CONCLUSIONS AND POLICY IMPLICATIONS 63
savannah zone, however, income for nonbeneficiaries in Fadama II increased significantly due to spillover effects. Such spillover suggests greater returns to public investment. These effects are also inevitable for public investments that are hard to limit to program participants. Spillover implies free riding, and it compromises the incentives for beneficiaries to pay matching funds. Mechanisms for introducing user fees for rural roads and for other CDD public investments in which beneficiaries paid matching funds should be explored. The impact of Fadama II on productive asset acquisition is large and statis- tically significant across all agroecological zones, asset terciles, and genders. However, the change in the value of productive assets caused by participa- tion in Fadama II was larger and more significant for group-owned productive assets. The dramatic increase in the value of productive assets resulting from participation in the project was mainly caused by the cash transfer from the 70 percent matching funds that the project provides to FUGs. The large cash transfers used to implement this project raises the important question of whether this success story can be replicated in other states. Three major issues that need to be addressed in scaling up this success story are better targeting of poor and vulnerable groups, finding sustainable methods for promoting development of rural financial services, and increas- ing the capacity of fadama resource users to manage productive assets efficiently. These three issues are interrelated and therefore need to be considered simultaneously.
Over the first year that the project operated, the coefficient of variation of beneficiary incomes decreased by 55 percent, whereas that of nonbenefi- ciaries increased, suggesting that the project contributed to the reduction of income inequalities. But calculation of this coefficient did not control for other factors that could also affect improvement in income distribution. Additionally, the impact of Fadama II on incomes of households in the poorest tercile and on female-headed households was not significant. Hence there is weak evidence that Fadama II improved income distribution. Addressing the low capacity of the poor and vulnerable to manage pro- ductive assets efficiently calls for increased training and development of complementary services, such as advisory services. One of the components of Fadama II was provision of demand-driven advisory services. The project increased the demand for postharvest handling technologies but did not have a significant impact on the demand for financial management and market- ing information (although it did increase adoption of these technologies). Fadama II reduced the demand for soil fertility management technologies, but it increased their adoption, suggesting that the program supplied them or created conditions that led farmers to adopt them. The low demand for soil
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