Programme description

Title: Umbrella Programme on Natural Resource Management
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: India
Lead executing agency: National Bank for Agriculture and Rural Partner Development (NABARD)
Overall term: 2008 to 2013

Context

Despite India's recent high economic growth rate, around 350 million of its more than a billion people still live on less than one dollar a day. Of these, 75% live in rural areas and are primarily dependent on agriculture and natural resources for their subsistence. Unfortunately, as the National Environment Policy of the Government of India states, 'environmental degradation is a major causal factor in enhancing and perpetuating poverty, particularly among the rural poor.'

To address the mutually reinforcing problems of depleted natural resources and declining livelihood opportunities, the Indian Government says it needs to invest more than EUR 11 billion annually in the natural resource sector until 2022. However, at just EUR 1 billion per year, public investment, which mainly consists of government grants, currently falls well short of the required amount.

To increase agricultural productivity without depleting the natural resource base, and to create employment, generate income and reduce poverty, it is essential to promote greater dynamism and sustainable private investment in rural areas. Public spending on grants for natural resource management does not promote entrepreneurship, generate employment or involve the local communities directly as stakeholders; it therefore fails to ensure the sustainability of natural resources or investments.

Objective

The effectiveness of selected public and private investment programmes in the field of natural resource conservation and management has been enhanced.

Approach

The Umbrella Programme on Natural Resource Management (UPNRM) is being jointly implemented by the National Bank for Agriculture and Rural Development (NABARD), KfW Entwicklungsbank and GIZ. Its purpose is to promote environmentally sustainable growth by encouraging private investments that benefit the poor. In terms of rural natural resource management, this represents a shift away from a purely grant-oriented approach to the more effective and sustainable involvement of the private sector. To this end, the programme has developed a two-pronged strategy:

1. Loans: Financial support is provided in the form of loans to producer organisations, NGOs, corporations, rural banks and local governments. Unlike grants, loans require a return on investments and can prompt the emergence of growth through community-based enterprises.
   
   The programme is developing new loan-based financial products that combine loans and grants to support pro-poor and community-oriented projects. These should generate income for the project participants, while ensuring that natural resources are used sustainably. By helping to develop, promote and demonstrate successful approaches in which loans have encouraged sustainable forms of income generation, the programme is contributing to a gradual shift from grant-based to loan-based natural resources management projects. The average size of the loans is much bigger than is typical for microfinance. They are specifically aimed at developing rural businesses.
   
   
2. Public-private partnerships (PPPs): to attract sustainable private investment, new forms of collaboration between the public sector, the corporate sector and civil society have to be explored and developed. PPP approaches are still underdeveloped and underutilised in the natural resources sector, particularly in rural areas.
   
   UPNRM plans to develop and test frameworks and models for partnerships geared towards the sustainable use of natural resources. These will involve rural producer organisations, the private sector, NGOs and public sector agencies, including NABARD. The partnerships will serve the purpose of linking rural producers to the overall value chain, developing rural infrastructure, such as water purification plants, and delivering market-oriented services for the rural community. Once these models have been tested and successfully implemented, NABARD will then support public sector agencies to foster similar partnerships with larger corporations.

Results achieved so far

In the first two years of the programme, NABARD sanctioned investments of over EUR 19 million in 50 projects in 11 states and one union territory. Only around five per cent of the total amount was allocated as grants, which were primarily used for capacity development. This move from grants to loans has demonstrated the economic viability of such activities. It ensures their sustainability and clearly shows that people are ready to take out loans to invest in activities that involve the sustainable management of natural resources.