Financial viability of groundwater use for irrigation by smallholder farmers in the Usangu plains, Tanzania

MSc. Dissertation 2018

Groundwater (GW) use for irrigation by smallholder farmers has been proposed as a solution to increasing water scarcity in the Usangu Plains, Tanzania. This study evaluated the financial viability of utilising GW for irrigation by smallholder farmers in the plains. Specifically, the study analysed the costs and benefits of using GW for small scale irrigation, examined the socio-economic factors influencing the use of GW for irigation, and assessed the financial affordability of smallholder farmers to invest in GW irrigation. Primary data were collected using a semi-structured questionnaire which was administered to a random sample of 97 households in three villages, while data from key informants were gathered using a checklist. Secondary data from various sources were used to supplement the primary data. Discounted cash flow, descriptive statistics, and logistic regression were used to analyse data. Key findings show that, investment in GW for irrigation is economically viable at a discounting rate of 12% and had a Net Present Value of TZS 38 636 794, Cost Benefit Ratio of 6.55, and Internal Rate of Return was 81%. Socio-economic factors namely household size was statistical significance (P<0.05) while gender, income and membership in socio networks although were not significant had a positive association with GWI. High initial investment cost relative to farmer’s income level was revealed. Conclusively, investment in GWI by smallholder farmer is financially viable and household income level was found to be a constraint to GWI development. The study suggest that, government and development agencies should participate in GWI investment such as through subsidisation and tax exemption of GWI devices. Further market for agricultural goods should be improved in order to increase on farm production efficiency which presents opportunities for increasing income and hence farmers’ capacity to initial investment costs.