Social Return on Investment in Trail and Irrigation Canal Improvements in Far-western Hills of Nepal. June 2012

Transcription

1 Social Return on Investment in Trail and Irrigation Canal Improvements in Far-western Hills of Nepal June 2012 Contributors: Amanda Bittaker, Vassiliki Lembesis, Basan Shrestha and Sushil Raj Ghimire 1 We are grateful to Sanju Joshi for her help in building the SROI calculator; Josh DeWald, Jarrod Fath, Joe Dickman and Sanjay Karki who commented on the early versions of the calculator; and the beneficiaries and participants who gave their time to help with the pilot. 2 1 Assistant Finance Officer, Mercy Corps U.S. Headquarters; Director of Programs, Mercy Corps Nepal (MC-N); Design, Monitoring and Evaluation (DM&E) Manager, MC-N; and Project Manager, SNAP Project, MC-N. 2 DM&E Manager (former), MC-N; Regional Program Director - South & Central Asia Mercy Corps; DM&E Manager (former), MC-N; Deputy Director (DM&E), Mercy Corps U.K. Headquarters; and Country Director, MC-N.

2 Contents EXECUTIVE SUMMARY INTRODUCTION THEORY MODEL Design Characteristics Implications DATA RESULTS Trail Improvement Irrigation Improvement CONCLUSION BIBLIOGRAPHY ANNEX 1: MAP OF SURVEYED VDCS IN BAITADI AND DOTI ANNEX 2: TRAIL IMPROVEMENT - HOUSEHOLD SURVEY QUESTIONNAIRE ANNEX 3: IRRIGATION CANAL IMPROVEMENT - HOUSEHOLD SURVEY QUESTIONNAIRE ANNEX 4: TABLES ANNEX 5: SROI CALCULATOR-TIME VALUE THROUGH TRAIL IMPROVEMENT ANNEX 6: SROI CALCULATOR-VALUE OF PRODUCTION THROUGH IRRIGATION CANAL P a g e

3 EXECUTIVE SUMMARY Recently, there has been a trend toward development as an investment decision: organizations looking to maximize their impact are asking where, when, and how much to invest in order to do the most good. Social return on investment, SROI, is one attempt at answering these questions. SROI is a method for valuing social benefit relative to the resources invested by monetizing social benefit and applying formulas from traditional financial analysis. This paper introduces two low-resource, field-ready calculators that compute three measures of social return on investment. The first calculator computes the value of time saved through trail improvement; the second measures the value of an increase in production through irrigation schemes. Both use three measures of return on investment: discounted present value (DPV), net present value (NPV), and benefit cost ratio (BCR). We have two assumptions to estimate these measures of return on investment: first, a discount rate of 11% per year considering the current inflation scenario in Nepal and second, four years of benefit duration for trail improvement and six years for irrigation canal improvement. These calculators were piloted on a Mercy Corps project in far-western hills of Nepal, Safety Nets supporting Agricultural Productivity (SNAP), funded by the World Food Program. We selected eight clusters located in seven wards of five village development committees (VDCs) in two districts of Baitadi and Doti that had both trail and irrigation canal schemes. 40 households, five from each cluster selected using a random sampling technique, were surveyed for both trail and irrigation improvements in June The trail survey focused on respondent households travel patterns before and after the improvement, in particular, frequency, time, and reason for travel. It asked supplemental questions about demographics and what beneficiaries did with the time they saved. The irrigation survey focused on respondent households area and yield of each crop grown before and after the irrigation improvement and the market price for each. The project supported trail and irrigation canal improvements worth of 949,953 NPR and 1,015,535 NPR respectively, attributed solely to Mercy Corps intervention in eight clusters located in seven wards under study. Trail improvement saved travel time of 2,062 working people and irrigation schemes increased production from 639 ropanis 3 of land in the entire clusters under pilot. To estimate the monetary value of the benefits in the clusters under pilot, the findings from 40 sampled household respondents were used. The trail improvement survey data shows an increase in trips taken, and enough of a reduction in time per trip (28%) that overall time spent traveling is reduced. While the time saved for each trip is small, so many people use the trail so often that the overall time savings are substantial. Considering all 2,062 working people in seven wards under this pilot to benefit, we find that the present value (PV) of the trail is 6,441,875 Nepalese rupees 4 (NPR). This is the present value of 41,031 days per year saved from 2,062 working people who could earn 157 NPR per day. Assuming the horizon of four years and a discount 3 1 hectare = ropani ( 4 1 USD = NPR, June 2012 ( 3 P a g e

4 rate of 11% per annum, the DPV is 22,183,980 NPR indicating the total present value over four. Deducting the trail improvement cost 949,953 NPR from DPV, the NPV is 21,234,027 NPR. The benefit cost ratio of the trail in years is 22.35, suggesting the total benefit was 22 times the cost over four years. The irrigation canal improvement survey data reveals an overall increase of 24% in the total production of maize, rice, wheat, potato, lentil and soybean after intervention. Given 639 ropanis of land irrigated under this pilot, we find that the total increase in value of production is 10,711,589 NRP per year. Assuming a horizon of six years and a discount rate of 11% per annum the DPV is 50,300,519 NPR indicating the total present value over six years. Upon deducting the irrigation improvement cost of 1,015,535 NPR from DPV, the NPV is 49,284,984 NPR. The benefit cost ratio of irrigation improvement is 49.5, suggesting that for this investment in irrigation improvement, the total gain is 49 times the investment over six years. Thus, we can conclude that both the trail and irrigation canal improvements were positive investments in terms of benefit to the targeted communities. In all, we believe this calculator piloted on the SNAP project demonstrates that, while care must be taken with the amount of data collection necessary, easy to use and field ready SROI calculators are a useful tool in assessing the impact of a program. The economic returns on investment from both schemes although seemed quite high in comparison to similar studies, they could decrease had we considered the total cost of the schemes including project cost and community contribution. In this valuation we used only the project cost as the total cost of intervention, as we did not have the details of the community contribution. In practice the SNAP project had realized that in many instances community people contributed more labor for the schemes than they were paid for. Thus, it is a learning that project needs to maintain the total cost of scheme including both project cost and community contribution. Likewise, both project and community costs need to be considered for the monetary valuation of the returns from the schemes on the investment. The schemes that have low community contribution to the total cost will be less likely to sustain although the schemes show high return on investment. The higher level of benefit as revealed by BCR from investment in irrigation canal than in trail improvement in the same households under pilot could pose whether there was some linkage between those interventions. It was likely that the travel time saved through trail improvement could have also been used for agriculture improvement. This additional effort by the farmers and irrigation facilities could have contributed to higher level of benefit as revealed by higher BCR in case of irrigation canal improvement. Although the SROI was not designed to explore and establish the linkage between trail and irrigation canal improvements, future studies could better examine this issue and establish a linkage. 1 INTRODUCTION Development organizations, from donors to practitioners, have long sought a standardized way to illustrate the value of programs. Such a method could be used to evaluate programs and make strategic planning decisions. Recently, there is a trend toward development as an investment decision: organizations looking to maximize their impact are asking where, when, and how much to invest in 4 P a g e

5 order to do the most benefit. If we could develop objective measures of benefits achieved, results could be used to increase the effectiveness of project evaluations, organizational learning, strategic decisionmaking and project design. Social return on investment, SROI, is one attempt at creating such objective measures. SROI is a method for valuing social benefit relative to the resources invested by monetizing social benefit and applying formulas from traditional financial analysis. It can be used by any organization or business interested in its social impact to evaluate the strengths of its investments in social good. SROI was first formalized in the early 1990s by REDF, a United States venture philanthropy organization giving grants to social enterprises (see REDF, 2000). REDF monetized the value of employing people who would not otherwise be employed to assess the amount of benefit each of the grantees achieved. Many foundations have since used some variation on this theme of social good transformed into monetary value to track their portfolios and compare programs (see Bill and Melinda Gates Foundation, 2008; William and Flora Hewlett Foundation, 2008; Weinstein, 2009). The Gates Foundation has gathered and documented these measures (see Tuan, 2008). Currently, there is a burgeoning field of networks, specialists, and consultants who champion SROI as an impact evaluation and decision-making tool. Several organizations have tried to systematize SROI, although the practice and calculations remain far from standardized. This paper aims to contribute to this body of work by introducing two low-resource, field-ready calculators that compute three measures of social return on investment. The first calculator computes the value of time saved through trail improvement; the second measures the value of an increase in production through irrigation schemes. Both use three measures of return on investment: discounted present value (DPV), net present value (NPV), and benefit cost ratio (BCR). These calculators were piloted on a Mercy Corps project in far-western hills of Nepal, funded by the World Food Program, titled Safety Nets supporting Agricultural Productivity (SNAP). Building on Mercy Corps food security related interventions in Nepal, the SNAP project was designed around three major areas of intervention: Cash for Work (CfW); improved agriculture productivity; and nutrition and hygiene behavioral change. The CfW component of the project had dual objectives: inject cash in highly food insecure households 5 in the form of wage money to improve short-term household income; and build infrastructures critical for long-term food security improvement. Schemes considered by the project included irrigation Photo 1: Community members constructing irrigation canal (source: SNAP project record) 5 Nepal Population Census 2011 defines household as a group of people who normally live together and share a common kitchen ( This study follows the same definition. 5 P a g e

6 canal, irrigation pond, trail, road, vegetable collection center, for example. In the context of this project, irrigation schemes are vital in improving the production of crops and thereby household nutrition and income levels; whereas trail schemes facilitate access to markets for the sale of crops produced. We found that both the values of time and production calculators fulfilled their purpose: they are simple to use and give a clear picture of the investment. While trail improvement showed only a modest savings in time per trip, because the trail is used more frequently by a large number of people, it proved to be a strong investment. Irrigation canal improvement showed an increase of 45% in the value of major crops production and thus proved worthy of investment. The remainder of this paper is organized as followed: the second section illustrates the theory of SROI and the third describes the formulas and methods used in the calculators. The fourth section introduces the data and the fifth section presents the results. The final section has concluding observations and discusses some ideas for further research. 2 THEORY SROI takes return on investment measures developed in financial analysis and applies them to social impact. It incorporates a wider concept of value, enabling one to include environmental and social benefit in calculations of value to determine the strength of an investment. To perform calculations with these diverse benefits, we can use money as the measurement unit. Since we can construct shadow prices for many of the values we try to measure, money is a convenient measurement unit. Of course, not every social value can be captured or monetized. We discuss the limits of our calculators more in the following section. The calculators used here include three measures of SROI: discounted present value (DPV), net present value (NPV), and a benefit cost ratio (BCR). DPV is the total monetary value of improvement generated every year for certain number of years taking into account an annual discount rate. NPV is the net value deducting investment cost from DPV. BCR is the ratio of DPV to the investment cost, over a certain amount of years. These measures are further defined and discussed in section 3.2 Characteristics below. Like calculations in a stock report, different measures highlight different strengths or weaknesses of an investment. Thus, the calculators use three measures to offer a broader illustration of the investment. We chose DPV, NPV, and BCR in particular because these three measures cover key investment information such as value of time saved and change in value of production, that are straightforward to construct and understand, and are already commonly used in development literature. 3 MODEL 3.1 Design We chose to monetize the value of time and the value of increase in production as examples of social return on investment. Neither of these measures capture all social benefits derived from an intervention that would require much more in depth and expensive research and analysis. Instead, the 6 P a g e

7 calculators are designed to highlight one aspect of benefit derived from an intervention. For example, we might use this tool to calculate the social benefit from time saved by constructing a well closer to a population center, but would not take into account the social benefit of increased safety for vulnerable populations due to shorter trips to a closer location. The calculators are designed to measure the social benefit of the value of time saved (VT) and the value of an increase in production (VP). If a program introduces new stoves that use less fuel, or a new well that is closer to a population center, the VT calculator calculates how much time was saved by that improvement, and the value of that time saved. The monetized measures represent how much money could have been earned, if the time saved due to an improved community trail had been devoted to income generating activities. Thus, while some beneficiaries choose to devote saved time to activities that do not create income, we take the value of the saved time to be equal to the income that could be generated in that time. The VP calculator computes the value gained from an infrastructure improvement which increases production. Similar to the VP calculator, we assume value gained could be, but does not necessarily have to be, converted to income farmers could consume some of their increased production, or save it for seed stock, and we include that value in our calculations. We account for attribution in each of the calculators. For the VT calculator, we assume the newly introduced tool or technology is distinct from previous tools and the before and after values encompass a short enough time span that the amount of time saved can be fully attributed to the intervention. For the value of increased production, we control for the effect of change in precipitation and temperature on the value of production. Finally, we make two assumptions about the parameters of the model. We assume a discount premium of 1%. There is no standard cost of capital or industry beta for non-profits but, according to Tuan (2008), discount rates of 10% or even higher are used. In the same line, White and Rorick (2010) used 12% discount rate to estimate BCR in a disaster risk reduction project in far-western Nepal. Considering these experiences and the inflation rate close to double digits for Nepal in recent years 6, the discounted rate is assumed to be at 11% per year for this study. In addition, we control for what would have happened without the improvement (sometimes referred to as the deadweight loss) by defining a finite horizon for the benefit of the program. There are variations in terms timeframe of benefit used in these methodologies, Tuan argues, and refers to a case of using 10 years of benefit duration. Given the rapidly changing development environment and uncertainty about future programing or funding, we assume we cannot predict more than 10 years in the future. Thus, the calculators compute the value of the improvements for up to 10 years. White and Rorick considered both four and 10 years to estimate BCR. We estimate, given the population and programming in the far-western hills of Nepal, a similar trail improvement would have happened within four years of benefit duration, and a similar irrigation improvement would have happened within six years P a g e

8 3.2 Characteristics Each calculator is built around three measures of SROI: discounted present value (DPV), net present value (NPV), and a benefit cost ratio (BCR). We use the common formula for each. The DPV is calculated as follows: Eq. 1 Where V t is the value of the improvement in period t, i is the discount rate, and N is the number of periods the benefit continues. The value in each period is discounted by how far in the future it is, and so the discounted present value is the sum of the value over the periods the benefit continues. This describes the total value all direct beneficiaries receive over the life of the improvement. The second measure, NPV is calculated as follows: Eq. 2 Where Rt is the value of the improvement in period t and R 0 is the value in period zero (the year of the investment). This describes the net (DPV - cost) value of the improvement to investors or stakeholders. The higher the NPV, the better the investment. A BCR is a slightly different equation: instead of an amount in currency units, a BCR is a unit-less proportion of benefit over cost: Eq. 3 Where DPV is the discounted present value over N periods and C is the cost in period zero. If the benefit is less than the cost, the ratio is less than 1. For example, a ratio of 2.41 suggests the total benefit was 2.41 times the cost. 3.3 Implications The equations, as constructed, assume all cost is incurred in period zero. Thus, these calculators are appropriate for improvements in which all the costs are up front and there are no operations or maintenance costs. These observations found the basis of our empirical pilot. 4 DATA The data comes from Doti and Baitadi districts in the far-western Region of Nepal, where the first phase (August 2010 to June 2011) of the SNAP project was implemented. We selected Baitadi and Doti out of three districts (including Dadeldhura), as second phase of SNAP project was continued until June 2012 and accordingly project management support was available in only those two districts. We selected eight clusters located in seven wards from five village development committees (VDCs) in two Districts 8 P a g e

9 (two in Baitadi and three in Doti) (See Annex 1 for map of VDCs under study). VDCs and Clusters were selected based on the existence of both project constructed trail and irrigation canal schemes, given that only these two scheme types were considered for the study; number of households in the cluster benefitting from the schemes; walking distance between clusters; and variation in distance from more densely populated population centers. 40 households, five from each cluster selected using a random sampling technique, were surveyed for both trail and irrigation improvements in June Table 1, Annex 4 records the surveyed clusters and number of respondents. The surveys, conducted after the improvements, asked questions about respondent s activities before and after the improvements (Annexes 2 and 3). The trail survey focused on respondent s travel patterns before and after the improvement: frequency, time, and reason for travel. It asked supplemental questions about demographics and what beneficiaries did with the time they saved. The irrigation survey focused on the area and yield of each crop grown before and after the irrigation improvement and the market price for each. We supplement this data with data on population from the Nepal 2011 census and data on cost of improvements from the Mercy Corps project database. First, we present the data on the trail improvement: Table 2, Annex 4 records demographic information for the households surveyed for the trail improvement. Working population (household members able to work 7 ) constitutes 61.3% (168 out of 274). This data, coupled with the census population data, is used to compute entire beneficiaries, i.e. 2,062 working population in seven wards of the studied VDCs 8. Tables 3 and 4, Annex 4 present the number of trips and travel time before and after the trail. The number of trips increased an average of 1 per month, while the travel time per two-way trip decreased by half an hour. Table 5, Annex 4 presents the current value in first of the travel time saved due to trail improvement. Table 6, Annex 4 shows how respondents spent the time saved by the trail improvement. The most cited type was non-productive activities; however, summing the different types of income generating activities yields (service, business, wage labor and home based production) 21 counts of productive labor were cited, which equals 47% of the total responses. Table 7, Annex 4 illustrates the area, production and yield (production per area) of major crops grown before and after the irrigation improvement. Table 8, Annex 4 illustrates average market price and value of production of crops. Both overall production and yield have increased by 24% due to irrigation improvement. Production and yield have improved across all crops. Market price has increased in all but one crop. Overall, the value of production has increased by 45%. Table 9, Annex 4 presents the PV, DPV, cost of intervention, NPV, BCR for first year of benefit and BCR for total duration of intervention specific benefit for both trail and irrigation canal improvements. It was evident that the BCR in first year for irrigation canal improvement (10.55) was higher than that for trail 7 SNAP (2011) defines HH members able to work as people who are above 16 years of age and able to contribute in cash for work intervention. This study follows the same definition. 8 Population census 2011 shows that there are 21,622 people across 45 wards in five studied VDCs (9 wards per VDC. Considering 61.3% people as able to work, there are people capable to work across all those wards. The studied clusters are located in seven wards. Thus, it is estimated that there will be 2,062 working people in seven wards of five VDCs. 9 P a g e

10 improvement (6.78). Although, SROI was not designed to explore and establish a link between trail and irrigation canal improvements and there was no data generated on this line, there could be the linkage between trail and irrigation canal improvement. Perhaps, the time saved from reduced travel time due to trail improvement could have been used for home based production including crop production, which might have also contributed to better crop production and increased value of production. The SROI calculators for each of two interventions were developed in the excel with the grey shaded cells left for entering data. The white cells were fixed with the formulae for auto-calculation. For this document, the SROI calculators were copied from excel and pasted in Annexes 5 and 6. Detailed valuation of measures of return on investment using these calculators are presented under results for each intervention. 5 RESULTS We begin with the questions: were the trail and irrigation improvements strong investments in the social good of the beneficiary communities? The answers to these questions are presented under respective sections below. 5.1 Trail Improvement The project supported trail improvement worth of 949,953 NPR, attributed solely to Mercy Corps intervention in eight clusters located in seven wards of five VDCs under study. It is assumed that 2,062 working people in those wards of four VDCs under study benefit in monetary terms due to reduced travel time through trail improvement. From the survey of 40 households, we find that travelers spent, on average half an hour less per journey from on average 1.79 hours for two way travel before intervention to 1.29 hours after intervention, reducing the travel time by 28% (Table 3, Annex 4). If this applies across all 2,062 working people in seven wards of the selected VDCs, there will be savings of 41,031 days per year due to reduced travel time. This total time saved per year is the number of direct beneficiaries multiplied by the change in travel time (Table 5, Annex 4). Therefore, given a worker could reasonably earn 157 Nepalese rupees (NPR) per day before the trail improvement, the present value of the trail is 6,441,875 NPR in total time saved per year for the entire working people in the studied clusters (2,062 individuals). Even though the time savings for each trip is relatively small (28%), so many people are using the trail so frequently that the small time savings add up to large benefits for a population. Using the present value of the trail above (6,441,875 NPR), given the trail improvement cost 949,953 NPR, and assuming a horizon of four years (that is the number of years until these trails would have been made by someone else), and a discount rate of 11% (an inflation rate of 10% plus a discount premium of 1%), equation 1 gives a DPV of 22,183,980 NPR. Discounted yearly values are: 6,441,875 NPR for first year, 5,803,491 NPR for second year, 5,228,370 for third year and 4,710,243 NPR for fourth year. Equation 2 gives a NPV of 21,234,027 NPR. The large DPV and NPV suggest that the small savings, gained often by many, last long enough to have quite a substantial positive impact on the beneficiary population. Equation 3 yields a ratio of over 10 P a g e

11 4 years, suggests the social good gained was 22 times greater than the cost. BCR for first year is The costs of this improvement are low enough and the gains frequent enough and last enough that the gains are far greater than the cost. In addition, table 5, Annex 4 presents the number of trips before and after the road improvement by gender and type of trip. The number of trips increased (possibly due to the lower time cost of traveling), while the overall amount of time traveled is less. From this, we can infer another one of the things people do with their saved time is take more trips. However, 60% of households reported to have used their saved time for home based non-work or non-economic activities. 38% reported home based production work and wage labor was the least use of saved time (3%) (Table 6, Annex 4). Of the 86 women surveyed who are capable to work, collectively they take an additional 94 journeys per month, mostly for other purposes (i.e. for fodder or for worship ). 82 men, on the other hand, collectively took only 16 more journeys per month, mostly for fodder collection (Table 4, Annex 4). Finally, we consider some effects left unmeasured by the SROI calculator. Any transportation infrastructure that makes mobility easier has effects on the markets it reaches. Barriers to trade are lowered, because it becomes easier to get goods and labor to the places that need it most. While we did not collect data to assess any benefits from lowered barriers to trade, we found wages increased by 14%, four percent more than the inflation rate. This may be an effect of increased opportunities to earn more income due to a greater ability to travel to places that have higher wage rates. Another possible unmeasured effect is increased diversity and social cohesion through the ability to travel farther more frequently. Both males and females traveled to visit family 11% more after the road was built. 5.2 Irrigation Improvement The project supported irrigation canal improvement cost of 1,015,535 NPR, attributed solely to Mercy Corps intervention. The intervention irrigated 639 ropanis of land benefiting benefited 341 farmers in eight clusters of seven wards in five VDCs under study. The survey of 40 farmers reveals that they have increased the total production of maize, rice, wheat, potato, lentil and soybean from 33,736 kg per year to 41,828 (increase in the production by 24%) (Table 7, Annex 4). With the increase of market prices of crops, the value of production of crops from a ropanis of land in a year has increased from 37,136 to 53,899 NPR, resulting in an increase of 16,763 NPR per ropani of land (Table 8, Annex 4). If this applies to all 639 ropanis of land irrigated in the studied clusters, total increase in present value of production from total land will be 10,711,589 NRP per year. Assuming a horizon of six years (that is the number of years until these irrigation canals would have been made by someone else) and a discount rate of 11% per year (an inflation rate of 10% plus a discount premium of 1%), equation 1 gives the DPV of 50,300,519 NPR over six years. It is the present value that is expressed as a sum of increase in value of production for six consecutive years with annual discount rate of 11% (10,711,589 NPR for first year, 9,650,080 NPR for second year, 8,693,766 NPR for third year, 7,832,222 NPR for fourth year, 7,056,055 NPR for fifth year and 6,356,807 NPR for sixth year). 11 P a g e

12 Given the irrigation improvement cost of 1,015,535 NPR, equation 2 gives a NPV of 49,284,984 NPR, calculated based on the DPV deducting the cost of irrigation canal. Equation 3 yields a ratio of 49.5 over six years, calculated based on the DPV divided by the cost of irrigation canal. The BCR for first year is It suggests that the social good gained was 49.5 times greater than the cost. 6 CONCLUSION In conclusion, we set out to find the social benefit derived from two improvements from the SNAP project in far-western hills of Nepal by piloting two SROI calculators computing three measures of SROI: DPV, NPV and BCR. We have assumed a discount rate of 11% per year, and four years of benefit duration for trail improvement and six years for irrigation canal improvement to estimate these measures of return on investment. The project supported trail and irrigation canal improvement worth of 949,953 NPR and 1,015,535 NPR respectively, attributed solely to Mercy Corps intervention in eight clusters located in seven wards of five VDCs of Baitadi and Doti. Trail improvement benefited 2,062 working people by saving their travel time and irrigation schemes increased production from 639 ropanis of land. The findings from 40 sampled household respondents were used for estimating the monetary value of the entire benefits through schemes. The trail improvement data shows an increase in trips taken, but enough of a reduction in time per trip (28%) that overall time spent traveling is reduced. While the time saved for each trip is small, so many people use the trail so often that the overall time savings are substantial. Considering all 2,062 working people in seven wards under pilot to benefit, we find that the PV of the trail is 6,441,875 NPR. Over four years, the DPV is 22,183,980 NPR and the NPV is 21,234,027 NPR. The benefit cost ratio of the trail is Thus, we conclude the trail improvement was a strong investment into the social benefit of the affected communities. Likewise, irrigation canal improvement data shows an overall increase of 24% in the total production of maize, rice, wheat, potato, lentil and soybean after intervention. Considering entire beneficiary farmers in the clusters under pilot, the present increased value of production is estimated at 10,711,589 NRP per year from 639 ropanis of land. Assuming a horizon of six years and a discount rate of 11% per year, the DPV is 50,300,519 NPR and NPV is 49,284,984 NPR. The benefit cost ratio is From this it is concluded that the irrigation canal improvement was a strong investment into the social benefit of the target communities. The economic returns through these schemes although seemed considerably high in comparison to returns estimated by other studies. For example, White and Rorick (2010) calculated the BCR of 1.94 over four years with a discount rate of 12% for the disaster risk reduction intervention undertaken in far-western district of Kailali. They had assumed the project cost to be one sixth of the total cost including community contribution. In case of SNAP project, it was realized that in many instances community people contributed more labor for the schemes than they were paid for. However, in this valuation we used only the project cost as the total cost of intervention, as we did not have the details of the community contribution. Total cost including community contribution and the low attribution of 12 P a g e

13 the project cost to the total cost will substantially reduce NPV and BCR. Thus, it is a learning that project needs to maintain the total cost of scheme including both project cost and community contribution. Likewise, both project and community costs need to be considered for the monetary valuation of the returns from the schemes on the investment. The schemes that have low community contribution to the total cost will be less likely to sustain although the schemes show high return on investment. For future research, we would like to append more measures highlighting different aspects of an investment, such as an Internal Rate of Return (IRR), to the SROI calculators in order to illustrate a more nuanced picture of the investment. Ideally, measures that do not need additional data to calculate could be included, to keep the data collection burden low. We also see potential in developing similar SROI calculators to analyze different types of social benefit: for example, a calculator that estimates the multiplier effect of an investment in economic development or beneficiaries asset bases. In all, we believe this calculator pilot on the SNAP program demonstrates that, while care must be taken with the amount of data collection necessary, easy to use and field ready SROI calculators are a useful tool in assessing the impact of a program. The higher level of benefit as revealed by BCR from investment in irrigation canal than in trail improvement in the same households under pilot could pose whether there was some linkage between those interventions. It was likely that the time saved in travel through trail improvement could have also been used for agriculture improvement. This additional effort by the farmers and irrigation facilities could have contributed to higher level of benefit as revealed by higher BCR in case of irrigation canal improvement. Although the SROI was not designed to explore and establish the linkage between trail and irrigation canal improvements, future studies could better examine this issue and establish a linkage. The DPV, NPV and BCR values depended on the entire beneficiary values, 2,062 working people in trail improvement and 639 ropanis of land in irrigation canal scheme. The more accurate the entire beneficiary values the more accurate will be the values of these measures of return on investment. Thus, the project needs to keep the realistic record of the beneficiaries and benefits reached due to intervention to get more accurate monetary values for justifying the cost efficiency of the intervention. 7 BIBLIOGRAPHY Bill and Melinda Gates Foundation Profiles of Eight Integrated Cost Approaches to Measuring and/or Estimating Social Value Creation. Bill and Melinda Gates Foundation Impact Planning and Improvement. REDF SROI Reports. SNAP (2011). Baseline Survey Report. Safety Nets supporting Agricultural Productivity (SNAP), Mercy Corps Nepal. 13 P a g e

14 Tuan, Melinda Measuring and/or Estimating Social Value Creation: Insights into Eight Integrated Cost Approaches. Bill & Melinda Gates Foundation Impact Planning and Improvement. Weinstein, Michael M Measuring Success: How Robin Hood Estimates the Impact of Grants. Robin Hood Foundation. White, Bo A. and Mary M. Rorick Cost-Benefit Analysis for Community Based Disaster Risk Reduction in Kailali, Nepal. Benefit%20Analysis_Kailali2.pdf. William and Flora Hewlett Foundation Making Every Dollar Count: How Expected Returns Can Transform Philanthropy. William and Flora Hewlett Foundation P a g e

15 8 ANNEX 1: MAP OF SURVEYED VDCS IN BAITADI AND DOTI VDCs in Baitadi VDCs in Doti 15 P a g e

16 9 ANNEX 2: TRAIL IMPROVEMENT - HOUSEHOLD SURVEY QUESTIONNAIRE District: Ward No. VDC Cluster/ Village. Date Name of respondent: Filled in By (Enumerator): 1 Name of household (HH) head 2 Sex of HH head Male (1) Female (2) 3 Caste/ ethnicity Brahman/ Chhetri (1) Adibasi/ Janajati (2) Dalit (3) Madhesi/ Tarai (4) Others (5) 4 Number of HH member (total) Male Female 5 Number of HH members that are able to work Male Female 6 Travel after trail improvement 6.1 Work Please provide information on travel through this trail after improvement for different purposes Name of work place (6.1a): No. of HH member Means of travel (able to work) walk (1)/ cycle(2)/ motorcycle (3)/ per month vehicle (4)/ others (5) (specify) No. of times No. of hours per Male (6.1.1) ( & ) (6.1.5) (6.1.7) Female (6.1.2) ( & ) (6.1.6) (6.1.8) 6.2 Marketing (selling goods to market/ getting goods to home) Name of market place (6.2a): No. of HH member Means of travel (able to work) walk (1)/ cycle(2)/ motorcycle (3)/ per month vehicle (4)/ others (5) (specify) two way travel No. of times No. of hours per Male (6.2.1) ( & ) (6.2.5) (6.2.7) Female (6.2.2) ( & ) (6.2.6) (6.2.8) 6.3 Visiting family members Name of family members place (6.3a): No. of HH member Means of travel (able to work) walk (1)/ cycle(2)/ motorcycle (3)/ per month vehicle (4)/ others (5) (specify) two way travel No. of times No. of hours per Male (6.3.1) ( & ) (6.3.5) (6.3.7) Female (6.3.2) ( & ) (6.3.6) (6.3.8) two way travel 16 P a g e

17 6.4 Other travel 1 (please specify) (6.4a) Name of place for other travel 1 (6.4b): No. of HH member Means of travel No. of times No. of hours per (able to work) walk (1)/ cycle(2)/ motorcycle (3)/ per month vehicle (4)/ others (5) (specify) two way travel Male (6.4.1) ( & ) (6.4.5) (6.4.7) Female (6.4.2) ( & ) (6.4.6) (6.4.8) 6.5 Other travel 2 (please specify) (6.5a) Name of place for other travel 2 (6.4b): No. of HH member Means of travel No. of times No. of hours per (able to work) walk (1)/ cycle(2)/ motorcycle (3)/ per month vehicle (4)/ others (5) (specify) two way travel Male (6.5.1) ( & ) (6.5.5) (6.5.7) Female (6.5.2) ( & ) (6.5.6) (6.5.8) 7 Travel before trail improvement Please provide information on travel through this trail before improvement for different purposes 7.1 Work Name of work place (7.1a) No. of HH member Means of travel No. of times No. of hours per (able to work) walk (1)/ cycle(2)/ motorcycle (3)/ per month vehicle (4)/ others (5) (specify) two way travel Male (7.1.1) ( & ) (7.1.5) (7.1.7) Female (7.1.2) ( & ) (7.1.6) (7.1.8) 7.2 Marketing (selling goods to market/ getting goods to home) Name of market place (7.2a) No. of HH member Means of travel No. of times No. of hours per (able to work) walk (1)/ cycle(2)/ motorcycle (3)/ per month vehicle (4)/ others (5) (specify) two way travel Male (7.2.1) ( & ) (7.2.5) (7.2.7) Female (7.2.2) ( & ) (7.2.6) (7.2.8) 7.3 Visiting family members Name of family members place (7.3a) No. of HH member Means of travel No. of times No. of hours per (able to work) walk (1)/ cycle(2)/ motorcycle (3)/ per month vehicle (4)/ others (5) (specify) two way travel Male (7.3.1) ( & ) (7.3.5) (7.3.7) Female (7.3.2) ( & ) (7.3.6) (7.3.8) 17 P a g e

18 7.4 Other travel 1 (please specify) (7.4a) Name of place for other travel 1 (7.4b) No. of HH member Means of travel (able to work) walk (1)/ cycle(2)/ motorcycle (3)/ per month vehicle (4)/ others (5) (specify) No. of times No. of hours per Male (7.4.1) ( & ) (7.4.5) (7.4.7) Female (7.4.2) ( & ) (7.4.6) (7.4.8) 7.5 Other travel 2 (please specify) (7.5a) Name of place for other travel 2 (7.5b) No. of HH Means of travel member (able to walk (1)/ cycle(2)/ motorcycle (3)/ per month work) vehicle (4)/ others (5) (specify) two way travel No. of times No. of hours per Male (7.5.1) ( & ) (7.5.5) (7.5.7) Female (7.5.2) ( & ) (7.5.6) (7.5.8) 8 How do your household members (able to work) spend their time saved due to reduced travel time? (8.1 to 8.5) two way travel Service (1) Business (2) Wage labor (3) Home based production work (4) Home based non-work (5) Others (6) 9 If wage labor, how many hours does one need to work if hired as a wage labor? 10 How much is the labor wage per day currently (after intervention)? No. of hours per day Male (9.1) Female (9.1) Rupees per day Male (10.1) Female (10.1) 11 How much was the labor wage rate per day before intervention? Male (11.1) Female (11.1) Rupees per day Thank you very much for your participation! 18 P a g e

19 10 ANNEX 3: IRRIGATION CANAL IMPROVEMENT - HOUSEHOLD SURVEY QUESTIONNAIRE District: Ward No. VDC Cluster/ Village. Date Name of respondent: Filled in By (Enumerator): 1 Name of household head 2 Sex of household head 3 Caste/ ethnicity 4 How much land is irrigated by scheme under consideration that is owned and cultivated by the household? 5 How much land is irrigated by the scheme under consideration that is rented- in and cultivated by the household? 6 What are the main agricultural commodities you cultivate after irrigation canal improvement? And how much quantity do you harvest this time? Commodities Maize (6.1) Rice (6.2) Wheat/Barley (6.3) Potato (6.4) Citrus (6.5) Lentils (6.6) Soybean (6.7) Other 1 (6.8) Other 2 (6.9) Other 3 (6.10) 7 What were the main agricultural Commodities commodities you cultivated before irrigation canal improvement? And how Maize (7.1) much quantity did you harvest that Rice (7.2) Wheat/Barley (7.3) time? Potato (7.4) Citrus (7.5) Lentils (7.6) Soybean (7.7) Other 1 (7.8) Other 2 (7.9) Other 3 (7.10) Land (Ropani) Male (1) Female (2) Brahman/ Chhetri (1) Adibasi/ Janajati (2) Dalit (3) Madhesi/ Tarai (4) Others (5) Ropani Ropani Quantity (6.1.1) Kg (6.1.2) (6.2.1) Kg (6.2.2) (6.3.1) Kg (6.3.2) (6.4.1) Kg (6.4.2) (6.4.1) Kg (6.5.2) (6.5.1) Kg (6.6.2) (6.6.1) Kg (6.7.2) (6.7.1) Kg (6.8.2) (6.8.1) Kg (6.8.2) (6.9.1) Kg (6.9.2) (6.10.1) Kg (6.10.2) Land (Ropani) (7.1.1) (7.2.1) (7.3.1) (7.4.1) (7.5.1) (7.6.1) (7.7.1) (7.8.1) (7.9.1) (7.10.1) Quantity Kg (7.1.2) Kg (7.2.2) Kg (7.3.2) Kg (7.4.2) Kg (7.5.2) Kg (7.6.2) Kg (7.7.2) Kg (7.8.2) Kg (7.9.2) Kg (7.10.2) 19 P a g e

20 8 What is the current (after irrigation canal improvement) Commodities market price of different agricultural commodities that you cultivated? Maize Rice Wheat/Barley Potato Citrus Lentils Soybean Other 1 Other 2 Other 3 9 What was the last year (before irrigation canal Commodities improvement) market price of different agricultural commodities that you cultivated? Maize Rice Wheat/Barley Potato Citrus Lentils Soybean Other 1 Other 2 Other 3 Thank you very much for your participation! Price Rs/Kg (8.1) Rs/Kg (8.2) Rs/Kg (8.3) Rs/Kg (8.4) Rs/Kg (8.5) Rs/Kg (8.6) Rs/Kg (8.7) Rs/Kg (8.8) Rs/Kg (8.9) Rs/Kg (8.10) Price Rs/Kg (9.1) Rs/Kg (9.2) Rs/Kg (9.3) Rs/Kg (9.4) Rs/Kg (9.5) Rs/Kg (9.6) Rs/Kg (9.7) Rs/Kg (9.8) Rs/Kg (9.9) Rs/Kg (9.10) 20 P a g e

21 11 ANNEX 4: TABLES Table 1: Sample size (No. of households surveyed in two districts) VDC and Clusters Ward No. Baitadi Doti Total Bijayapur Maharagaun Maharatol Daud Gangkhet Sunda Kalena Warigune Khatiwada Baltha Talladehi Dalit Tole Sunali Grand Total Table 2: Trail respondent demographics Number of HH surveyed: 40 Observations Average Min Max HH members Male Female HH members able to work Male Female Table 3: Travel patterns before & after trail Before Trail After Trail Count Average Count Average Number of trips Male Female Travel Time Male Female : Number of two-way trips recorded per month taken by one person 2: Travel time for one two-way trip 21 P a g e

22 Table 4: Number of trips per month by means of travel Female Male Total Before After Change Before After Change Before After Change Work (12.9) (12.11) 28 Market Family Visit Other Total Times/Week Average per Beneficiary Change % per beneficiary Table 5: Current value of travel time saved in first year Before 1. Number of trip per person per month (from table 3) Number of trip per person per week (SN 1/30 * 7) Travel hour per person per two way trip (from table 3) Hour spent on travel per week Hour spent on travel per year Average number of working hours a day Average number of day spent on travel per person per day Number of direct beneficiaries (2062-estimated number of working people in seven wards of the studied VDCs) 2,062 2, Number of travel days spent by all direct beneficiaries (2,062) 161, , Total time (number of days) saved per year (difference between before and after values in SN 9) 41, Average wage rate per day (NPR) Current value of total travel time saved in first year of benefit (NPR) (SN 10 x 11) 6,441,875 After Table 6: How time saved by trail is spent Type Count Service 3 Business 2 Wage Labor 1 Home based production 15 Home based non production P a g e

23 Table 7: Agricultural production and market price before and after irrigation improvement Crop Before After Difference Area (ropani) Production (Kg) Yield (Kg/ ropani) Area (ropani) Production (Kg) Yield (Kg/ ropani) Area (ropani) Production (Kg) Yield (Kg/ ropani) Maize , , Rice , , Wheat , , Potato , , Lentils Soybean , , Total 33,736 41, Average Percent change 23.98% 24.05% Table 8: Value of production of crops before and after irrigation improvement Crop Before After Difference Average price (Rs/ Kg) Value of production (Rs/ Ropani) (Yield X Price) Average price (Rs/ Kg) Value of production (Rs/ Ropani) (Yield X Price) Average price (Rs/ Kg) Value of production (Rs/ Ropani) (Yield X Price) Maize Rice Wheat Potato Lentil Soybean Total Percent change 45% 23 P a g e

24 Table 9: PV, DPV, NPV and BCR of trail and irrigation canal improvement Trail Irrigation canal Discount rate 11% per year 11% per year Present value (PV) (NPR) 6,441,875 10,711,589 Discounted present value (DPV) (NPR) for four years 22,183,980 Discounted present value (DPV) (NPR) for six years 50,300,519 Value in Year 1 (NPR) 6,441,875 10,711,589 Value in Year 2 (NPR) 5,803,491 9,650,080 Value in Year 3 (NPR) 5,228,370 8,693,766 Value in Year 4 (NPR) 4,710,243 7,832,222 Value in Year 5 (NPR) 7,056,055 Value in Year 6 (NPR) 6,356,807 Cost of intervention (NPR) 949,953 1,015,535 Net present value (NPV) (NPR) 21,234,027 49,284,984 Benefit cost ratio (BCR) in Year Benefit cost ratio (BCR) in Year Benefit cost ratio (BCR) in Year P a g e