Income diversification through improved irrigation in Ethiopia: impacts, constraints and prospects for poverty reduction

Abstract

This Working Paper is based on research conducted in three sites in GoroGutu woreda, East Harerghe Zone, Oromia Regional State, Ethiopia, from January to May 2009. The research examined the potential for irrigation to increase household resilience and contribute to poverty reduction and pro-poor growth through enabling households to diversify incomes – both commercial crop production and new forms of non-farm income generation. Previous studies have found strong links between irrigation, agricultural productivity and poverty levels, reflecting both direct and indirect effects. Irrigation leads to increases in yields and farm income which can buffer irrigators against risks in their livelihood. However, the feedback mechanisms and indirect effects that link irrigation and poverty reduction are less clear. These include the potential for reinvestment in farming or other income-generating activities, as well as effects on local food and labour markets which also affect surrounding communities and non irrigating households. Second-order impacts occur if irrigation areas become ‘nuclei of growth’ which attract investments in other infrastructure and services. Irrigation may have positive or negative effects on inequality; drivers of inequality in the benefits gained from irrigation include distance from the irrigation source and disparities in landholding size and education. Income diversification is the process by which households widen their income base by adopting new economic activities. For rural agricultural households, this includes: agricultural diversification (producing a wider variety of crops or livestock or their products); diversification from subsistence into commercial activities; and diversification from agriculture into nonfarm activities. Income diversification may be driven by the desire to increase income in order to become more food secure, upgrade housing, educate children, accumulate assets or otherwise improve the household’s standard of living (pull factors). In the most successful cases, income diversification creates an upward spiral of increased household incomes and reinvestment in higher value activities. Such a spiral would be growth-promoting and poverty-reducing. In contrast, income diversification may occur as a survival response to severe shocks and stresses – for example when members of poor farming households are forced to migrate in search of wage labour or sell assets because their crops fail or they face a sudden need for extra income (push factors). Small-scale irrigation is a policy priority in Ethiopia for the alleviation of rural food insecurity and poverty. Income diversification is proposed as a climate adaptation strategy in Ethiopia’s NAPA (National Adaptation Programme of Action).