 550,000 tonnes.
• The same group of farmers will benefit from access to sustainable credit through the climate-smart lending mechanism being piloted. For example, farmers will be able to purchase equipment such as straw bailers and rice husk compactors, machines that ensure that residues (straw and rice husks) are packaged and sold to other users instead of being burned, as is the current practice.  
• The results of the pilot model will convince other financial institutions of its validity, resulting in more favourable lending policies for farmers.
• Two policy papers will be developed, one focusing on climate-smart financing mechanisms, as a means to encourage farmers to adopt sustainable rice farming practices, the other focusing on the benefits farmers derive from adopting SRP farming practices. They will be targeted at public institution as the ministries of Agriculture, of the Environment and of Finance, and at private sector policy makers such as the Tanzania Agricultural Development Bank.

What have we achieved so far?

• The commercial bank CRDB restructured its lending conditions to include sustainability requirements, and disbursed 54 loans to MAMCOS farmers. These loans were specifically tailored to farmers trained by Rikolto and TARI in the use of the SRP standard. In return for their commitment and investment inenvironmentally friendly rice production, they received larger loans.
• 300 farmers were trained in sustainable practices. 50 of these were young farmers who were also trained trained in farmer support services, suchas transplanting, spraying, spacing, seedling management and fertiliserapplication, to assist farmers.