Umbrella Programme for Natural Resource Management

Programme description

Title: Umbrella Programme for 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 2015

Context
Despite India’s rapid economic growth, nearly 354 million of its 1.2 billion population continue to live on less than one dollar per day. Of these, 78 per cent live in rural areas and depend primarily on agriculture and natural resources for their livelihoods.

The Government of India’s National Environment Policy states that 'environmental degradation is a major causal factor in enhancing and perpetuating poverty, particularly among the rural poor.' To address this problem, the Indian Government says it needs to invest more than EUR 11 billion annually in the natural resource sector until 2022. However, public investment currently stands at just EUR 1 billion per year, provided mainly through grants. Public spending on grants alone is not enough to encourage entrepreneurship in rural areas, generate employment opportunities or encourage local communities to get involved as stakeholders. Instead, using loans and private investments to leverage public funding is a viable solution to increase investment in rural areas.

Objective
Business models have been introduced in rural areas to reduce poverty by creating livelihood opportunities, increasing farm incomes, strengthening agricultural value chains and conserving natural resources.

Approach
The National Bank for Agriculture and Rural Development (NABARD), KfW development bank and GIZ are collectively implementing the Umbrella Programme for Natural Resource Management (UPNRM), the aim of which is to promote environmentally sustainable growth by encouraging private investments that are pro-poor. This represents a paradigm shift as the programme moves away from purely grant-based funding to a greater reliance on loans. This increases the leverage and outreach of investments in rural areas, creating income based on sound business models that ensure the sustainability of natural resources. The programme pursues a two-pronged strategy.

  1. Loans tied to capacity building elements
    The programme is developing new loan-based financial products that combine loans with small-scale grants that respond to needs and support pro-poor and community-oriented projects. NABARD provides loans to NGOs, producer organisations, cooperatives and banks. Unlike grants, loans require a return on investments. The loans must generate an income for the project participants, who pursue an appropriate business plan to ensure their repayment as well as the sustainable use of natural resources.
    At around six per cent of the total investment, the grant is mainly intended to fund capacity building measures for implementing agencies and the project participants. By demonstrating successful loan-based approaches, the programme encourages sustainable income generating activities.
  2. Development partnerships with the private sector
    UPNRM is working to identify new synergies between the public and private sectors, including corporates and civil society in order to attract sustainable private investments.
    In India, the concept of public-private partnerships is best known for large-scale infrastructure investment programmes. Applying the approach with the farming community in rural areas is a new step that presents challenges. The programme is devising and testing forms of partnership that will facilitate convergence through business operations linked to the sustainable use of natural resources. These will involve rural producer organisations, the private sector, non-governmental organisations, community-based organisations and public agencies. The partnerships will connect rural producers to the overall value chain, improve rural infrastructure such as water purification plants, and deliver market-oriented services to the rural community.

Results
By January 2015, NABARD had supported more than 250 projects with investments totalling EUR 61 million, in 21 states and one union territory. Only six per cent was allocated as grants, which were primarily used for capacity development. Since its inception in 2007, the programme’s portfolio has expanded rapidly, ensuring the provision of livelihood opportunities to India’s rural poor and benefiting more than 300,000 people.

NABARD recently initiated a collaboration between UPNRM and commercial banks in order to encourage further dissemination of the loan approach. The programme ultimately hopes to achieve one loan project per village. In view of India’s size, this would mean around 600,000 loan projects.

Contact

Sabine Preuss
sabine.preuss@giz.de