Financial viability of groundwater irrigation and its impact on livelihoods of smallholder farmers: The case of eastern Ethiopia

This paper examines the economics of groundwater irrigation and its impact on livelihood of smallholder farmers in Eastern Ethiopia. The results indicate that groundwater technologies are financially viable at 8, 12.25 and 16.5 percent discount rates. The net present value of these technologies is still viable under partial and full cost recovery regimes. Small-scale groundwater irrigation with boreholes provides a good option for poor households, bringing about significant positive impact in consumption expenditure. Groundwater, if adequately harvested, has a significant positive impact on the improvement of livelihoods of smallholding farmers; it is advantageous for the society if government and nongovernmental agencies are engaged in the expansion of deep groundwater wells on a sustainable basis. It is also vital to think of institutionalizing a cost recovery scheme to ensure water use efficiency and to sustain the future investments in irrigation, especially in developing groundwater resources.