While agriculture is central to Nepal’s economy with more than 60 percent engaged in farming, it is still not able to produce enough to support its population.

Food insecurity is a major issue in Nepal and this is evident in the agricultural imports that have increased six folds in the last decade from Rs 44.4 billion (USD 0.38 billion)1 to Rs 250 billion (USD 2.1 billion) in 20202.

Multiple factors contribute to low agricultural productivity in Nepal. Most farmers own small plots of land and grow subsistence crops using traditional farming methods. Difficult terrain, especially in the hilly and mountainous region, make it more problematic for farmers to access water for irrigation year-round. Erratic rainfall and climate variability are also putting pressure on water resources and impacting agricultural productivity. Limited access to finance for purchasing high-quality agricultural inputs also leads to low agricultural yields.

To address the issues of scant technology, inputs, poor market facilities, and services for farmers that increase the cost of productivity in Nepal, UNCDF partnered with SunFarmer for an innovative agribusiness solution. This partnership primarily focused on supporting smallholder farmers at all levels of the value chain with digital solutions and payment for agricultural inputs, logistics and sales, and pay-as-you-go irrigation solution as one of the core components of the value chain.

A model farm to transfer technologies

A one-acre model farm was established in Thaha municipality 30 km away from Kathmandu to develop, refine and transfer agricultural solutions-driven by digital innovation. SunFarmer introduced a solar water pump for irrigation on a pay-as-you-go (PAYGO) basis making it easier for smallholder farmers to access water year-round. However, paying regular small installments for the pump, became difficult and impractical for the farmers who had to commute long distances to get to the closest bank located miles away. This is where UNCDF helped SunFarmer leverage digital payment services which allowed farmers to directly pay SunFarmer from their mobile wallet. In absence of a cash management system, SunFarmer easily collected their payments and digitalization also increased the scalability of this model.

In addition to pay-as-you-go solar solution for irrigation, smallholder farmers are trained in high-value crop cultivation (tomatoes, broccoli, cucumber, bell pepper, etc.), tunnel farming for growing off-season vegetables, and given quality agricultural inputs (seeds and fertilizers). These agricultural solutions provided twice the output than what farmers were growing before.

Farmers get profit for their yields easily as SunFarmer helps to sell their produce to various markets and transfers the sales amount directly to their wallet. Farmers also get agro advisory services from SunFarmer on social media and other digital channels, including a mobile app, on weeds management, diseases, cropping patterns, etc.

Expanding the scope to drinking water

Post-April 2015 earthquake and subsequent aftershocks, villages across Nepal experienced a shortage of water. Existing water supply infrastructures were damaged, and the earthquake severely impacted natural spring sources. In Majhigau, the only natural water source for drinking water dried out. The villagers then traveled 20 to 25 minutes uphill each time to bring water for their family and livestock. To tackle the water shortage, the community collected funds to purchase an electric water pump. However, constant load shedding and the high cost of maintenance and electric bills made the pump unsustainable and expensive.

With the support from UNCDF and SunFarmer, a solar water pump for drinking water was set up in Majhigau on a community-based PAYGO scheme. The PAYGO financing allowed the community to pay for the solar pump in small monthly installments over a period of three to four years – enabling the community to afford the solar pump and easily access clean drinking water. Community members formed a ‘water-users committee’ responsible to collect the installment amount from the villagers each month and deposit it in a micro-cooperative in their village. The micro-cooperative then digitally transfers the amount to SunFarmer. Today the community has finally purchased the solar water system.

All 125 households enjoy a tap in their house and have access to clean drinking water. Families save up to three hours a day solely because they do not hike multiple times in a day to collect water. The water user’s committee has now made enough savings to hire two personnel for maintenance of the system. The committee also supports households that are unable to pay installments through their savings.

Impact and way forward

Innovative models in agriculture such as the one developed with Sunfarmer in Chitlang is transforming the lives of farmers and enhancing their livelihoods through the use of digital financial services. PAYGO is proving to be an effective model for not only providing necessary services/products but also finance to rural consumers.

The community-based PAYGO model for solar pump is a success and suitable for Nepal given the local context where most water schemes are operated and managed by water users committees. This dynamic should be considered while structuring new PAYGO products, particularly as it will help expand the reach and reduce the risk premium for providers.

For farmers, digital payments will make it easier to access a range of other services like credit, insurance, and so on that builds on their payments record in the long run.

These models were refined through UNCDF partnerships in Chitlang and are now being expanded by SunFarmer into other districts like Saptari, Dhading, and Makwanpur, proving to be scalable and sustainable. Such technology-driven models in agriculture are increasing access to energy, water, as well as finance in rural Nepal.

Watch our video on Smart Agricultural Solutions for Smallholder Farmers.