1. Payment for Ecosystem Services promotes watershed management through Payment for Watershed Services. It encourages improved land management practices in upstream areas to enhance the quantity and quality of water downstream. The Nou Forest Reserve in Babati district covers Lake Manyara's headwaters. Its rivers are the primary water source for the area's inhabitants. However, there have been reports of declining water quality and quantity, presenting an opportunity to introduce payment for watershed services for Nou Forest Reserve conservation and management. The present study was conducted to assess the level of awareness among downstream water users about the importance of watersheds in providing sustainable water supply. Using the Contingent Valuation Method, the study estimated the communities’ willingness to pay for improved watershed services, analysed factors influencing capacity to pay, and examined possible operational modes for implementing payment mechanisms. A total of 155 domestic water users and 50 non-domestic water users were interviewed. It was found that 71% of domestic water users and 82% of non-domestic water users were willing to pay for improved watershed services, with a mean willingness to pay estimated at TAS 1261 per user/year for domestic water users and TAS 112322 per user/year for non-domestic water users. Factors such as gender, occupation, education, and farm size significantly (P<0.05) influenced water users' willingness to pay. Income was a significant factor in the willingness to pay for non-domestic water users, but it was not significant for domestic water users. The current study suggests that downstream water users in Babati district, who act as watershed service buyers, could collect a water user fee based on estimated amounts. This approach would help address declining water quality and quantity through improved watershed management and thus enhance watershed conservation and management.
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