Development organizations are asking where, when,
and how much to invest in order to maximize their impact. Social return on investment
is an attempt that values social benefit relative to the resources invested.
This paper introduces a calculator that computes three measures namely
discounted present value (DPV), net present value (NPV), and benefit cost ratio
(BCR). Piloted in a food security project, the calculator measures the value of
production through irrigation schemes. Two assumptions were made to estimate
the measures: first, a discount rate of 10% per year and second, five years of
benefit duration for irrigation canal improvement.
Eight clusters located in five village development
committees in two districts of Baitadi and Doti were selected. 40 households,
five from each cluster selected using a random sampling technique, were
surveyed in June 2012. Irrigation schemes with the project cost of US$ 13.9
thousand out of a total of US$ 16.9 thousand increased production from 32
hectares of land in the entire clusters under pilot. To estimate the monetary
value of the benefits in the clusters, the findings from 40 sampled household
respondents were used. The survey data revealed an overall increase of 24% in
the total production of paddy, wheat, maize, potato, lentil and soybean after
intervention. With the increasing market price of commodities, the value of
production increased by 45% per year. Given 32 hectares of land irrigated, the
DPV and NPV were estimated at US$ 0.45 million and US$ 0.43 million
respectively. Given the project cost, the benefit cost ratio was 32, suggesting
that the benefit from the irrigation improvement was 32 times greater than the
investment over five years. Thus, it was concluded that the irrigation canal
improvement was positive investment in the targeted communities.
High BCR poses whether
irrigation scheme alone is attributed to the increased production of crops.
There were several other interventions undertaken in the communities in order
to improve the agricultural productivity, which were not accounted. Thus, the
future studies need to consider the project logic and also the costs of other
interventions that are intended to improve crop, for estimating the more realistic
returns. Besides, it will be worth considering more measures highlighting
different aspects of an investment, such as an Internal Rate of Return (IRR),
to the calculators in order to illustrate a more nuanced picture of the
investment.
