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  • Moving towards a more integrated view on finance and impact

Moving towards a more integrated view on finance and impact

A Lubuk Beringin villager taps a rubber tree on her farm in Jambi province, Indonesia. Photo by T. Saputro/CIFOR
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Marthe Tollenaar. Photo by New Forests.

In the penultimate interview of this initial series, we hear from Marthe Tollenaar and MaryKate Bullen of New Forests, an Australia-based fund management company with more than A$5 billion invested in sustainable leading-edge forestry, land management, and conservation projects in the Asia-Pacific region and the United States.

Marthe is responsible for the environmental and social management of investments in Southeast Asia and for supporting compliance with International Finance Corporation (IFC) Performance Standards and Forest Stewardship Council (FSC) certification.

MaryKate Bullen. Photo by New Forests.

MaryKate leads corporate communications and media relations, as well as strategic planning and implementation of corporate sustainability and responsible investment initiatives. They share many decades of experience on how to make investments more inclusive.

This interview complements our previous interviews held with non-governmental organizations (the International Institute for Environment and Development and the Finance Alliance for Sustainable Trade), intergovernmental bodies (the United Nations Forum on Forests), a community organization (the Association of Forest Communities of the Peten), a development bank (the Netherlands Development Finance Company) and another investment company (FORM International), thereby enriching the discussion on inclusive finance.

How do you define ‘inclusiveness’ and why should it be addressed by financial institutions?

At New Forests, we consider inclusiveness to mean the generation of value for all stakeholders in our business, including investors and communities, and the environment. We believe that an inclusive approach ensures steadier and more long-term profitability, and creates opportunities through shared value business strategies.

Rubber trees grow in rows in South Sumatra, Indonesia. Photo by I. Cooke Vieira/CIFOR

We also feel that demonstrating successful business models that incorporate environmental and social benefits are essential for transitioning the forest and land use sectors to long-term sustainable models that promote equity and inclusion.

New Forests ensure that our investments use appropriate best practice in stakeholder engagement, guaranteeing inclusiveness with respect to gender, indigenous peoples, and other potentially vulnerable groups.

As global demand for resources grows, there is a need to increase productivity while ensuring the conservation of the world’s remaining natural forests and sustaining the needs of local communities. The Sustainable Landscape Investment (SLI) framework has six core themes that we apply throughout our investment portfolio, which is designed to balance these interests and deliver enhanced investment performance in support of our corporate purpose.

New Forests’ Sustainability Working Group developed a series of quantifiable measures to track our performance against each of the six themes defined in the SLI framework, and both the Shared Prosperity and Land Use themes measure the inclusiveness of our investments.

We are continuing to build on this and look to deepen the benefits that inclusiveness can bring, continuing to focus on key areas including gender, shared values, and the social license to operate (for example ensuring that Free, Prior, Informed Consent (FPIC) or similar procedures have been implemented by investees).

Read also: More dialogue needed between farmers, forest enterprises and finance providers

What are the structural barriers to financing smallholders and small- and medium-sized enterprises (SMEs)?

There are several options for New Forests to invest in smallholder forestry: The first is direct investment in smallholder-managed forestry assets through a cooperative or other organizational structure. The second is through outgrower schemes that enhance scale and production by integrating contract farmers in the business model, enhancing scale and production of our investments. A third is with forestry and agroforestry programmes, though the signing of agreements with communities for mixed cropping models either inside or outside the forest area under our management.

Structural barriers differ in each of these different investment options. Smallholder-managed forestry assets, even when they are united through a cooperative or other form of association, often lack the scale required to make an attractive business case for direct investments.

A Hevea plantation in Ngazi, DRC. Photo by A. Fassio/CIFOR

Good governance is key to meeting our strict performance and compliance requirements, but is often challenging in smallholder forestry. Organizational structures are also often lacking or poorly managed, with a high risk of internal disputes, and low smallholder commitment reduces the quality of production.

New Forests requires certification of our investments as part of our Social and Environmental Management System. The challenges described above and complex supply chains mean that there are considerable barriers to group certification, increasing reputational risk for the investor. Another challenge in the forestry sector is the long investment horizon. Smallholders are often looking for quick returns and lack the resources to make long-term investments.

Expected returns in forestry may also not be high enough for the farmers to compete with alternative crops like oil palm or annual food crops. Land tenure and land governance issues can also be barriers to investing in smallholders, because investment criteria require certainty over forestry use rights through the duration of the investment.

What are the underlying reasons for these structural barriers?

There is a clear knowledge gap at the local level of production techniques in forestry. Smallholder timber production is typically geared toward the local market, with low-tech processing facilities, and the low quality of timber products often not suited for more commercial and industrial end uses. Smallholders also traditionally lack access to the technical knowledge and expertise in improved silvicultural practices.

There is often a lack of funding for research and development and technical capacity to develop and implement appropriate Standard Operating Procedures. These aspects mean that smallholder forestry is often less productive, less efficient and less profitable than larger-scale models where such resources are available.

Smallholders also face challenges marketing their products. A lack of knowledge on pricing and markets often causes them to sell their products (far) below market-price to middlemen or processing facilities. Long, non-transparent supply chains in smallholder operations increase the marketing complexity, and corruption can contribute to unfair pricing of smallholder products.

Governance of smallholder cooperatives may lack structure and effective oversight and controls, but this may also be complicated by existing disputes or political interference, enhanced by corruption and lack of law enforcement. Communities often lack the knowledge and experience to establish formal bodies, especially with respect to finance, administration and legality.

These barriers can, however, be mitigated to some extent through capacity development, technology transfer, and development of more effective intermediaries and support organizations.

Read also: Financial products should be adjusted to better meet needs of community forest enterprises

How is your organization addressing the needs of smallholders and SMEs for finance, and what have you learnt from that?

New Forests is not focused on investing in SMEs and smallholders directly, but we seek to help our investees – which in Asia are typically medium-sized businesses or subsidiaries of larger conglomerates – identify and understand their impacts on SMEs and smallholders in order to seek where shared value opportunities may exist.

Evening in the forest of Mount Halimun, Salak National Park, West Java, Indonesia. Photo by A. Erlangga/CIFOR

We have developed and implemented various smallholder models in our existing portfolio in Southeast Asia. In our experience, these models play an important role in creating a shared interest in our investments, facilitating shared revenue streams, and providing a social license to operate on the land. New Forests is therefore optimistic that our future investments in the region will continue to include smallholder and SME opportunities.

In addition to these integrated smallholder models, the Tropical Asia Forest Fund (TAFF), managed by New Forests, has in its portfolio companies that invest in local business development, including contract managers, handicrafts, food processing, tailors and farming businesses. Where possible, we link these development opportunities to company needs. In our Indonesian investment for example, we trained local tailors to manufacture uniforms for company staff.

We further incentivize involvement at the local level through community-based monitoring programmes. Communities in and around the forest management units are hired to monitor and patrol the forest close to their village, and receive a bonus for good management, e.g. no fires, no illegal activities, no littering.

Through smallholder models, local business development, employment and other community-based activities, New Forests’ investments promote economic development in the region, and further enhance a shared interest in the company.

What examples do you have of successful or promising financial innovations that contribute to sustainable landscapes?

New Forests has developed an innovative blended finance structure for its latest investment fund for Southeast Asia, with the goal of enhancing investment in sustainable plantation forestry and generating significant positive climate, community, and biodiversity impacts. The fund aims to bring together complementary mainstream and high-impact, development-oriented capital to invest in a diversified portfolio of plantation assets with associated impact activities.

One interesting financial innovation that we came across recently is Fast Track Trade, a platform that connects buyers and sellers through block chain technology, currently being piloted with smallholders in Indonesia.

Read also: Scaling up sustainable forestry projects key to attracting finance

What types of support and conditions are needed to ramp up development and scaling of such innovative finance?

New Forests considers that new commercial models for sustainable forestry are required to meet rising Asian timber demand while also ensuring the sustainable development of emerging markets in ways that are socially and environmentally beneficial. The impact tranche of the second phase of the Tropical Asia Forest Fund (TAFF) is an innovative step to shift capital at scale into high-impact investment models and will seek to demonstrate the case for sustainable forestry businesses in Southeast Asia. Using blended finance, the fund will focus on priority impact activities that are anticipated to support a shift in the overall risk-return profile of investments, while also targeting broader climate, community, and biodiversity benefits.

Through this, we aim to show that more sustainable investment approaches produce an overall benefit for investors, society, and the environment. By demonstrating a scalable, institutional impact investment approach, a second phase of the Tropical Asia Forest Fund (TAFF2) is positioned to be a leader that will shape the market for sustainable forestry in emerging economies. The blended finance structure may also be transferable to other regions and sectors, promoting replicability and scale for impact investment aligned to the Sustainable Development Goals and the Paris Agreement.

We believe a shift is required towards a more integrated view on finance and impact – moving from grant funding into high-impact business models. A key factor in achieving this shift is educating investors in commercial landscape investment opportunities, aligning the interests of commercial and mission-oriented finance.

By Nick Pasiecznik, Tropenbos International.

This interview has also been published on Tropenbos International’s website.


This article was produced by Tropenbos International and the Center for International Forestry Research (CIFOR) as part of the CGIAR Research Program on Forests, Trees and Agroforestry (FTA). FTA is the world’s largest research for development program to enhance the role of forests, trees and agroforestry in sustainable development and food security and to address climate change. CIFOR leads FTA in partnership with Bioversity International, CATIE, CIRAD, INBAR, ICRAF and TBI. FTA’s work is supported by the CGIAR Trust Fund.

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  • More dialogue needed between farmers, forest enterprises and finance providers

More dialogue needed between farmers, forest enterprises and finance providers

A market in the village of Minwoho, Lekié, Center Region, Cameroon. Photo by O. Girard/CIFOR
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As part of this new interview series on inclusive landscape finance, Tropenbos International’s Nick Pasiecznik spoke to Noemi Perez, an inclusive finance and investment specialist, with extensive experience with key issues gained from work in both the private and public sectors.

Noemi began her career sourcing timber for one of the largest door manufacturers in the world, Puertas Montealban, rising to general manager.

After seeing how the corporate sector could support and promote sustainable finance for small-scale forest enterprises, she applied her experience to roles in the World Wildlife Fund (WWF) in Costa Rica and the Forest Stewardship Council (FSC) in Mexico.

She then cofounded the international, non-profit Finance Alliance for Sustainable Trade (FAST) in Montreal, Canada, in 2008, where she worked until April 2018. At FAST, she worked mainly with public funds seeking to match small- and medium-sized forest enterprises (SMEs) to private investors. Noemi is currently a freelance consultant.

Read also: Strengthening producer organizations is key to making finance inclusive and effective

What are the underlying reasons for underfinancing of small-scale agricultural and forest businesses?

The most basic problem is lack of literacy – not only financial literacy, but also basic literacy. How can we expect farmers or rural entrepreneurs to be able to access finance if many can’t even read or count? Even among those that can, there is a lack of understanding of business fundamentals, when what is needed is business acumen, as a prerequisite for good decision making, including finance.

Thus, there is a serious and urgent need for basic education and business education. For example, in 2010, at an investment conference I attended, rural SMEs were invited to present their cases, but it was clear that some were not even differentiating between sales and profit.

Another constraint is that farmers often sell perishable agricultural produce, and do not have facilities to store goods while waiting for a better price. This makes them even more vulnerable: they have to sell at any price, or they run the risk of losing everything. The lack of strong producer organizations makes it very hard for individual smallholders to be bankable.

On the other hand, financial service providers are not willing to take risks in sectors where they have not previously invested. They may not have sufficient knowledge or information on how to manage risk in rural small-scale agricultural and forest business settings.

Even institutions that claim to invest in forestry or agriculture, often say things like “we invest in agriculture, but we don’t invest in that country”, or “we don’t invest in that sector” without even looking at the specific business cases.

What are we not doing right, or not doing well enough, or not doing at all?

Where are the farmers? We need to inform financial service providers and bring them together with farmers. I have been to more than a hundred meetings and conferences on agriculture, forestry investment and similar initiatives, and there is hardly ever a farmer present, or not more than a single token representative. This is not right. We need to create situations where farmers can sit down and tell financial service providers face to face what it is that they need.

At the same time, the financial sector needs to explain their own needs and constraints clearly to farmers. Then they can sit down together and discuss how to manage the risks.

Financial institutions need to understand small-scale agricultural and forest business needs. Adapting and creating specific products and services based on their needs is key, particularly medium- and long-term access to finance.

They also need to know how value chains work, be in contact with different links in the chain, understand market requirements and make strategic alliances. They need to better understand smallholder production cycles, needs, products and markets, and that it is usual and acceptable to rely on local markets and not only on export markets.

On the other hand, farmers must understand the requirements of financial institutions, their restrictions, and that they need certainty that they will get their money back, to satisfy their own investors. Financial institutions must also make clear to farmers why they charge X or Y percent interest, and where this money goes, as often, rural, agricultural SMEs do not even understand why interest is charged!

In addition, one important thing we can do is to look more closely at successful small-scale agricultural and forest businesses in developed countries – how do they work and what makes them successful, what subsidies exist and what types of finance do they have access to?

In developed countries, many small-scale agricultural and forest businesses make a decent income. Even though they have their own struggles, they live well. It would be useful to compare similar types and sizes of smallholder enterprises in developed and developing countries, how they are organized and how they operate.

Read also: Catalyzing partnerships for reforestation of degraded land

What examples do you have of successful or promising ‘model’ approaches or innovations?

Good examples of inclusive finance tend to occur where the true realities of farmers are well understood, such as the impacts of seasonality of production, for example. These success stories have almost always resulted from situations where farmers and financial institutions have sat together and talked and rural, agriculture smallholders have repaid. There are excellent examples from banks that have specialized in agriculture, such as the Netherland’s Rabobank, or France’s Credit Agricole. There are also socially oriented lenders such as Alterfin, the Commodities Fund of Kenya, Pear Capital,  Root Capital, Oikocredit,  ResponsAbility, Triodos Investment Management, Bankaool, and Shared Interest.

What is your vision on how to increase finance and investment in sustainable forestry and farming?

My vision is that every individual should have the right to access financial resources to improve their livelihood if they can demonstrate they have a viable business and produced positive social and environmental impacts. But how? First, we must promote greater dialogue between small-scale enterprises and financial service providers, as I have explained.

This also highlights and connects to those small-scale agricultural and forest businesses that already have a secure market and long-term relationships that could immediately back up a loan. Next, we need to better understand current markets and take these into account – and not any potential future (e.g. export) markets that might take 5–10 years to materialize.

Finally, we need to provide similar conditions for small-scale agricultural and forest businesses in developing countries as are offered to those in developed countries, including the needed levels of education from basic financial literacy to business acumen.

By Nick Pasiecznik, Tropenbos International.

This interview has also been published on Tropenbos International’s website.

Please note that the photos used here are for illustrative purposes and do not refer directly to FAST activities.


This article was produced by Tropenbos International and the Center for International Forestry Research (CIFOR) as part of the CGIAR Research Program on Forests, Trees and Agroforestry (FTA). FTA is the world’s largest research for development program to enhance the role of forests, trees and agroforestry in sustainable development and food security and to address climate change. CIFOR leads FTA in partnership with Bioversity International, CATIE, CIRAD, INBAR, ICRAF and TBI. FTA’s work is supported by the CGIAR Trust Fund.

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  • A guide to investing in collectively held resources

A guide to investing in collectively held resources

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Impact investors typically finance businesses that seek to challenge the status quo, valuing environmental and social outcomes to deliver more sustainable returns on investment. Microfinance institutions such as Grameen and FINCA lead the way in financing poor and marginalized groups. Now, however, increasing attention is being given to help investors respect land rights and form equitable partnerships with communities living in rural areas. Communities are increasingly being given rights to manage the world¹s remaining common pool resources (CPR) – such as forests, pastures and fisheries – as common property. As such, investors interested in accessing and developing these resources have the opportunity to work with a new investment partner, the community user group (CUG). This guide is designed to help investors better understand the challenges and opportunities of investing in resources managed collectively by a community – where the community is the principal investment partner! In this guide we draw on examples and lessons learned from four case-study countries considered to have the most successful arrangements for collectively managing natural resources. The case countries are Guatemala, Mexico and Nepal, which have devolved forest rights to communities, and Namibia, which has devolved wildlife rights.

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  • Blend, bond and blockchain: The financial landscape is changing to fit the planet's needs

Blend, bond and blockchain: The financial landscape is changing to fit the planet’s needs

A large cashew tree grows in Burkina Faso. Photo by O. Girard/CIFOR
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Upfront investment in REDD+ can be a burden for many countries in the short term, but in the long term can instill a sense of ownership, as seen in the case of Brazil. Photo by N. Palmer/CIAT

On a map of global landscapes, the most expansive ecosystem will not appear: finance.

It is the underlying rooted network channeling funds to the right places at the right times, or the superimposed atmosphere raining down fertilization where needed. However you view it, it is a constitutional source of life for its biological brethren, and enormously so.

Yet sustainable finance is also struggling to adapt to the rapidity of global development, forcing global research and dialogue to move quickly in figuring out how to keep it healthy and green. What existing mechanisms can we leverage, and what must we innovate? What financial infrastructure do we prune, replant, grow?

Such was the focus of the third annual Global Landscapes Forum Investment Case Symposium, in which the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) participated, held on May 30, 2018, in Washington, DC, the US. Looking at the state of landscape investment this year, the event pulled certain topics forward as being important of late: blended finance, bonds and blockchains, with discussions on the three synthesized in this article. REDD+ finance was also a key topic at the summit.

Read also: New study finds little private finance in REDD+ efforts, suggests blended finance as way forward

BLENDED FINANCE

Thirty years ago, China’s Loess Plateau had reached a desperate state of soil erosion and land degradation. After centuries of unsustainable grazing and agricultural practices, an area the size of France that had once fed nearly a quarter of the country’s population had floods and crop failure as its norms, keeping millions in poverty with no way out.

The World Bank stepped in, and with the help of some US$500 million of public investment matched with about the same from the private sector, the landscape transformed. Incomes doubled, agricultural output shot up, and the dusty dry landscape gave way to fertile terraces — all in just 15 years.

“I’ve seen with my own eyes that it’s absolutely, entirely possible to transform a completely degraded landscape in a very poor environment with no capacity to do anything,” said Juergen Voegele, Senior Director of the World Bank Food and Agriculture Global Practice and member of the Loess project team.

He was describing a successful scenario of blended finance, which the Organisation for Economic Co-operation and Development defines as “the strategic use of development finance for the mobilization of additional commercial finance towards the Sustainable Development Goals in developing countries.” In other words, public or philanthropic capital is put up first to attract further investment from the private sector.

It is irrefutable that public money alone cannot fund the work imperative to achieving major restoration projects like the Paris AgreementBonn Challenge and AFR100. But despite growing pressure for the private sector to step up to the plate and chip into such efforts, its role in landscapes is — and should be — limited. Not every climate change effort should be made into a business opportunity, or prioritize financial logic and returns.

“To really start moving the billions, we need to collaborate effectively, and know our role within the ecosystem,” said Jennifer Pryce, President and CEO of non-profit social impact investment firm Calvert Impact Capital. Investing assets, she said, does not solve situations that need legal or diplomatic help.

Logs are seen on a riverbank. Photo by K. Evans/CIFOR

This is reflected in the World Bank’s Maximizing Finance for Development (MFD) concept, which urges development banks and other public funders to pool their capital to help developing countries build policy framework and capacity, cement high standards and reduce as many risks as possible for environmental projects. Once these bones are in place, the private sector can — and will be more apt to — step in and flesh out efforts.

Laura Tuck, the World Bank’s Vice President of Sustainable Development, elaborated on how this manifested in Vietnam’s Mekong Delta, where more than half of the country’s mangroves were cleared for shrimp ponds. After the Bank helped the government mandate 50 percent of shrimp ponds to have mangroves and take out a loan for restoration, the ecosystems were revitalized, and private companies flocked in for the ease with which they could harvest organic, premium-quality shrimp.

The appeal of blended finance is not exclusive to developing countries. Private landowners and businesses has begun investing more in the US forest estate — the world’s fourth largest — following a 10-year government commitment of federal funding for community-driven projects in 23 different landscapes, to combat the country’s growing spread of wildfire and insect disease.

“That’s that model of long-term anchoring of commitment to a landscape with defined outcomes, supported by the community, that enabled others to say that this is worth leveraging the federal dollar to get additional work done,” said US Forest Service Deputy Chief Leslie AC Weldon.

Read also: Making landscape finance more inclusive

BONDS

With a background in molecular biology and plant breeding, Howard Yana-Shapiro, the Silicon Valley-based Chief Agricultural Officer at Mars, Inc., is a self-proclaimed “gene jockey”. Within the last eight months, he has witnessed big data advance to a point where extraordinarily complex heterozygous genomes can be annotated with ease.

If big data can do it for genes, it can do it for landscape finance, he believes. “I can’t imagine that for the things we’re talking about mixing — bonds, instruments — that you couldn’t write a 3,000-line algorithm that would give you all the answers to all the complexity you’d want to know about which particular finance facility works best in which places.”

Bonds, as he said, are one of the primary mechanisms pushing forward in the landscape arena, serving as a way to refinance and finance projects by channeling capital into an investment that then generates revenue and gets repaid.

Dr. Christine Negra, principal at Versant Vision and advisor to the Climate Bonds Initiative (CBI), the foremost organization focused on advancing the bond market, said the ‘bond universe’ is still in its early days, with different forms popping up left and right. Asia’s first corporate sustainability bond was issued in Indonesia in FebruaryGlobal green bond issuance reached US$155.5 billion in 2017, and climate-aligned bonds — which include green certified bonds and non-certified bonds geared toward the low-carbon economy — currently value US$895 billion.

So far, the Forests Bond launched by the International Finance Corporation (IFC) is at the front of the pack, having received substantial acclaim. A five-year ‘green coupon bond’, it gives investors the choice of taking a 152 million bond in cash or in forestry carbon credits — which can be used to offset emissions or sold on the carbon market — purchased from a 200,000-hectare REDD+ conservancy project in Kenya.

Vikram Widge, IFC’s Global Head of Climate Finance and Policy, said that replicating this bond form in commodity sectors such as coffee, cocoa and oil palm could help build market infrastructure and provide alternative livelihoods to impoverished communities — 90 percent of which rely on forest resources — while we wait for the roughly US$300 billion needed to significantly slow deforestation rates.

A large cashew tree grows in Burkina Faso. Photo by O. Girard/CIFOR

CBI is the main hand behind setting global bond standards and sector-specific criteria, to ensure the ‘green credibility’ of bonds — as well as issue a litmus test for the market. “Putting criteria out there is a way to build it and see if they come, to see the demand for certified bonds,” said Negra.

Yana-Shapiro, on the other hand, warned of having too many tick boxes, and said bond measurement should hone in on five criteria only: productivity, profitability, environmental stewardship, good government and solid management, and social inclusion.

He posed the challenge of how to make the landscape sector worth more than Apple, which is soon to break worth of US$1 trillion. “I would suggest to you that it is not an abstract idea. We are looking at things today that are equally complex in a genome as in a landscape, and we’re able to put that together… to facts and not fiction.”

Read also: Good investments in agriculture and forestry can benefit smallholders and landscapes

BLOCKCHAINS 

Landscape finance would not be properly of the times without a disrupter trying to challenge its ways. Blockchains appear to be filling this role, emerging as a viable alternative to the traditional financial system infrastructure in certain situations.

Since Bitcoin emerged in 2008, not coincidentally alongside the global financial crisis and breakdown of trust in financial institutions, cryptocurrency has grown to account for some 400 billion in capital. This capital is distributed through blockchain networks, which Katherine Foster, Advisor on blockchains to the World Bank, defined as “decentralized, distributed, public (more or less) digital ledgers used to record data transactions across many computers.”

With the safety belt of cryptography, information is shared and stored across a chain of devices in a way “considered immutable and unchangeable.” Chains can be public or contained to a private group of users, and uploaded data can include everything from photos to e-signatures and legal certifications.

Because these are peer-to-peer networks that leave out centralized banks, institutions and other middlemen, blockchains can significantly lower transactional costs, both formal and informal. Vice President for US Business Development at blockchain software company ChromaWay Todd Miller said to think of all the money one can save by keeping one’s own records rather than hiring Goldman Sachs: “It’s not black magic here. It’s a distributed database not controlled by anyone.

And for that reason, “It’s up there with drones for how sexy it is for a lot of organizations,” he said.

Blockchain technology also has two defining features of every disruptor worth entertaining: it opens up new opportunities and makes life easier. In its role as a global contractual database time-stamped, date-stamped and signed, blockchain technology could stretch the horizon of capital acquisition, allowing people to borrow or invest without stepping foot in a bank.

By storing similar information on physical assets like commodity crops, it can also help supply chains be more efficient, transparent and safe. For instance, it could help Ethiopian coffee smallholders certify their beans as fair-trade; track the beans as they move through a supply chain, documenting every value added along the way; and ultimately show consumers the origins of their morning cup.

Already, in the famously iniquitous diamond industry, blockchain technology has proven enormously effective in reducing corruption and conflict.

The biggest challenge blockchains face, however, is quality data to insert into their networks. World Bank Land Administration Specialist Aanchal Anand said she often hears institutions say, “I want to be blockchain ready by 2020.” But this raises the question of whether or not they have data in digital form. If a government’s records are written on paper with coffee stains and tears, blockchains cannot help, she said. To get meta about it, data about data going into blockchains is needed to confirm accuracy.

There also needs to be a level of comfort with the technology, which Anand says comes from on-chain trust (knowing that transactions are validated) and off-chain trust (being able to call or email someone if and when something goes wrong).

Nevertheless, in comparison to Wells Fargo, for example, when consumers were oblivious to the grand misuse of their information, blockchains offer a new alternative with enormous positive potential. “We need to evaluate blockchains not compared to a perfect world,” said Miller, “but to the world we’re in today.”

By Gabrielle Lipton, originally published at CIFOR’s Forests News


This research forms part of the CGIAR Research Program on Forests, Trees and Agroforestry, which is supported by CGIAR Fund Donors.

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  • Vietnam prepares for long-term agroforestry strategy to address national and international commitments

Vietnam prepares for long-term agroforestry strategy to address national and international commitments

Mountains in Northwest province show signs of erosion from unsustainable farming practices. Photo by Robert Finlayson/ICRAF
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FTA COMMUNICATIONS TEAM

Mountains in Northwest province show signs of erosion from unsustainable farming practices. Photo by Robert Finlayson/ICRAF

Vietnam is preparing for a long-term strategy to speed up the adoption of agroforestry nationwide.

Agroforestry has been practiced for a long time in Vietnam. However, widespread adoption remains limited. Building on previous work to address barriers to adoption, a workshop was held on April 5, in which participants agreed that a long-term strategy for the development of agroforestry throughout the country was needed to address national and international commitments.

Titled “Enhancing Agroforestry Development in Vietnam: Policy Environment and Investment Opportunities”, the workshop featured presentations by Nguyen Ba Ngai, vice director of the Vietnam Administration of Forestry; Chu Van Chuong, vice director of the International Cooperation Department of the Ministry of Agriculture and Rural Development; Yurdi Yasmi of the Food and Agriculture Organization of the United Nations (FAO); and Delia Catacutan, country coordinator of the World Agroforestry Centre (ICRAF) Vietnam.

Read more: Vietnam’s Ministry of Agriculture and Rural Development awards ICRAF coordinator for agriculture and rural development work

The workshop was another step forward after a 2015 national policy dialogue for agroforestry development, from which two actions were implemented with technical and financial support from FAO. First, a review of agroforestry-related policies; and, second, the formulation of an agroforestry development proposal for the country. Progress on these two actions was presented at the workshop to ensure the most viable strategies were developed for Vietnam.

The policy working group presented its analysis, confirming that there was no specific policy for agroforestry development, the situation being compounded by a lack of legal definition of agroforestry practices and lack of official guidelines. The working group highlighted that many of the barriers to adoption could be addressed through the promulgation of supportive policies, including on land and tenure, financial mechanisms and rural advisory or extension support for farmers.

Workshop participants pose for a photograph. Photo by Tran Ha My/ICRAF

The Northern Mountainous Agriculture and Forestry Science Institute, ICRAF and UN-REDD presented their experiences of promoting agroforestry practices in different regions of the country, followed by an FAO presentation on the National Target Program on Sustainable Forest Development and Drought Initiatives, which was reinforced by a call for all present to work together to prepare a proposal on nationwide agroforestry development.

Just what shape that would take was discussed by the participants, with many agreeing that it was necessary to have an official definition of agroforestry upon which to base a legal framework for a specific policy and subsequent activities. Others, however, argued that it was not necessary to have a unique policy for agroforestry, saying it would be better to integrate practices into existing policies relating to forestry, agricultural extension or advice, and payment for forest environmental services.

Overall, the workshop participants agreed that there were many way to achieve more effective promotion of agroforestry, such as through promulgating agroforestry techniques, improving governance, establishing financial mechanisms, developing markets (including carbon), increasing education and training, integrating with payment for forest environmental services and UN-REDD programs, and adopting organic certification.

Participants also agreed that there was an urgent need for a nationwide study of agroforestry to assess the successes and lessons from existing practices, regions suitable for agroforestry and the main commodity species. The participants expected that a long-term strategy for the development of agroforestry in Vietnam would be developed in the near future.

Read more: Agroforestry sites in Vietnam provide lessons for farmland in Bhutan and Nepal

Representatives from the Vietnam Administration of Forestry, FAO, ICRAF and the Japan International Cooperation Agency covered such a strategy in a panel discussion. They argued that Vietnam should have a national program with targets and resource mobilization for long-term development. The government is expected to be able to gather national and international partners to fill the gaps in technology, finance and markets.

There was also discussion of deeper collaboration to speed up the adoption of agroforestry. The Ministry of Agriculture and Rural Development expressed its support for partners continuing to work with the government in restructuring the agricultural sector to increase production quality, quantity and value.

By Pham Thanh Van, originally published at ICRAF’s Agroforestry World


This work is linked to the CGIAR Research Program on Forests, Trees and Agroforestry, which is supported by CGIAR Fund Donors.

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  • Good investments in agriculture and forestry can benefit smallholders and landscapes

Good investments in agriculture and forestry can benefit smallholders and landscapes

The finance pavilion stands beside the indigenous people's pavilion at the GLF Bonn 2017. Photo by Pilar Valbuena/GLF
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FTA COMMUNICATIONS TEAM

With companies increasingly being seen as key partners in scaling-up efforts to achieve sustainable landscapes, a growing number of private actors are moving from ‘do no harm’ to a ‘do good’ approach.

In light of this, Tropenbos International (TBI) – along with the CGIAR Research Program on Forests, Trees and Agroforestry (FTA), the Netherlands Development Organization (SNV), Finance Alliance for Sustainable Trade (FAST) and the Forests and Farm Facility – organized a well-attended panel discussion titled “Inclusive Finance and Business Models – Actions for Upscaling” at the recent Global Landscapes Forum (GLF) in Bonn, Germany.

Held in the Finance Pavilion, where FTA and TBI also shared a booth showcasing their work and research, around 40 participants came together to hear from five panelists, share ideas about what a do-good approach means in practice, and consider how it can be scaled up.

Watch: Inclusive Finance and Business Models – Actions for Upscaling

In opening the discussion, TBI Director René Boot said: “There’s a growing need for companies and for investors to basically upgrade their corporate social and environmental responsibility policy. We think it is time to move from ‘do no harm’ to ‘do good’.”

Boot pointed out that in order to make that step, it is important to know how to build businesses that are both profitable and can contribute to livelihoods, secure land rights, and make use of the entrepreneurial qualities of smallholders and small and medium enterprises. “Do we have enough information, do we have enough examples, to scale up?” he asked.

Attendees peruse the materials available at the finance pavilion. Photo by Pilar Valbuena/GLF

The first speaker, Herman Savenije of TBI, presented the findings of a working paper titled Improving the positive impacts of investments on smallholder livelihoods and the landscapes they live in, a joint effort from the Dutch Development Bank (FMO), TBI, Dutch organization for development HIVOS and the Royal Tropical Institute (KIT).

The report “developed some key points for the do-good approach for investment and business,” Savenije explained. The points in the report were divided into three categories: recognizing rights; active engagement; and “think landscapes” – which is also an overarching focus of the GLF. An increasing number of business cases show that the approach is feasible, but requires thinking, acting and partnering beyond a business-as-usual approach, he added.

Savenije suggested that mainstream investments and businesses often ignore and underestimate land governance, land rights and livelihoods issues, but failing to properly address the issues could lead to business and reputational risks. “So strengthening the position of smallholders and communities within value chains, within landscapes, makes business sense,” he said.

Carina van der Laan of SNV then discussed access to finance for smallholders in oil palm plantations in Indonesia, while Marcelo Cardozo of the Bolivian forest producer organization MINGA provided perspectives from indigenous producers on accessing finance for integrated territorial management, Francesca Nugnes shared FAST’s experiences in supporting small- and medium-scale enterprises on building workable, sustainable business models, and Paul Hol of Sustainable Forestry Investments (SFI) discussed investments in tree plantations in Ghana and Tanzania.

Aspects of the session echoed a discussion organized by TBI in September, which showed that a growing number of investors want to have a greater positive impact on people’s rights and livelihoods in areas where they do business.

Read more: Getting down to business: Seminar promotes shift toward inclusive investment

The finance pavilion stands beside the indigenous people’s pavilion at the GLF Bonn 2017. Photo by Pilar Valbuena/GLF

Following the panel discussion at GLF, TBI and FTA produced a report outlining its outcomes.

“In the context of agricultural and forestry production, a do-good approach means that commercial investments simultaneously improve the environmental integrity of the landscape and the livelihoods of the people living there, while making a profit,” the report read.

“This requires long-term thinking and investments, including investing in stakeholder engagement and building relationships. Initially, this may result in higher opportunity costs, which makes such investments risky for the private sector. How then can a do-good approach be operationalized on the ground?”

Finding ways to operationalize this approach should be one of the main goals of related research – to advance understanding not only on which business models have greater potential for sustainability and social inclusion, but also on the most effective ways for financial institutions to support scaling-up efforts – which is embraced by FTA’s work on innovative finance, said Pablo Pacheco, a Center for International Forestry Research (CIFOR) scientist leading the work.

Those involved are convinced about the need to team up to reach scale. The success of a do-good approach, thus, is considered to be largely dependent on collaboration and connections. The panel discussion was another step forward in contributing to these efforts.

Read more:

By Hannah Maddison-Harris, FTA Communication and Editorial Coordinator


This work is linked to the CGIAR Research Program on Forests, Trees and Agroforestry, which is supported by CGIAR Fund Donors.

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  • Financing farmers: Can funds for oil palm help save our forests?

Financing farmers: Can funds for oil palm help save our forests?

A worker wheels a barrow of oil palm fruit. Photo by Icaro Cooke Vieira/CIFOR
Posted by

FTA COMMUNICATIONS TEAM

Oil palm fruits in Jambi, Indonesia. Photo by Iddy Farmer/CIFOR

Palm oil: people love it, hate it or maybe just use it without even knowing. The controversial vegetable oil is found in thousands of consumer products from soap to lipstick, frozen pizza, ice cream and even fuel.

World demand continues to increase rapidly and is placing pressure on forests, mainly in Indonesia. But, for now, the profitable commodity is here to stay. So what can be done to reduce the pressure on forests?

Efforts are ongoing to stop the rapid destruction of tropical forests through more sustainable business practices. In 2004, the Roundtable on Sustainable Palm Oil (RSPO) was launched with the vision to “transform markets to make sustainable oil palm the norm”. Pressure from activists on big corporations that use palm oil in their products has also had some impact, leading them to make commitments to sustainable supply and zero deforestation.

Most action to date has focused on how large palm oil companies do business but increasingly, concerns comprise what the implications are for smallholders, and how smallholders can capture greater benefits from engaging in palm oil supply chains.

In Indonesia — one of the biggest palm oil producing countries alongside Malaysia — up to 40 percent of the land used to grow oil palm is cultivated by smallholders who farm, on average, just 2 hectares each.

The sustainability of the palm oil sector has also triggered Indonesian government efforts to improve the policy environment for inclusion of smallholders, and channeling resources for them to improve practices in management and replanting. There is also an ongoing effort to strengthening the national standards for sustainable palm oil (ISPO).

Read more: Towards responsible and inclusive financing of the palm oil sector

Three teams of researchers from the Center for International Forestry Research (CIFOR) as part of its work under the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) and from partner institutions have produced a series of infobriefs looking at how smallholders can improve their lives and, at the same time, protect remaining forests. The major challenge, according to their findings? Money.

“Oil palm provides more economic benefits to smallholders than other crops, and it’s expanding,” says Pablo Pacheco, a Principal Scientist at CIFOR. “Yet smallholders have to adopt more sustainable practices. Research has to contribute to this, and identify options for them to improve their practices, as well as identify what resources are needed to make that change happen.”

“That’s where financing comes in, and becomes an important key resource for smallholders to be able to access,” he adds.

THE REPLANTING CHALLENGE

A worker wheels a barrow of oil palm fruit. Photo by Icaro Cooke Vieira/CIFOR

The Indonesian government estimates that a total of 175,000 hectares of oil palm farmed by smallholders needs to be replanted each year, and this alone creates major challenges for farmers. 

Hans Harmen Smit, global coordinator for palm oil at the Netherlands Development Organization (SNV), one of the partner organizations, was part of the team that examined current finance practices. Their focus was on Indonesia and Malaysia, which together account for about 85 percent of total global palm oil production. Smit says that without proper financing, farmers only replant when they can afford to.

“The problem is, once they replant, they have to wait three years at least for the new plantation to become productive, and during that time they have no income,” he says.

Smallholder income from oil palm varies. On average, smallholders with around two hectares of land can earn a gross monthly income of US$290 to US$400.

Researchers say that without financial support, farmers do not have the resources to replant year after year on the same plot, and so they tend to move to peatlands and forested areas, “slash and burn” the land, and plant the only crops available to them, which are often low-quality varieties.

Smit points out that in Malaysia, the sector has better systems in place for replanting, and smallholders can more easily obtain financial support. In Indonesia, there is the Crude Palm Oil (CPO) Fund that supplies replanting loans, but it is often difficult to access, especially for smallholder farmers with limited funding.

“The lesson learned here is that saving for replanting is often not done as it should be. The government needs to engage more and manage programs to help farmers save for replanting,” says Smit.

He adds that one of the main problems is a lack of available information for financial service providers (FSPs) to evaluate the lending risks and set appropriate interest rates. He says the loans are often too small on an individual level, and this makes the loan origination costs too high compared to their value.

“We need to start by supporting better data collection on the cash flows of smallholders. Once this data is available, we can create investible portfolios for investors,” says Smit.

Read more: The long and winding road to sustainable palm oil

FUNDING THE GAPS

A couple works together on a plantation. Photo by Icaro Cooke Vieira/CIFOR

The researchers also identified major gaps between existing credit schemes and what farmers actually need. Addressing this could pave the way for more sustainable palm oil for smallholders.

One key finding was that lenders who do offer credit only provide it in the short term. But what smallholders actually need is both working capital and credit in the long term for replanting and financing other management practices.

“Most lenders also don’t have schemes that take into account the fact that oil palm farmers don’t make any money in the first three or four years, so they can’t make payments at this time unless they find additional sources of income, which is difficult,” says Pacheco.

Another issue is repayment of loans. When ‘tied’ farmers, who are under contract with oil palm plantations, access funds through a cooperative, profits from their harvest are used to pay back their loans. But when individual farmers seek loans, they have to pay back in cash.

Smallholders trying to access loans also face major challenges when trying to meet the requirements of most FSPs.

“Sometimes they don’t have savings accounts or own the land, so they can’t provide collateral,” says Pacheco.

Pricing of the fresh fruit bunches (FFB) produced by oil palm can also be a challenge for farmers. FFB prices are set by governments and oil palm companies, and tied farmers are paid more than independent farmers.

But there are ways to help smallholders overcome these challenges. Incentives and technical support to meet sustainability requirements, land tenure security, and support for FSPs to assess and manage risks, and build the capacity of smallholder organizations, could all have an impact, the research finds.

FINDING SUSTAINABLE FINANCE

Most of the financing for major palm oil companies comes from FSPs based in Asian countries like Japan, Malaysia, Indonesia and Singapore. And on the whole, these do not employ adequate environmental, social and governance (ESG) policies, the research suggests.

“American- and European-based FSPs’ policies are more advanced, but even they don’t fully address how financial resources can be better channeled to smallholders,” says Pacheco.

He warns that there is the danger of a two-tier marketplace developing: one in Asia, where there is less consumer pressure for sustainable palm oil, and a second focusing on US and European markets that have adopted more sustainable practices.

INVESTING IN PEOPLE

Pacheco says the future of smallholders holds a real dilemma. If they become more integrated into the existing supply chain, more productive, use better practices and have access to good financing and markets, they are likely to become more and more dependent on supply chains and companies for their livelihoods.

“You want smallholders to improve system practices, their knowledge of fertilizers, harvesting and so on, but without losing their freedom,” says Pacheco.

It all comes down to how farmers are empowered to negotiate prices, conditions with companies and so on, he adds.

“For me, social empowerment is critical, and I think that needs to be included in the debate. Up to now, the focus has been on efficiency, sustainability, less impact on forests — and not enough attention has been given to empowering these important players, the smallholders, who are trying to reap as much benefit as possible in the market,” he concludes.

By Suzanna Dayne, originally published at CIFOR’s Forest News

For more information on this topic, please contact Pablo Pacheco at [email protected].


This research was conducted by CIFOR in partnership with Profundo, the International Center for Applied Finance and Economics (InterCafe) at the Bogor Agricultural University (IPB), the Netherlands Development Organization (SNV) and Financial Access (FA).

This research forms part of the CGIAR Research Program on Forests, Trees and Agroforestry, which is supported by CGIAR Fund Donors

This research was supported by the United States Agency for International Development (USAID) through the project “The Role of Finance in Integrating Oil Palm Smallholders into Sustainable Supply Chains.”

  • Home
  • Financing farmers: Can funds for oil palm help save our forests?

Financing farmers: Can funds for oil palm help save our forests?

A worker wheels a barrow of oil palm fruit. Photo by Icaro Cooke Vieira/CIFOR
Posted by

FTA COMMUNICATIONS TEAM

Oil palm fruits in Jambi, Indonesia. Photo by Iddy Farmer/CIFOR

Palm oil: people love it, hate it or maybe just use it without even knowing. The controversial vegetable oil is found in thousands of consumer products from soap to lipstick, frozen pizza, ice cream and even fuel.

World demand continues to increase rapidly and is placing pressure on forests, mainly in Indonesia. But, for now, the profitable commodity is here to stay. So what can be done to reduce the pressure on forests?

Efforts are ongoing to stop the rapid destruction of tropical forests through more sustainable business practices. In 2004, the Roundtable on Sustainable Palm Oil (RSPO) was launched with the vision to “transform markets to make sustainable oil palm the norm”. Pressure from activists on big corporations that use palm oil in their products has also had some impact, leading them to make commitments to sustainable supply and zero deforestation.

Most action to date has focused on how large palm oil companies do business but increasingly, concerns comprise what the implications are for smallholders, and how smallholders can capture greater benefits from engaging in palm oil supply chains.

In Indonesia — one of the biggest palm oil producing countries alongside Malaysia — up to 40 percent of the land used to grow oil palm is cultivated by smallholders who farm, on average, just 2 hectares each.

The sustainability of the palm oil sector has also triggered Indonesian government efforts to improve the policy environment for inclusion of smallholders, and channeling resources for them to improve practices in management and replanting. There is also an ongoing effort to strengthening the national standards for sustainable palm oil (ISPO).

Read more: Towards responsible and inclusive financing of the palm oil sector

Three teams of researchers from the Center for International Forestry Research (CIFOR) as part of its work under the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) and from partner institutions have produced a series of infobriefs looking at how smallholders can improve their lives and, at the same time, protect remaining forests. The major challenge, according to their findings? Money.

“Oil palm provides more economic benefits to smallholders than other crops, and it’s expanding,” says Pablo Pacheco, a Principal Scientist at CIFOR. “Yet smallholders have to adopt more sustainable practices. Research has to contribute to this, and identify options for them to improve their practices, as well as identify what resources are needed to make that change happen.”

“That’s where financing comes in, and becomes an important key resource for smallholders to be able to access,” he adds.

THE REPLANTING CHALLENGE

A worker wheels a barrow of oil palm fruit. Photo by Icaro Cooke Vieira/CIFOR

The Indonesian government estimates that a total of 175,000 hectares of oil palm farmed by smallholders needs to be replanted each year, and this alone creates major challenges for farmers. 

Hans Harmen Smit, global coordinator for palm oil at the Netherlands Development Organization (SNV), one of the partner organizations, was part of the team that examined current finance practices. Their focus was on Indonesia and Malaysia, which together account for about 85 percent of total global palm oil production. Smit says that without proper financing, farmers only replant when they can afford to.

“The problem is, once they replant, they have to wait three years at least for the new plantation to become productive, and during that time they have no income,” he says.

Smallholder income from oil palm varies. On average, smallholders with around two hectares of land can earn a gross monthly income of US$290 to US$400.

Researchers say that without financial support, farmers do not have the resources to replant year after year on the same plot, and so they tend to move to peatlands and forested areas, “slash and burn” the land, and plant the only crops available to them, which are often low-quality varieties.

Smit points out that in Malaysia, the sector has better systems in place for replanting, and smallholders can more easily obtain financial support. In Indonesia, there is the Crude Palm Oil (CPO) Fund that supplies replanting loans, but it is often difficult to access, especially for smallholder farmers with limited funding.

“The lesson learned here is that saving for replanting is often not done as it should be. The government needs to engage more and manage programs to help farmers save for replanting,” says Smit.

He adds that one of the main problems is a lack of available information for financial service providers (FSPs) to evaluate the lending risks and set appropriate interest rates. He says the loans are often too small on an individual level, and this makes the loan origination costs too high compared to their value.

“We need to start by supporting better data collection on the cash flows of smallholders. Once this data is available, we can create investible portfolios for investors,” says Smit.

Read more: The long and winding road to sustainable palm oil

FUNDING THE GAPS

A couple works together on a plantation. Photo by Icaro Cooke Vieira/CIFOR

The researchers also identified major gaps between existing credit schemes and what farmers actually need. Addressing this could pave the way for more sustainable palm oil for smallholders.

One key finding was that lenders who do offer credit only provide it in the short term. But what smallholders actually need is both working capital and credit in the long term for replanting and financing other management practices.

“Most lenders also don’t have schemes that take into account the fact that oil palm farmers don’t make any money in the first three or four years, so they can’t make payments at this time unless they find additional sources of income, which is difficult,” says Pacheco.

Another issue is repayment of loans. When ‘tied’ farmers, who are under contract with oil palm plantations, access funds through a cooperative, profits from their harvest are used to pay back their loans. But when individual farmers seek loans, they have to pay back in cash.

Smallholders trying to access loans also face major challenges when trying to meet the requirements of most FSPs.

“Sometimes they don’t have savings accounts or own the land, so they can’t provide collateral,” says Pacheco.

Pricing of the fresh fruit bunches (FFB) produced by oil palm can also be a challenge for farmers. FFB prices are set by governments and oil palm companies, and tied farmers are paid more than independent farmers.

But there are ways to help smallholders overcome these challenges. Incentives and technical support to meet sustainability requirements, land tenure security, and support for FSPs to assess and manage risks, and build the capacity of smallholder organizations, could all have an impact, the research finds.

FINDING SUSTAINABLE FINANCE

Most of the financing for major palm oil companies comes from FSPs based in Asian countries like Japan, Malaysia, Indonesia and Singapore. And on the whole, these do not employ adequate environmental, social and governance (ESG) policies, the research suggests.

“American- and European-based FSPs’ policies are more advanced, but even they don’t fully address how financial resources can be better channeled to smallholders,” says Pacheco.

He warns that there is the danger of a two-tier marketplace developing: one in Asia, where there is less consumer pressure for sustainable palm oil, and a second focusing on US and European markets that have adopted more sustainable practices.

INVESTING IN PEOPLE

Pacheco says the future of smallholders holds a real dilemma. If they become more integrated into the existing supply chain, more productive, use better practices and have access to good financing and markets, they are likely to become more and more dependent on supply chains and companies for their livelihoods.

“You want smallholders to improve system practices, their knowledge of fertilizers, harvesting and so on, but without losing their freedom,” says Pacheco.

It all comes down to how farmers are empowered to negotiate prices, conditions with companies and so on, he adds.

“For me, social empowerment is critical, and I think that needs to be included in the debate. Up to now, the focus has been on efficiency, sustainability, less impact on forests — and not enough attention has been given to empowering these important players, the smallholders, who are trying to reap as much benefit as possible in the market,” he concludes.

By Suzanna Dayne, originally published at CIFOR’s Forest News

For more information on this topic, please contact Pablo Pacheco at [email protected].


This research was conducted by CIFOR in partnership with Profundo, the International Center for Applied Finance and Economics (InterCafe) at the Bogor Agricultural University (IPB), the Netherlands Development Organization (SNV) and Financial Access (FA).

This research forms part of the CGIAR Research Program on Forests, Trees and Agroforestry, which is supported by CGIAR Fund Donors

This research was supported by the United States Agency for International Development (USAID) through the project “The Role of Finance in Integrating Oil Palm Smallholders into Sustainable Supply Chains.”

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  • Linking sustainable supply, inclusive business models and innovative finance

Linking sustainable supply, inclusive business models and innovative finance

Pressures on forests and lands forests and lands are increasing as the world population and economies keep growing. Oil palm workers in Indonesia returning home. Photo: Icaro Cooke Vieira/CIFOR
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FTA

Pressures on forests and lands forests and lands are increasing as the world population and economies keep growing. Oil palm workers in Indonesia returning home. Photo: Icaro Cooke Vieira/CIFOR

By Pablo Pacheco, Team Leader – Value Chains, Finance, & Investments, Center for International Forestry Research (CIFOR), Coordinator of Flagship 3

Pressures on forests and lands are increasing as the world population and economies keep growing. This pressure also leads to better solutions from public and private actors to enhance sustainable supply mechanisms and integrate smallholders in supply chains. In this context, Flagship 3 Sustainable global value chains and investments for supporting forest conservation and equitable development embraces the challenge of researching and providing options of how value chains and investments can be made more sustainable and inclusive, and leverage the potential of finance for scaling up.

In 2017, Flagship 3 will identify knowledge gaps, distill best practices, produce methods and tools, convene stakeholder meetings, engage in business and multi-stakeholder platforms, support learning initiatives, and co-generate options of policies and practices to:

  • Improve the sustainability of forests, agricultural and tree-crops production in forest landscapes by identifying complementarities between public regulations on the one hand, and private standards and commitments on the other hand;
  • Inform businesses and service providers about business models that are more inclusive, gender-responsive, economically viable and environmentally sustainable;
  • Increase investment flows in forest and tree-crop sectors by helping develop innovative finance mechanisms to support smallholders and small- and medium-scale enterprises (SMEs).

The three groups of activities we embrace have interconnected goals and approaches. The first goal examines the policy and institutional environment shaping the governance of supply chains, with special emphasis on supply chain and territorial interventions.

Assessing the impacts of certification standards in cacao and coffee is part of the work on value chains.Photo: Icaro Cooke Vieira/CIFOR

The second goal focuses on business models in timber and tree-crop value chains that link corporations with smallholder farmers and small and medium enterprises (SMEs).

The third goal assesses how the financial sector influences the social and environmental performance of value chains and businesses, and how innovative finance provides opportunities for smallholders and SMEs.

Enhancing public and private arrangements for sustainable supply

Research under this theme will equip farmers, businesses and the public sector with knowledge of institutional arrangements and management systems to produce agricultural crops and manage forests in more integrated and sustainable ways—and in compliance with social and environmental standards.

We will focus our efforts on producing synthesis to engage in two international processes (e.g. FLEGT, zero deforestation) and to inform two regional/national policy dialogues on the public-private governance mechanisms that are needed to enhance sustainable supply in order to ease the pressures on forests. Our primary focus will be on timber in Central Africa and oil palm in Southeast Asia.

Timber is another key commodity in this research area. Photo: Tomas Munita/CIFOR

We will complete analysis on the governance of timber value chains (Cameroon, Zambia, Uganda) and of palm oil in Indonesia, and link analysis on the connections between global sustainability processes (e.g. FLEGT VPA, RSPO, ESPO) with national regulations and initiatives to enhance sustainable supply in the timber and oil palm sectors.

More complex policy regimes are emerging linking public regulations and private standards, yet there is need to connect them and build complementarities between them.

We are also supporting the development of monitoring tools and approaches to assess progress in performance of corporate commitments to sustainability with focus on oil palm, cacao and timber. We are also assessing the impacts of certification standards in cacao and coffee.

Supporting initiatives to foster the development of inclusive business models

Better knowledge is needed on how to build business options and fair partnerships that create opportunities for smallholder farmers who are increasingly involved in global value chains. This research also aims at safeguarding the rights of marginalized groups such as women and indigenous people.

We will advance work on inclusive business models by operationalizing a strategic partnership with the Dutch development organization SNV. This partnership is aimed at building and testing approaches and interventions that improve the effectiveness of inclusive business models across several SNV projects. In addition, we will support ongoing multi-stakeholder processes for strengthening capacities and policy environments for smallholders and SMEs in the timber and oil palm sectors in some select countries and landscapes.

Our main efforts will be on assessing the technical and economic performance of independent oil palm smallholders in West and Central Kalimantan, Indonesia and of outgrower schemes implemented in the oil palm and sugarcane sectors across some select countries (e.g. Brazil, Tanzania and Mozambique). This will yield some recommendations on building more inclusive models.

We are also working on developingapproaches to design project interventions that consider the specific needs of women and youth in more inclusive business models.

Engaging with responsible finance institutions and impact investors

We want to build bridges to connect responsible financial institutions and innovative financing mechanisms with smallholders and land users in forest landscapes. The goal here is to embrace more sustainable practices and inclusive business models under reduced financial and territorial risks, and to achieve greater social benefits for smallholders and SMEs accessing those financial resources.

Our work on finance and investments, with support from our partners (e.g. The Finance Alliance for Sustainable Trade, FAST), will engage key financial institutions and impact investment funds and managers to identify the demand for responsible finance and their challenges to undertake investments at scale especially in forest landscapes.

We will focus on identifying existing schemes and demand for responsible finance and impact investment, and their challenges. Besides that, we will advance studies on palm oil in Indonesia and cacao in Ghana related to innovative finance schemes to overcome barriers facing smallholders who want to take up more efficient and sustainable practices. This work has the potential to trigger transformational change.

 

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  • Host country governance and the African land rush: 7 reasons why large-scale farmland investments fail to contribute to sustainable development

Host country governance and the African land rush: 7 reasons why large-scale farmland investments fail to contribute to sustainable development

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FTA

Authors: Schoneveld, G.C.

The large social and environmental footprint of rising investor demand for Africa’s farmland has in recent years become a much-examined area of enquiry. This has produced a rich body of literature that has generated valuable insights into the underlying drivers, trends, social and environmental impacts, discursive implications, and global governance options. Host country governance dynamics have in contrast remained an unexplored theme, despite its central role in facilitating and legitimizing unsustainable farmland investments. This article contributes to this research gap by synthesizing results and lessons from 38 case studies conducted in Ethiopia, Ghana, Nigeria, and Zambia. It shows how and why large-scale farmland investments are often synonymous with displacement, dispossession, and environmental degradation and, thereby, highlights seven outcome determinants that merit more explicit treatment in academic and policy discourse.

Source: CIFOR Publications

Publication Year: 2016

ISSN: 0016-7185

Source: Geoforum

DOI: 10.1016/j.geoforum.2016.12.007


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