Trialling farmer-friendly financing solutions for solar irrigation equipment in Tanzania

With nearly eight hours of sunlight per day on average and accessible water resources, Tanzania’s potential for solar-powered irrigation is huge. Solar-powered irrigation could radically transform the agricultural sector: it can sustainably increase food production, reduce energy costs and fuel-based carbon emissions, boost livelihoods and build farmers’ resilience to climate change. However, for low-income smallholder farmers – who manage 80% of the country’s farmland – the cost of solar irrigation technologies is still too steep. In an effort to overcome this challenge, Energy 4 Impact is collaborating with the Water and Energy 4 Food programme to create new financing mechanisms that can make solar irrigation an affordable and attractive option for Tanzanian farmers.

Joseph Ngubile is a smallholder farmer growing eggplants, cabbages and tomatoes on his 1.5 acre plot in the village of Budalabujiga in the Simiyu region of Tanzania. Until recently, Joseph largely relied on manual irrigation which involved filling up buckets at a nearby river or using a pedal pump and hoses to water his crops. Such a physically exhausting form of irrigation was particularly onerous at peak growing periods, so Joseph would sometimes hire a petrol-fuelled pump – hardly an ideal solution as the high cost of fuel and system rental ate into his profits.

Without consistent access to an efficient form of irrigation, the area he was able to cultivate, and the yield of his harvest was limited. It also rendered Joseph dependent on manpower that was not always readily available, as he explains: "When my wife was sick for several months and could not help me tend our crops, I wasn’t able to water them properly myself. The harvest failed, so our farm brought in no income that season and we struggled to get by over the next three months."

For farmers like Joseph, solar-powered water pumps would be an ideal solution, but the vast majority are not in a position to afford such systems: an upfront deposit of 25-30% for systems that range from USD$650 to USD$3245 (depending on size) might comprise around half their annual income.

Farmers need access to capital to invest in equipment, but Project Manager Fredrick Tunutu explains why financing is also typically out of their reach:
 

Reliant on rudimentary irrigation techniques, small-scale farmers are trapped in a vicious cycle of low productivity and poor profitability.

Through its collaboration with WE4F, Energy 4 Impact has been exploring farmer-friendly financing solutions with finance providers and solar irrigation technology suppliers with a pre-existing footprint in Tanzania. It recently negotiated a deal with pump supplier Simusolar to make their pay-as-you-go models more accessible to low-income farmers.  Once an initial deposit of 25% has been paid, the company offers their pay-as-you-go pumps on credit with a repayment period of up to twenty-two months.

Joseph first became interested in the pay-as-you-go option offered by Simusolar during farmer introduction sessions organised by Energy 4 Impact.  He decided to sell his stock of maize to raise the deposit for the pump in April 2021 and is now paying it off through monthly instalments of USD$21 over twenty-two months. Solar irrigation equipment has allowed Joseph to cut down on manual labour and eradicate fuel expenses, giving him enough confidence in the financial outlook of his farm to lease another plot where he grows tomatoes – a more profitable market than cabbages. In the future he could even generate some extra income by leasing out the system to neighbours.

Other forms of financing which the Energy 4 Impact team has been exploring, for example loans or lines of credit secured through financial institutions under conventional terms, have proven less tenable: the combination of high deposit (30%) and short tenure (six-month repayment period) required by most financial institutions render such loan products inaccessible for farmers. Energy 4 Impact is continuing to negotiate with Vision Fund Micro Finance Bank and Equity Bank to achieve more favourable terms.  

Energy 4 Impact’s support extends beyond the initial acquisition of equipment: through WE4F, farmers such as Joseph are offered agronomic advice on choosing inputs (i.e. seeds, fertilisers, pesticides) and accessing new markets, as well as business training, to ensure their farms are economically viable and profitable. Conversely, as the demand for their equipment continues to grow, collaborating pump suppliers can also reach new customers and develop retail chains for their products in new agricultural districts.

Making affordable and energy-efficient irrigation systems available to farmers in poor and marginalised regions is an indispensable step towards ensuring the resilience of agricultural communities especially vulnerable to the impacts of climate change. Not only does the WE4F project contribute to improving food security in the region, it also helps further government objectives to reduce poverty and enhance economic development for the vast majority of Tanzanians who depend on agriculture for their livelihood.

The Water and Energy 4 Food programme is a joint initiative between the German Federal Ministry for Economic Cooperation and Development (BMZ), the European Union (EU), the Ministry of Foreign Affairs of the Government of the Netherlands, Sweden through the Swedish International Development Cooperation Agency (Sida), and the U.S. Agency for International Development (USAID).