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  • The what, how and why of inclusive finance for sustainable landscapes

The what, how and why of inclusive finance for sustainable landscapes

Farmers weed rice fields in Dintor village, Indonesia. Photo by A. Erlangga/CIFOR
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Cabbage plantation areas on the slope of mount Gede Pangrango Sukabumi, West Java, Indonesia. Photo by R. Martin/CIFOR

Every year, hundreds of billions of dollars are invested into the land use sector. Currently, almost all of these funds are spent in support of conventional land use practices, generally contributing to environmental degradation and hampering progress toward the Sustainable Development Goals.

But what if we could turn this around? What if we could instead invest these billions of dollars into making landscapes more sustainable and inclusive of the rural poor?

To explore this potential, the CGIAR Research Program on Forestry, Trees and Agroforestry (FTA), Tropenbos International (TBI) and the
Center for International Forestry Research (CIFOR) set out to gather information from a range of experts, including financial service providers. So far, eight interviews and a summary note have been published. Recently, a webinar discussed the findings, focusing on barriers, solutions and unanswered questions.

Read also: Summary and discussion: Inclusive finance interviews

Big bucks for landscapes

The idea behind ‘inclusive finance’ is to leverage a growing appetite for new financial instruments for good. Fund managers and non-governmental organizations (NGOs) are piloting new models that help reorient investments toward inclusive and environmentally responsible land use practices.

A farmer displays cowpeas at the weekly market in Chiana, Ghana. Photo by A. Fassio/CIFOR

While many different models exist, the recent webinar highlighted two in particular. Pauline Nantongo Kalunda, the executive director of ECOTRUST in Uganda, explained that her organization specializes in conservation finance. It works with poor smallholder farmers, who depend on natural resources for all their basic needs and who are far removed from markets and sources of financing.

“What my organization does is … identify the resources they live with and the new land use options they could adopt, and then we package these into bankable opportunities to be able to access multiple finance sources throughout the gestation period for sustainable land use,” Kalunda said.

After sustainable land use practices have been established, often with help from donor funding or impact investors, ECOTRUST quantifies the resulting ecosystem services and sells them. For example, if a new land management practice results in greater carbon sequestration, carbon credits can be sold on the global carbon market. The returns can be reinvested in sustainable land use, creating a positive feedback loop.

This approach resonated with the webinar’s second presenter, Juan Carlos Gonzalez Aybar, an impact investment manager at Althelia Funds. His work includes searching for the kind of bankable prospects that ECOTRUST develops. Althelia Funds seek out investments that conserve protected areas and strengthen farmer cooperatives, and they gain their returns when they sell earned carbon credits on the carbon markets, while enabling the cooperatives to sell their produce on the cacao and coffee markets. Aybar said that while the shareholders backing these funds sit on “big bucks” and want to create an impact, they are looking for the right projects.

“An opportunity is a little bit more than an idea – it’s not enough to know that we should probably invest in the Amazon or the highlands of Peru. We pitch opportunities to investors as an investment product, we raise the funds and we deploy it,” he explained.

Barriers to success

Beyond a shortage of suitable investment opportunities, other barriers for taking inclusive finance to scale also exist. The webinar’s third presenter, Marco Boscolo, forestry officer at the Food and Agriculture Organization of the United Nations (FAO), mentioned a lack of financial literacy and business management skills in local communities as a persistent challenge.

A woman carries vegetables in Yangole, DRC. Photo by A. Fassio/CIFOR

“I want to highlight the importance of strengthening the organization of these small producers and to develop human capacity, including financial literacy,” he said. He went on to say that it is very important to have the right mindset, likening smallholders to ‘sleeping giants’ who can achieve great things as long as they have access to the necessary resources.

FAO, whose mandate includes advising governments on how to manage new opportunities for poverty reduction, such as through inclusive finance, have developed guidelines on how different players can engage in inclusive value chains.

Another challenge is finding institutions that can attract and subsequently distribute funding. Local banks or cooperatives, for example, might either not be present or cannot be accessed by all members of a community.

Althelia Funds therefore relies on existing local institutions. “NGOs are great catalyzers. They have the habit of administrating external funding, and they have the social and technical capital to be the aggregator of the financing,” said Aybar.

Read also: Linking smallholders to existing wood value chains for sustainable supply

A risky reputation

“Things like forests – they are looked at like resources to bring in income, but not necessarily resources that need to be invested in,” said Kalunda, pointing to another stumbling block in Uganda and elsewhere: Investing in landscapes and smallholders is still perceived as risky.

“Local bankers may only know what they read in the newspaper, which is maybe about invasions and wildfires, so forestry is not really seen as a business with potential,” said Boscolo.

Farmers harvest rice paddies in Dintor village, Indonesia. Photo by A. Erlangga/CIFOR

According to Aybar, investors’ reluctance can be partly blamed on the recent financial crisis that led many to experience large losses. Yet achievements such as the Paris Climate Agreement and a growing portfolio of successful landscape investments are likely to increase investors’ appetites. “Few investors are ready to be the first ones to raise money, but now that we’ll have a track record, others will come,” Aybar said.

Finally, national governments have an important role to play. They can create an enabling environment by ensuring that rules and regulations are clear and enforced, and they can promote public finance instruments. Such efforts could also help mobilize more in-country financing of landscape investments.

Proof of concept

While the potential for inclusive finance investments for sustainable landscapes has been established, many questions remain unanswered. First of all, some of the basics are still being explored – how is inclusive finance defined, who can benefit and what models work well?

Boscolo reiterated the need to document and share case studies and business models that have proved successful. FAO is also working to establish forest finance information hubs to help governments learn more about these mechanisms.

A farmer sits near a collection of groundnuts near Chiana, Ghana. Photo by A. Fassio/CIFOR

A second line of questioning is focused on impacts. Is there a risk that investors are only seeking a social license to operate, rather than large-scale transformative change? One webinar participant put it like this: There is a danger of facilitating cherry-picking of the very best, most profitable productive asset projects, yet never reaching scale as a consequence.

“In general, investing in landscapes and making this financing inclusive is already a huge challenge, so if there are situations that we can call cherry-picking, then let’s learn from them,” answered Boscolo. “We still need to demonstrate that it can be done.”

Aybar shared the sentiment that establishing proof of concept is an important first step: “We need to get out of our comfort zone, go to new frontiers and keep [taking] risk[s].”

By Marianne Gadeberg, communications specialist.


This event was organized by the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) and hosted by the Global Landscapes Forum (GLF). The event is part of a project involving FTA, Tropenbos International (TBI) and the Center for International Forestry Research (CIFOR). 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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  • Time to rethink the role of trees, forests and agroforestry in the fight against climate change

Time to rethink the role of trees, forests and agroforestry in the fight against climate change

Open lands used for cabbage plantations in Sukabumi, Jawa Barat, Indonesia. Photo by R.Martin/CIFOR
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The role of forests and trees in mitigating climate change and capturing and storing carbon in biomass and soil is well recognized. Over the past few decades, a variety of schemes, including REDD, REDD+,  4per1000 and AFR100 have been designed to leverage this mitigation potential.

An Acai nursery in Acre, Brazil. Photo by K. Evans/CIFOR

However, much less attention has been given to the role of forests and trees in helping farmers and farm systems adapt to climate change. Today, with climate change impacts already having immediate, dramatic impacts on smallholder farmers, it is time to have a more balanced approach.

That’s why we are calling for a shift of focus from trees and mitigation to trees and adaptation. There is a need to explore what forests, trees and agroforestry can bring to the adaptation of other sectors, particularly agriculture.

This coincides with a need to change perspectives, from a dominant global perspective centered on carbon, to a local perspective centered on what works for farmers in a particular place. There is growing understanding that tree planting initiatives for mitigation won’t happen unless they benefit farmers locally. Farmers, however, will plant trees if they see how they help their livelihood systems become more resilient to climate change.

At the recent 4th World Congress on Agroforestry, our colleagues from the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) gave a series of presentations that illustrates this farmer-centered, place-based approach. They showed how agroforestry can allow farmers to adapt to climate change, improve their livelihoods and contribute to resilient systems, while also working toward mitigation objectives.

Read also: Agroforestry: Development underdog headed for center stage in global sustainability efforts

Trees for adaptation

During the congress, Roeland Kindt (ICRAF) and collaborators presented their work on a climate change atlas being prepared for Africa, with habitat change projected for 150 tree species native to Africa. This work follows a publication by World Agroforestry (ICRAF), in collaboration with Bioversity International, CATIE and Hivos, on habitat suitability maps for 54 tree species that are widely used in Central America for shade in coffee or cocoa agroforestry systems.

Tea pickers at work in Pangkalan Limus village, Mount Halimun Salak National Park, West Java, Indonesia. Photo by A. Erlangga/CIFOR

To adapt to climate change, preserving the diversity of genetic resources is crucial. Alice Muchugi (ICRAF) and collaborators explored the challenges relating to the conservation of high-value tree genetic resources and proposed options to facilitate their conservation and use.

In order to better achieve restoration targets through agroforestry, Lalisa Duguma (ICRAF) and collaborators proposed to change the discourse from “tree planting” to “tree growing”. They highlighted the discrepancy between the short time span of most restoration projects and the time needed to ensure a good survival rate of planted trees, especially when accounting for future shifts in climate.

Soil organic carbon

The increase of soil organic carbon, an indicator of carbon sequestered, should also be seen as an adaptation measure. It is key to soil fertility and to water retention and storage in the soil. It  can therefore help boost and stabilize the productivity of agroforestry systems, even in the face of climate change impacts.

A study by Sari Pitkänen and collaborators conducted in Southeast Sulawesi, Indonesia, showed that carbon stocks in agroforestry systems correlate with tree diversity.

Amango plantation in Yalka village, Burkina Faso. Photo by O. Girard/CIFOR

However, despite knowing the importance of soil organic carbon, measuring it has long been slow, expensive and difficult to standardize. In response to this, Keith Shepherd and collaborators from ICRAF have tested infrared spectroscopy technology that can provide a robust, low-cost, integrated indicator of soil organic carbon levels. They have demonstrated that inexpensive handheld infrared instruments can be used for measuring soil health changes.

Being able to easily measure soil organic carbon levels allows for evaluating the impacts of restoration initiatives. In another study, Ermias Aynekulu (ICRAF) and collaborators examined the effects of two decades of annual prescribed burning of grazing lands in Burkina Faso and three decades of livestock exclosures in Ethiopia.

Shepherd suggested prioritizing efforts to promote good land management practices at scale to prevent carbon losses, rather than trying to restore already degraded land. This would mean looking at policy interventions to prevent degradation and maintain or enhance soil fertility – for example by promoting agroforestry practices.

Read also: A five-part road map for how to succeed with agroforestry

Local knowledge and land restoration

Land restoration can play a considerable role in addressing climate change, both adaptation and mitigation, and for this agroforestry is key. Several presentations at the congress explored some of the dimensions that determine the likelihood of success for restoration projects. Key among these factors were accounting for and leveraging local knowledge.

A farmer in Tintilou village, Burkina Faso. Photo by O. Girard for Center for International Forestry Research (CIFOR).

Mary Crossland (Bangor University) and collaborators, in a study in northwest Ethiopia, noted that national objectives and local perceptions and priorities are often different. Local actors are often reluctant to accept the exclosure of areas that are not yet highly degraded, even though it has been shown to be a more effective strategy than focusing on very degraded land. Farmers with a large amount of livestock or little land were strongly opposed to exclosures. This example shows the need to understand how livelihoods interact with different restoration interventions and to take measures that compensate for their impacts on the most vulnerable people.

Anne Kuria (ICRAF) and collaborators explored the role local knowledge can play in adapting land restoration options to local contexts and farmers’ circumstances in Ethiopian drylands. Farmers identified 12 contextual factors that influence the suitability of restoration options for local contexts. Biophysical factors were soil erosion type, soil type, soil depth, slope of the field, field location along a slope and field size. Socioeconomic factors were livestock management systems, land tenure systems, labor, gender, technology and skills. This study also demonstrated that farmers utilized their local knowledge to adapt and modify land restoration interventions to suit their needs and context.

Making agroforestry count

Understanding the potential of agroforestry as a climate change adaptation strategy is one thing, but how can it become a key element of countries’ climate policies?

Here, key mechanisms are the national adaptation plans (NAPs) that countries are preparing under the United Nations Framework Convention on Climate Change (UNFCCC) as an opportunity. Ninety-one countries are currently in the process of developing their national adaptation plans.

An organic cabbage plantation on the mountain of Gede Pangrango Sukabumi, West Java, Indonesia. Photo by R. Martin/CIFOR

In a review that we conducted of the 15 national adaptation plans published so far, the word ‘agroforestry’ is present in two-thirds of the plans, but agroforestry practices are referenced more frequently, as a means of adaptation and as serving a great variety of purposes related to natural resource management. These include restoring degraded land, reducing soil erosion, restoring water catchments, protecting water tanks and rivers, protecting against wind and storms and providing shade.

These recommendations generally focus on single biophysical benefits and often neglect integration of the trees with other crops as well as agroforestry’s potential socioeconomic benefits. The NAPs are generally silent on measures related to the enabling environment needed for planting trees, such as measures for tenure as well as seed and seedling systems.

Because the UNFCCC clearly says that the NAPs have to be guided by the “best available science”, we now have a huge responsibility to bring scientific information to the attention of decision-makers.

By Vincent Gitz, Director, FTA and Alexandre Meybeck, Senior Technical Advisor, FTA.


The CGIAR Research Program on Forests, Trees and Agroforestry (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, ICRAF, INBAR and TBI. FTA’s work is supported by the CGIAR Trust Fund.

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  • Involving youth in restoration and conservation

Involving youth in restoration and conservation

Local people travel on "peque peque" in Cashiboya, Loreto Province, Peru. Photo by M. del Aguila Guerrero/CIFOR
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During the Global Landscapes Forum (GLF) in Bonn, Germany, in December 2018, the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) spoke with Vania Olmos Lau, a biologist, youth representative for the GLF, and youth representative for the Youth in Landscapes Initiative (YIL).

At the GLF, Olmos Lau was part of the panel titled, “Delivery of quality and diverse planting material is a major constraint for restoration: What solutions, what emerging needs?”, hosted by FTA with Bioversity InternationalWorld Agroforestry (ICRAF), and supported by the Food and Agriculture Organization of the United Nations (FAO).

During the session, Olmos Lau emphasized that achieving the Bonn Challenge is also important to youth. She cited as examples a lack of knowledge and access to seeds in Paraguay, as well as bureaucratic hurdles in Mexico, as existing barriers to restoration.

Read our interview with Vania Olmos Lau here, edited for length and clarity.

What practical actions can young people take to protect forests and trees?

Vegetable field in Gunung Simpang, West Java, Indonesia. Photo by Y. Indriatmoko/CIFOR

First of all, it is important that the people that care about this, that already have experience, and that already have a good institutional base, approach the young people that are interested, have the enthusiasm, and have the will.

These young people know that the protection of forests and trees is important, but they might not know all the details. In this case, people with experience can help young people focus their efforts correctly, on things like restoration.

Read also: Using forests to support wellness

How can we strengthen the capacity of local communities if younger generations lack interest and knowledge is centered on older generations?

It needs to be done in a fun way. Youth everywhere have so many distractions. With the Internet we see all these cool things happening in the cities, and not in rural areas. We need to find a way to make the integration between generations fun. And to make agriculture, and nature, fun for everyone – something that is attractive, and something that people want to do.

What I’ve actually learned from the older people in my family is that we need to change and that a lot of these changes aren’t happening because we just don’t have the will, and because we have very internally ingrained habits. The new generation is paying attention to this and this is changing, but there’s a lot of resistance from the older generation to make these changes.

How can we move from restoration pledges toward restoration action?

A handful of shelled Brazil nuts, Puerto Maldonado, Madre de Dios, Peru. Photo by M. Simola/CIFOR

It’s very important to use local species, because what I’ve seen in the field a lot is that when you introduce species that might be regionally local, but not adapted to a specific site – and this can happen a lot in mountainous regions where soil and climate can change quite quickly – these relatively exotic plants die a lot.

At least in the case of Mexico, where we’ve had experience, local communities notice that the plants that other institutions bring have a higher mortality rate. And when they start experimenting with the seeds from local trees, they have a much higher survival rate.

What role can seed systems play?

In Mexico, there is a lot of exchange of seeds. Traditionally, communities have done this for a very long time. That’s why we are the center of origin for so many important agricultural species, especially corn. Corn is relevant for all the world, and it’s very important to support communities to continue to do this and ensure that they are not influenced by the seeds that are provided by the government and external companies, which, in many instances, can have a greater yield but at the cost of losing diversity. And as we know, with climate change, and with all these changes that we have to adapt to, having diversity is super important.

Read also: The right species for the right purpose

How can economic incentives support communities to restore and conserve forests?

Economic incentives should be focused first and foremost on conservation, through, for example, payment for ecosystem services. After the conservation of existing natural ecosystems is guaranteed, then economic incentives can focus on restoration.

Restoration is an opportunity to give youth and young people a chance to have a good job that means something and that is economically viable for them. In this regard there’s a lot of opportunity to involve youth.

When I was doing my thesis in Paraguay, for example, I compared how different land uses interact, and one of the land uses was a restoration project. It was interesting to see that the farmers were interested in restoration, and in trees, because wood was becoming very expensive in the region. They would therefore want forest on their land for their cattle.

This was very interesting because cattle, as we know, is a very important deforestation driver, but in this case, it was a reason to keep some forest on their land. It’s very important that we see this, and see how different land uses compete, or have synergies.

By the FTA communications team. 


The CGIAR Research Program on Forests, Trees and Agroforestry (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, ICRAF, INBAR and TBI. FTA’s work is supported by the CGIAR Trust Fund.

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  • The right species for the right purpose

The right species for the right purpose

Cengkeh (cloves) accounted for 27% of seedlings produced in project-sponsored nurseries. Photo by Endri Martini/ICRAF
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During the Global Landscapes Forum (GLF) in Bonn, Germany, in December 2018, the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) spoke to Charles Karangwa of the International Union for Conservation of Nature (IUCN) in Rwanda.

At the GLF, Karangwa was part of the panel titled, “Delivery of quality and diverse planting material is a major constraint for restoration: What solutions, what emerging needs?”, hosted by FTA with Bioversity InternationalWorld Agroforestry (ICRAF), and supported by the Food and Agriculture Organization of the United Nations (FAO).

The panel discussed how the ability to deliver diverse and quality seed and planting material is impacting pledges such as those made under the Bonn Challenge, which has now pledged 350 million hectares of degraded land globally for different forms of restoration by 2030. During the session, Karangwa explained that tree seed diversity determines the extent and speed to which ambitious restoration targets can be achieved.

Read our interview with Charles Karangwa here, edited for length and clarity.

Can you describe the restoration situation in Rwanda?

Rwanda is composed of 90 percent smallholder farmers, and it was engaged in restoration even before Rwanda committed to the Bonn Challenge in 2011. In Rwanda, agricultural practices, changes in climate, weather patterns, and population increases have affected land use and land cover, and the forest has been reduced to 30 percent.

Agricultural land has been degraded mostly because of subsistence farming. In addition, year after year, the population increases – and now with a total of more than 100 people per square kilometer, the land size is very small, and it’s used for many reasons, especially for subsistence farming. As such, restoration in Rwanda faces many challenges.

A native seed in Mau Forest, Kenya. Photo by P. Shepherd/CIFOR

Why must we invest more in knowledge and science?

Restoration is a long-term process. To regain ecological functionality and provide multiple benefits to people takes a long time – but it’s not that farmers don’t know what to do, or don’t know the importance of trees. It’s science which tells you how to restore land, and helps to predict the changes that are going to happen and be able to adapt.

We need knowledge, and we need science to adapt to climate change. Even smallholder farmers need this knowledge. Science is very important, and combined with local knowledge, it brings efficiency to restoration.

To give an example, when I was a child, I could see that the soil was fertile – you could see the biomass in the soil. However, because of over-farming, and using the same land for many years, the soil’s fertility reduced and now plant crops and trees no longer grow where we used to plant them. It’s really this conflict of use that needs science and adaptation.

Read also: Seed diversity vital to achieve landscape restoration pledges

Do trees compete with crops on farms?

This is very much linked to diversity, and conflicts. In my country, Rwanda, more than 80 percent of our trees are Eucalyptus, so we call it a monoculture. And we have 69 species of Eucalyptus across the country. If you take Eucalyptus, and plant it with beans, you won’t be able to harvest beans. Therefore, a farmer will initially think that trees are competing with their farm. But if you turn to agroforestry, and be selective about the kind of species you choose, a farmer will like the trees. They will understand that trees can increase the biomass in soil and increase production. Farmers sometimes see competition, depending on the type of species planted – and that’s where species diversity can play a role.

Watch: FTA at GLF: Using forests to support wellness

How can we move from restoration pledges toward restoration action?

We have already passed the 100 million hectares of land set by the Africa Forest Landscape Restoration Initiative (AFR100) – now we are at 110 million.

We have also surpassed the Bonn Challenge’s 150-million-hectare global target for 2020. Now we are at 168 million across the globe. So it’s really time now to move from pledge to implementation – and implementation is happening.

Planting Gnetum in Minwoho, Cameroon. Photo: O. Girard/CIFOR

Countries like Malawi have already decided to dedicate 7 million US dollars of domestic finance per year to restoration. Countries like Kenya and Uganda, and other countries in Africa, such as Niger and Burkina Faso, are already doing restoration on the ground. However, this really needs a lot of effort. It’s a movement from smallholders to policymakers, to financial partners, to development organizations, all of whom must work together and deliver these restoration movements.

The IUCN has established what we call a regional technical hub that supports countries in conducting assessments of their restoration opportunities, reviewing their policies, and supporting their financing streams, especially domestic finance, for restoration, and we have been doing this work across Africa.

By the FTA communications team.


The CGIAR Research Program on Forests, Trees and Agroforestry (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, ICRAF, INBAR and TBI. FTA’s work is supported by the CGIAR Trust Fund.

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  • Adapting land restoration to a changing climate: Embracing the knowns and unknowns

Adapting land restoration to a changing climate: Embracing the knowns and unknowns

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Key messages:

  • Land restoration will happen under climate change and different knowledge systems are needed to navigate uncertainties and plan adaptation.
  • The emergence of novel ecosystems presents a challenge for land restoration; they harbor unknown unknowns.
  • This brief presents key research linking land restoration and societal adaptation and an example of a practical framework for transformative adaptation.
  • It also proposes questions that can guide stakeholders in exploring different change narratives for adaptation and restoration planning.
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  • Guiding principles for sustainable bamboo forest management planning: Benishangul-Gumuz Regional State (BGRS)

Guiding principles for sustainable bamboo forest management planning: Benishangul-Gumuz Regional State (BGRS)

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Benishangul-Gumuz Regional State (BGRS) is the region of Ethiopia with the greatest bamboo forest cover. The resource has, however, encountered heavy degradation in recent years due to fires for farming and for hunting, mass flowering, unsustainable harvest, and land conversion. Bamboo, if harvested correctly, can become a valuable resource and a source of income for the rural population of BGRS. In order to do so, a management plan is needed at the regional level to provide guidance for future planning at the district level. This document, based on a desk study, field survey, direct observation, and a participatory mapping workshop, intends to provide this guidance for a sustainable bamboo forest management plan. It also gives recommendations on how to sustainably harvest bamboo, how to develop nurseries for future bamboo plantations, how to link bamboo forests with the private sector and the market, and the role bamboo could play in degraded land restoration.

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  • Catalyzing partnerships for reforestation of degraded land

Catalyzing partnerships for reforestation of degraded land

Aerial view of Southwest Mau Forest and neighbouring tea estates. Photo by Patrick Sheperd/CIFOR
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Charlotte van Andel. Photo by FMO

In this second edition of the “Innovative finance for sustainable landscapes” interview series, we hear from two sustainable finance experts from the Netherlands Development Finance Company (FMO). Steven Duyverman is a manager in FMO’s Agribusiness, Food and Water department and Charlotte van Andel is a senior environmental and social officer in the same department.

Steven Duyverman. Photo by FMO

Working in inclusive and green finance, FMO is ramping up its investments in the forestry sector. Duyverman and Van Andel reflect on how to apply their experience at the landscape level.

“Investors are reluctant to invest in landscapes in developing countries, since it is a new sector, with long payback periods and of uncertain risks. Such risks can be reduced by clarifying tenure rights, early engagement of local stakeholders in project development, strengthening partnerships and strengthening local capacities to implement best practices. Investors need to consider these if they really want to have an impact.”

How do you define ‘inclusive finance’ and why is it important?

Making finance inclusive is about reaching the bottom of the pyramid, so to speak, directly or indirectly. It must also focus on those so often left behind – the vulnerable, women, indigenous peoples and other marginalized groups. It is about increasing local employment, especially for the poorest, with decent and sustainable jobs that help improve local economies and reduce inequalities.

In forestry, outgrowers and employees, who are recruited locally to the largest extent possible, receive training. They are made aware of health and safety aspects, like using protective equipment when pruning or spraying. This equips them with skills and helps to ensure better livelihoods in the long term. Women are empowered and are often also seen as being more reliable and precise in certain tasks, such as in tree nurseries, allowing them to gain new knowledge and increase their own incomes.

With our forestry investments, we create 30–50 new jobs per 1,000 hectares of new plantations established. At the end of the day, FMO was established nearly 50 years ago not only to make money but, importantly, to create long-term development impact and to improve environmental and social conditions in the countries where it operates.

People gather under a tree. It takes time to find the most inclusive way of investing in the forestry sector. © FMO

What are the underlying reasons for the underfinancing of agricultural and forest businesses in developing countries?

One reason for underfinancing in the forestry sector is the reluctance of many to invest in a new sector, with long payback periods and unknown risks, in developing countries. For energy projects, for example, revenue streams and returns only come two or three years after the investment has been made. But investing in forestry requires a different view on cash flows, because even on the shortest cycles, it takes eight, 10, 12 years to start generating income from selling a marketable product (i.e. construction wood, electricity poles or wood chips), and before investors start to be repaid.

In such new markets, the risk is inherently higher than in more well-known investments with much shorter payback times that are perceived as ‘safer’. This does not just concern financial risk, but also – and inherent in inclusive finance – social and environmental risk. Establishing timber plantations is also a high-impact investment, and one of the cheapest means to make significant changes in mitigating climate and improving local economies and communities. However, given the complexity of large landscape-level forestry projects, getting these approved and implemented takes time. But we are gaining more experience in the sector, so we trust that efficiency will improve.

Another key issue for foreign investors is that working with local smallholders is difficult, as for them formal titles over the land they farm or want to reforest are sometimes impossible to acquire, and of uncertain legality if they do exist. Local authorities and land users sometimes have quite different views on what is needed, indicating that more dialogue is needed to increase understanding among all groups involved.

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

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

There is no right or wrong, but it is very important that we strive for sustainable development. That also means that we must ensure that business models are sustainable. Viability of a project requires financial, environmental and social standards to be met. For example, we require all our forestry clients to be Forest Stewardship Council (FSC) or Program for the Endorsement of Forest Certification (PEFC) certified.

We see that with a structured approach, income is created, deforestation is reduced and biodiversity improved. As a consequence, people have new alternative sources of cash income rather than depending on illegal charcoal making or poaching. At the same time, having additional income also tends to enhance development and security in local communities.

Our strength lies in catalyzing other partners; hence we need partnerships, partnerships and more partnerships to more effectively progress in the reforestation of degraded land. But for alignment reasons, we also require the support of governments to politically back up plans for land reforestation and to aid where adjacent commercial plantation forestry can be developed as a future mitigation toward deforestation.

We need more cooperation and collaboration, between us as a development finance institution and the private sector, with UN organizations, with national governments and their departments, with NGOs and civil society. To successfully nurture opportunities for growth in the restoration economy, cooperation of technology startups, smallholder finance and timber companies open doors to inspiring venture capital, private equity and impact investors who may know little about such landscape restoration opportunities.

Read more: Background note on FTA financial innovations for sustainable landscapes interviews

How is your organization addressing inclusive finance, and what are your experiences and key lessons?

At FMO, we provide ever more loans and equity to support projects with landscape-level objectives, and that have social and environmental benefits at their core. We have learned to include contextual risks. This triggers an early focus on risks outside the influence of our project, on how to better ensure indigenous peoples’ rights are respected, including land ownership and user rights, and using stakeholder engagement safeguards even more. We now also realize that it is not always possible to be able to do the right thing at the right time. Circumstances can be such that land issues cannot be fully resolved, or that human rights defenders are threatened, or that deforestation still takes place around the client’s activities. In such cases, we have developed ‘early warning systems’ and if seen to be so, we decide not to invest in unsustainable projects.

Companies that we invest in must have good and transparent relationships with local and legal authorities that have influence over forests and landscape. We also expect them to hear the voices of the people, of local communities, and to fully assess their needs. This means they must invest considerable time from an early stage, and talk to all involved, communities and traditional leaders, occasional users such as nomadic pastoralists, district and forestry authorities, NGOs or knowledge partners.

Going full circle, we also never forget local legislation, such as on forest protection, but also deal with the livelihood impacts of (illegal) users according to the World Bank’s International Finance Corporation (IFC) Performance Standards. Squaring that circle is not always easy. But only then can we add value and have the impact we are looking for.

One key lesson is that we used to give a lower priority to stakeholder engagement when we focused on returns. But now, at the very start of every investment, we expect companies to start talking with communities to get them to really understand the expected and potential changes, and agree in advance on how benefits can be shared. These include local job opportunities, training in pruning, use of fertilizers and safe pesticide application, and building roads, which can also initiate a village market, access to healthcare and schooling.

Training and supervising are important complements to inclusive finance, leading to sustainable safe jobs that support sustainable landscapes. © FMO

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

In Ghana and Sierra Leone, FMO is supporting a project that has reforested 10,000 hectares of formerly degraded land since 2013 and is working toward adding up to another 9,000 hectares of new plantations. In Laos, we are funding the expansion of a forestry plantation from 3,400 to 15,000 hectares, including investment to support the building of a new sawmill and wood-processing facilities. This is another example of how we are implementing an integrated, long-term investment strategy.

Helping to establish such large areas of forest plantations is also helping FMO achieve its aim of becoming carbon neutral, in line with the Paris Accord. For now, FMO has approved investment of around €40 million a year in new forest plantations. Innovative financial products are necessary, as repayments may only start after 5–7 years, so in the early years there will be no cash flow available to pay even the interest on the loans.

Furthermore, training is an important tool that builds knowledge, but also helps companies to ensure that environmental and social concerns are integrated into their processing system. So, we also provide financial support for analysis, studies, training and implementation, for instance for more efficient use of scarce water resources and for waste-water treatment.

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

The most important single factor that would increase investment is to support systems for registering and securing land rights, so that smallholders and foreign investors alike have formal ownership titles for the land they farm or want to plant with trees. And, of course, this is not just a need for development banks – it is a basic need for all land holders, independent of any future investment. Without formal titles, smallholder options are limited in many ways.

We work for a future where international development finance is no longer needed, where sufficient capital is available nationally, to support the establishment and growth of sustainable businesses in all sectors. And we also hope to see that environmental and social standards widely implemented in developed markets are also fully accepted in emerging markets and developing countries.

In that future, we expect old and new forms of finance to blend seamlessly, also mixing traditional approaches with the use of new technologies, working toward a circular and inclusive economy. This is what we are striving for. But just as it takes time for trees to grow, it will also take time to find the most inclusive way of investing in this sector. We are already seeing shifts.

By Nick Pasiecznik, Tropenbos International.

This interview has also been published on the Tropenbos International 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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  • Catalyzing partnerships for reforestation of degraded land

Catalyzing partnerships for reforestation of degraded land

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Charlotte van Andel. Photo by FMO

In this second edition of the “Innovative finance for sustainable landscapes” interview series, we hear from two sustainable finance experts from the Netherlands Development Finance Company (FMO). Steven Duyverman is a manager in FMO’s Agribusiness, Food and Water department and Charlotte van Andel is a senior environmental and social officer in the same department.

Steven Duyverman. Photo by FMO

Working in inclusive and green finance, FMO is ramping up its investments in the forestry sector. Duyverman and Van Andel reflect on how to apply their experience at the landscape level.

“Investors are reluctant to invest in landscapes in developing countries, since it is a new sector, with long payback periods and of uncertain risks. Such risks can be reduced by clarifying tenure rights, early engagement of local stakeholders in project development, strengthening partnerships and strengthening local capacities to implement best practices. Investors need to consider these if they really want to have an impact.”

How do you define ‘inclusive finance’ and why is it important?

Making finance inclusive is about reaching the bottom of the pyramid, so to speak, directly or indirectly. It must also focus on those so often left behind – the vulnerable, women, indigenous peoples and other marginalized groups. It is about increasing local employment, especially for the poorest, with decent and sustainable jobs that help improve local economies and reduce inequalities.

In forestry, outgrowers and employees, who are recruited locally to the largest extent possible, receive training. They are made aware of health and safety aspects, like using protective equipment when pruning or spraying. This equips them with skills and helps to ensure better livelihoods in the long term. Women are empowered and are often also seen as being more reliable and precise in certain tasks, such as in tree nurseries, allowing them to gain new knowledge and increase their own incomes.

With our forestry investments, we create 30–50 new jobs per 1,000 hectares of new plantations established. At the end of the day, FMO was established nearly 50 years ago not only to make money but, importantly, to create long-term development impact and to improve environmental and social conditions in the countries where it operates.

People gather under a tree. It takes time to find the most inclusive way of investing in the forestry sector. © FMO

What are the underlying reasons for the underfinancing of agricultural and forest businesses in developing countries?

One reason for underfinancing in the forestry sector is the reluctance of many to invest in a new sector, with long payback periods and unknown risks, in developing countries. For energy projects, for example, revenue streams and returns only come two or three years after the investment has been made. But investing in forestry requires a different view on cash flows, because even on the shortest cycles, it takes eight, 10, 12 years to start generating income from selling a marketable product (i.e. construction wood, electricity poles or wood chips), and before investors start to be repaid.

In such new markets, the risk is inherently higher than in more well-known investments with much shorter payback times that are perceived as ‘safer’. This does not just concern financial risk, but also – and inherent in inclusive finance – social and environmental risk. Establishing timber plantations is also a high-impact investment, and one of the cheapest means to make significant changes in mitigating climate and improving local economies and communities. However, given the complexity of large landscape-level forestry projects, getting these approved and implemented takes time. But we are gaining more experience in the sector, so we trust that efficiency will improve.

Another key issue for foreign investors is that working with local smallholders is difficult, as for them formal titles over the land they farm or want to reforest are sometimes impossible to acquire, and of uncertain legality if they do exist. Local authorities and land users sometimes have quite different views on what is needed, indicating that more dialogue is needed to increase understanding among all groups involved.

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

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

There is no right or wrong, but it is very important that we strive for sustainable development. That also means that we must ensure that business models are sustainable. Viability of a project requires financial, environmental and social standards to be met. For example, we require all our forestry clients to be Forest Stewardship Council (FSC) or Program for the Endorsement of Forest Certification (PEFC) certified.

We see that with a structured approach, income is created, deforestation is reduced and biodiversity improved. As a consequence, people have new alternative sources of cash income rather than depending on illegal charcoal making or poaching. At the same time, having additional income also tends to enhance development and security in local communities.

Our strength lies in catalyzing other partners; hence we need partnerships, partnerships and more partnerships to more effectively progress in the reforestation of degraded land. But for alignment reasons, we also require the support of governments to politically back up plans for land reforestation and to aid where adjacent commercial plantation forestry can be developed as a future mitigation toward deforestation.

We need more cooperation and collaboration, between us as a development finance institution and the private sector, with UN organizations, with national governments and their departments, with NGOs and civil society. To successfully nurture opportunities for growth in the restoration economy, cooperation of technology startups, smallholder finance and timber companies open doors to inspiring venture capital, private equity and impact investors who may know little about such landscape restoration opportunities.

Read more: Background note on FTA financial innovations for sustainable landscapes interviews

How is your organization addressing inclusive finance, and what are your experiences and key lessons?

At FMO, we provide ever more loans and equity to support projects with landscape-level objectives, and that have social and environmental benefits at their core. We have learned to include contextual risks. This triggers an early focus on risks outside the influence of our project, on how to better ensure indigenous peoples’ rights are respected, including land ownership and user rights, and using stakeholder engagement safeguards even more. We now also realize that it is not always possible to be able to do the right thing at the right time. Circumstances can be such that land issues cannot be fully resolved, or that human rights defenders are threatened, or that deforestation still takes place around the client’s activities. In such cases, we have developed ‘early warning systems’ and if seen to be so, we decide not to invest in unsustainable projects.

Companies that we invest in must have good and transparent relationships with local and legal authorities that have influence over forests and landscape. We also expect them to hear the voices of the people, of local communities, and to fully assess their needs. This means they must invest considerable time from an early stage, and talk to all involved, communities and traditional leaders, occasional users such as nomadic pastoralists, district and forestry authorities, NGOs or knowledge partners.

Going full circle, we also never forget local legislation, such as on forest protection, but also deal with the livelihood impacts of (illegal) users according to the World Bank’s International Finance Corporation (IFC) Performance Standards. Squaring that circle is not always easy. But only then can we add value and have the impact we are looking for.

One key lesson is that we used to give a lower priority to stakeholder engagement when we focused on returns. But now, at the very start of every investment, we expect companies to start talking with communities to get them to really understand the expected and potential changes, and agree in advance on how benefits can be shared. These include local job opportunities, training in pruning, use of fertilizers and safe pesticide application, and building roads, which can also initiate a village market, access to healthcare and schooling.

Training and supervising are important complements to inclusive finance, leading to sustainable safe jobs that support sustainable landscapes. © FMO

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

In Ghana and Sierra Leone, FMO is supporting a project that has reforested 10,000 hectares of formerly degraded land since 2013 and is working toward adding up to another 9,000 hectares of new plantations. In Laos, we are funding the expansion of a forestry plantation from 3,400 to 15,000 hectares, including investment to support the building of a new sawmill and wood-processing facilities. This is another example of how we are implementing an integrated, long-term investment strategy.

Helping to establish such large areas of forest plantations is also helping FMO achieve its aim of becoming carbon neutral, in line with the Paris Accord. For now, FMO has approved investment of around €40 million a year in new forest plantations. Innovative financial products are necessary, as repayments may only start after 5–7 years, so in the early years there will be no cash flow available to pay even the interest on the loans.

Furthermore, training is an important tool that builds knowledge, but also helps companies to ensure that environmental and social concerns are integrated into their processing system. So, we also provide financial support for analysis, studies, training and implementation, for instance for more efficient use of scarce water resources and for waste-water treatment.

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

The most important single factor that would increase investment is to support systems for registering and securing land rights, so that smallholders and foreign investors alike have formal ownership titles for the land they farm or want to plant with trees. And, of course, this is not just a need for development banks – it is a basic need for all land holders, independent of any future investment. Without formal titles, smallholder options are limited in many ways.

We work for a future where international development finance is no longer needed, where sufficient capital is available nationally, to support the establishment and growth of sustainable businesses in all sectors. And we also hope to see that environmental and social standards widely implemented in developed markets are also fully accepted in emerging markets and developing countries.

In that future, we expect old and new forms of finance to blend seamlessly, also mixing traditional approaches with the use of new technologies, working toward a circular and inclusive economy. This is what we are striving for. But just as it takes time for trees to grow, it will also take time to find the most inclusive way of investing in this sector. We are already seeing shifts.

By Nick Pasiecznik, Tropenbos International.

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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  • Tamanu trees making money in arid Wonogiri, new study shows

Tamanu trees making money in arid Wonogiri, new study shows

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FTA COMMUNICATIONS TEAM

Bees gather on organic honeycomb in West Kalimantan. Photo by L. McHugh/CIFOR

The tamanu tree (Calophyllum inophyllum) has been helping humans out since prehistoric times.

Tamanu is native to tropical Asia, and was carried by Austronesians on their migrations to Oceania and Madagascar: the tree was as valuable to these voyagers as oak was to their European counterparts. Also known as mastwood, tamanu has been used by shipbuilders for millennia because it grows tall and strong in sandy, rocky areas.

In Polynesia, indigenous groups affectionately refer to the tamanu tree as “beauty leaf,” as they use the oil from the fruit kernel as a moisturiser and healing balm. They also use it as a hair grease and painkiller. These days, tamanu oil is used internationally in a range of skin and hair-care products.

Now, the fragrant, deep brown oil may serve another purpose: bioenergy. A mature tamanu grove can yield up to 20 tons of crude oil per hectare each year. In Wonogiri district of Central Java, Indonesia, a new study shows that cultivating tamanu for bioenergy on degraded land can achieve multiple benefits for farmers while restoring the land, as well as helping to reduce the country’s reliance on fossil fuels.

Read more: Integrating bioenergy and food production on degraded landscapes in Indonesia for improved socioeconomic and environmental outcomes

Beyond oil palm

Indonesia has pledged to increase its biodiesel and bioethanol consumption to 30 percent and 20 percent respectively, of total energy consumption by 2025. However current levels of biofuel production are far from meeting these targets, and boosting production at the scale required comes with its own environmental challenges.

So far, almost all of the biofuel produced in the country has come from oil palm. But land conversion from food cropping to oil palm for biodiesel has an impact on food security. In many cases oil palm plantations have encroached upon rainforests and peatlands, threatening biodiversity and releasing carbon into the atmosphere.

Fresh palm oil fruit piled up in West Kalimantan, Indonesia. Photo by N. Sujana/CIFOR

This is why researchers have begun exploring alternative bioenergy options, looking at species with multiple uses that can grow on degraded land on which other crops struggle. A recent study showed that there are around 3.5 million hectares of degraded land across Indonesia that would be suitable for growing at least one of five key biodiesel and biomass species, including tamanu. As well as bioenergy, these crops are capable of improving soil function and boosting biodiversity, thus playing an important role in restoring the land.

Infographic: Nyamplung (Calophyllum inophyllum): Alternative bioenergy crop and powerful ally for land restoration

Farmers hit the honeypot

Planting trees on degraded lands is difficult, and the returns are slow. Farmers need other sources of income, too, if tamanu cultivation for biofuel is to be sustainable.

In Wonogiri, scientists from the Center for International Forestry Research (CIFOR), whose work is part of the CGIAR Research Program on Forests, Trees and Agroforestry (FTA), together with the Center for Forest Biotechnology and Tree Improvement Research and Development (CFBTI) and the Korean National Institute of Forest Science (NIFOS) sought to find out if the figures add up in the farmers’ favor.

They collected data from 20 farmers who grow tamanu on degraded land (which locals call nyamplung). The farmers intercrop the tree with maize, rice and peanuts, and make use of it in honey production.

The researchers found that while the rice and peanuts were not profitable, and the maize was only marginally so, farmers grew them anyway to feed their families. The big money, however, lay in honey production, which was almost 300 times more profitable than maize, said CIFOR scientist Syed Rahman. “We were all surprised to see just how profitable it was,” he added.

The results suggest that tamanu can be grown sustainably as part of an agroforestry system that also utilises honey production and subsistence crops in the area. What is needed now, says CFBTI senior scientist and professor Budi Leksono, is for the market for biofuels to be developed further to create economies of scale.

“The market for nyamplung oil is not really developed yet,” said Leksono. “But we’re anticipating an energy crisis, and [by doing this work now] we are preparing for the plantations of the future.”

However, the policy around this needs to be designed extremely carefully, cautioned Rahman. “Because it’s potentially so profitable,” he explained, “the risk is that people will expand this system to forestland, too.” He added that careful constraints must be applied to ensure it is cultivated only on degraded and underutilized lands.

The implications are exciting. As CIFOR senior scientist Himlal Baral noted, while national and global interests and commitments for forest landscape restoration are increasing, success so far has been limited by a lack of solid business cases or financial viability. “In order for funding to flow into landscape restoration, it needs to be profitable,” he said.

Tamanu-based systems may well offer a compelling case for restoration that is worth everybody’s while.

By Monica Evans, 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 the CGIAR Trust Fund.

This research was supported by the CIFOR Bioenergy project funded by NIFoS (National Institute of Forest Science, South Korea).

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  • Integrating bioenergy and food production on degraded landscapes in Indonesia for improved socioeconomic and environmental outcomes

Integrating bioenergy and food production on degraded landscapes in Indonesia for improved socioeconomic and environmental outcomes

Posted by

FTA COMMUNICATIONS TEAM

Growing bioenergy crops on degraded and underutilized land is a promising solution to meet the requirement for energy security, food security, and land restoration. This paper assesses the socioeconomic and environmental benefits of agroforestry systems based on nyamplung (tamanu) (Calophyllum inophyllum L.) in the Wonogiri district of Central Java, Indonesia. Data were collected through field observations and focus group discussions involving 20 farmers who intercrop nyamplung with maize, rice, and peanuts and utilize the species in honey production. Calculating each crop’s net present value (NPV) demonstrates that when grown as monocultures, staple crops rice and peanuts lead to negative profitability, while maize generates only a marginal profit; yet honey production utilizing nyamplung produces a NPV nearly 300 times greater than maize. However, when utilizing nyamplung, honey is also the commodity most sensitive to decreases in production, followed by nyamplung peanut and nyamplung rice combinations. While decreases in production have little effect on the NPVs of rice, peanuts, and maize, these annual crops can only be cultivated for a maximum of 6 years within the nyamplung’s 35-year cycle, due to canopy closure after this time. Nyamplung-based agroforestry systems can provide economic, social, and environmental gains on different scales. However, when considering the high profit potential of nyamplung combined with honey production, further research is needed to improve and develop bee husbandry practices so this becomes a viable option for local farmers.


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