Assessment of Economic Diversification Component

The economic diversification component Sida-Amhara Rural Development Programme, SARDP III aims at adding value to farm produce/product and for developing off-farm and non-farm activities of farmers attempting to supplement their household farming income. It does this mainly through the implementation of the enterprise development facility offering micro to large loans through MFIs and Savings and Credit Unions (secondary cooperatives). This activity is undertaken through a structure of government-employed facilitators, private business development service providers and government micro- and small-enterprise desks at woreda levels, and is facilitated through local financial intermediaries. Additional programme component activities include organisational development and networking enhancement, strengthening of rural-urban linkages and mainstreaming of pro-poor approaches by focusing on crosscutting issues in the support to women, vulnerable households and environmental awareness.

The assessment found that the targeting of the enterprise development facility favoured urban development over agricultural and rural development and therefore did not sufficiently focus on adding value to farm product/produce or through non-farm and off-farm activities. It was also found that terms and conditions applied conferred competitive advantage on the local microfinance organisation over savings and credit unions. Further, lending by MFIs and SACUs were not required to be revolving, which caused funds to leak out of the programme’s areas. The economic diversification component itself had limited success in encouraging investment in the latent livestock industry and in wool and meat production.