Smallholder farmers’ willingness to pay for irrigation water: Insights from Eritrea

Abstract

The role of irrigation water pricing as a signal for scarcity and opportunity cost of water, and financing tool for irrigation developments has been strongly upheld. While the ability and willingness to pay (WTP) of smallholder farmers for irrigation water could profoundly determine sustainability of irrigation projects, little empirical evidence exists about the consequences of irrigation water pricing based on direct survey of smallholder farmers’ WTP particularly from drier regions of the globe such as the Sahel. Here, we economically evaluate the consequences of irrigation water pricing through a direct survey of farmers’ WTP and the factors that affect farmers’ WTP for irrigation supply improvements. We collected unique data through a double-bound dichotomous-choice contingent valuation survey of smallholder irrigation farmers in Eritrea. Eritrea has set pricing guidelines designed to reflect irrigation water as an economic good, while the entire country is being swallowed by the ever-expanding Sahara desert as well as being home to globally the poorest smallholder farmers. Bivariate probit and logistic regression models were employed for data analysis and revealed: (1) some 54% of the farmers perceived water as an economic good; (2) about 76% of the farmers were willing to pay the initial offered bid for irrigation water; and (3) the average WTP of farmers was about 5% of average farm income. Our results further indicated that initial bid, land tenure security, age of a farmer, households’ income from irrigation farming and source of water being used are all significant determinants of farmers’ WTP for irrigation water supply improvement. Overall, our findings provide evidence that smallholder farmers are willing to pay for increased volumes of water for irrigation purposes and suggest that public-private partnerships for the storage and delivery of water for irrigation could be economically feasible, even in poor countries such as Eritrea.