The project will reduce the market and business risks faced by small and medium farmers diversifying into high value commodities in 10 districts of the Mid-West (MWDR) and Far-West (FWDR) Development Regions of Nepal. These two regions have the lowest human development indices within Nepal due to limited investment in access to services, physical, social and economic infrastructure. Poverty incidence is, on the average, high for both regions; within regions, the hill areas suffer higher rates of poverty where up to 70% of households fall below the poverty line. Small farmer incomes are limited by (i) low returns from traditional agricultural commodities, (ii) small and declining farm sizes with low productivity, and (iii) a supply-driven production system that has not captured potential market benefits for high value commodities (HVC). The project will assist small and medium sized farmers to diversify into HVC by establishing market linkages; providing capital for inputs and improved technology; and for building post harvest value chain infrastructure including storage, packaging, grading, and processing. Project grants will be provided to (i) small and medium farmers that are members of existing farmer groups or cooperatives with established market supply agreements for initial inputs and farm technology, and (ii) post harvest enterprises for the development of value chain infrastructure to support the market supply agreements. The Project will outsource service delivery to nongovernment organizations (NGOs) and the private sector for farmer mobilization, training, production, and business planning and for feasibility studies to access project funding.

The Project contributes to the ADB level one results framework through increasing rural income, reducing poverty and increasing food security in Nepal (ADB Target 17.14% of the Asia Pacific population living on less than $1 per day by 2015) � for the project, more than 95,000 individuals will move above this threshold. The level 2 country outcome performance targets are addressed through the provision of Project grants to small and medium sized enterprises (including farmer cooperatives) with the project supporting an estimated 220 enterprises and 890 farmer groups within the ADB performance target of 54,000 enterprise accounts supported. The Project contribution to the ADB level 3 operational targets is through the development of the private sector in the poorer parts of rural Nepal (ADB performance target of 30% of projects with private sector involvement) and gender mainstreaming (ADB performance target of 40% of projects with gender mainstreaming). The implementation modality builds strong partnerships with NGOs for which ADB performance target is for NGO inclusion within 80% of Projects.