This is a presentation by Isilda Nhantumbo, senior researcher at the International Institute for Environment and Development (IIED), on financing forest linked small- and medium-sized enterprises (SMEs). Nhantumbo opened the session on decentralised forestry finance at the Money Where It Matters (MWIM) event, held in London from 7-8 December 2016. The purpose of the MWIM event was to reflect on our insights and explore further how financing mechanisms can more effectively channel resources to the local level, and identify opportunities to increase flows of finance to the local level in new contexts for development assistance and national investment. Participants at the event also agreed on outstanding questions that require further research on finance for and with local actors to achieve the effective use and management of funds to deliver climate resilient sustainable development. More details: https://www.iied.org/promoting-local-access-development-climate-finance

1. Money where it matters, London 7-8 December 2016 1
Isilda Nhantumbo
8/12/2016Author name
Date
Isilda Nhantumbo
8/12/2016
Strength in numbers, greater
impacts for people and planet
Financing Forest-
linked SMEs

2. Money where it matters, London 7-8 December 2016 2
Isilda Nhantumbo
8/12/2016
Forests at IIED
Investment in
equitable
locally
controlled
sustainable
forests
Governance
Sustainable, viable
and inclusive
enterprises
Climate change
and financing

3. Money where it matters, London 7-8 December 2016 3
Isilda Nhantumbo
8/12/2016
Aggregation
quantity, quality, time
Marketing
advertising / retailing
The Market
Secure
legal
rights
Business
capacity
Technical
know-
how
Strong
enterprise
-oriented
organisati
on
1. Rights-based advocacy
3. Technical extension
2.Enterprisesupport
4.Organisation
Right-
holders
manage
Natural
resources
and need
CapitalCapacity
Producers
Cooperatives
Associations
Federations
Learning and
exchange
Risk
assessment
and
mitigation
measures
Finance and
investment for
sustainable
transformation of
forest landscapes,
people’s
livelihoods,
economies and
climate impacts

4. Money where it matters, London 7-8 December 2016 4
Isilda Nhantumbo
8/12/2016
Drivers
of DD
Unsustainable
logging
Unsustainable
agriculture
Unsustainable
extraction of
NTFP
Unsustainable
biomass
production and
consumption
Multiple resources, multiple users and drivers, links
between rural and urban, domestic and international
markets
SMEs – potential high multiplier effect
Addressing several SDGs – climate action, inclusive
growth, employment, gender equality
Forests landscapes and sustainable forest management for REDD+

5. Money where it matters, London 7-8 December 2016 5
Isilda Nhantumbo
8/12/2016
204,000 ha of 61,000 deforested
Example - Forest SMEs in Mozambique
10,000 ha, 500 m3/yr, 5 years
Intervention = transition to forest concessionaires
G24 = front runners – 9 forest concessions

6. Money where it matters, London 7-8 December 2016 6
Isilda Nhantumbo
8/12/2016
Mobilization of
SME
Training in
partnership with
government
Zoning
Inventory
Management plan
Reforestation plan
Business plan
Value addition
Consolidation of
businesses
Forming companies
Statutes
Registration
Public finance – bilateral donor
SMEs buy in and engagement
Additional
sources
of
finance?
Banks and
microfinance
institutions
Private investors
Public – domestic
sources, bilateral
and multilateral
agencies
Investment
In sustainable
viable and
Inclusive
businesses
Investment in enabling conditions
For land users and service
providers/intermediaries

7. Money where it matters, London 7-8 December 2016 7
Isilda Nhantumbo
8/12/2016
Access to
finance by
SMEs –
challenges for
investments in
sustainable and
inclusive forest and
agriculture
businesses
Interest rates
– the cost of
lending or
borrowing
Rate of
return – for
lender only?
Repayment
period – short
versus long
term investmentScale –
transaction
costs vs
cumulative net
economic,
social and
potentially
environmental
and climate
gains
Risk –
perceived and
real
The grace
period – how
soon can the
repayment start
Collateral or guarantees –
preference for assets such as
land, buildings and equipment
associated with liquidity
Business management capacity
– production potential,
technology and markets;
financial management systems
by beneficiaries
Legal registration
Natural disasters – floods,
droughts, wind storms, fire,…
Analysing barriers and opportunities to unlocking
finance to SMEs in Guatemala and Mozambique

8. Money where it matters, London 7-8 December 2016 8
Isilda Nhantumbo
8/12/2016
Questions for discussion
What are the barriers and challenges to
financing forest-linked SMEs?
How can we scale up good practice?
What do we do next?