This is a presentation by Anna Bolin, researcher at the International Institute for Environment and Development (IIED), which gives an overview of a case study on forest linked small- and medium-sized enterprises (SMEs) in Guatemala.
Bolin gave the presentation during a 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
Training Of Trainers FAI Eng. Basel Tilapia Welfare.pdf
Guatemala - progressive forest governance in support of small- and medium-sized enterprises (SMEs)
1. Anna.Bolin@iied.org 1
Anna Bolin
December 8th,
2016
Guatemala - progressive
forest governance in
support of SMEs
• National system for forestry
incentives: PINFOR & PINPEP
• US$ >$ 300 million 20 years,
• 430,000 ha of natural forest and
plantations established/managed, >1
million beneficiaries
• PROBOSQUE: US$ 625.7 million,
20,000 Jobs / year, 7.5 million farmers
• National alliance of forest
communities – 10 2nd level and 400 1st
level organisation 17.5% of
Guatemala’s forest cover, 30%
certified
2. Anna.Bolin@iied.org 2
Anna Bolin
December 8th,
2016
Forestry Incentives Programs
BANRURAL
BAM (Banco
Agrícola Mercantil)
FEDECOVERA
AND ASSOCIATED
COOPERATIVES
FIDOHSA
Financiera de
Occidente, Funding in
key industries for
sustainable development
(specialising in forestry)
FORESCOM
Financial Fund to
Promote Community
Forestry Development
Private Sector
National mechanisms
(Funds from: BANRURAL, FIDOHSA, BID, CATIE FINNFOR II, Forestry Concessions, MICOOPE)
PINFOR
(Forest producers with
legal ownership of the
land)
Forestry plantations
Management of natural
forest for protection
Management of natural
forest for production
Started: 1996
End date: 2016
PROBOSQUE
(Forest producers with legal
ownership of the land)
Forestry plantations
Management of natural
forest for protection
Management of natural
forest for production
Agroforestry Systems
(includes silvopastoral
systems)
Started: 2015
End date: 2045
PINPEP
(Smallholders without
legally ownership of the
land)
Forestry Plantations
Agroforestry Systems
Management of natural
forest for protection
Management of Natural
forest production
Started: 2010
End date: 2030
Public Sector
Funds obtained from: 1% of the Annual
Incomes Budget of the State of Guatemala,
per incentive program
Main objective: to promote forestry and
agroforestry activities related to
sustainable management, protection and
production
Options for forestry concessions MBR/options for
working capital and investment
Options for plantations (implementation and
harvesting)/options for working capital
MICOOPE
(Forestry loan, Coban
Cooperative)
BANRURAL
a) PINFOR loan
b) SME loan
Other mechanisms GuateCarbon
Financial mechanisms and options for forest SMEs
3. Sustainable SMEs
Capacities
Interests rate
Scale of investment
Rate of return
Repayment period
Grace period
Risk Management
Marketing, financial management,
processing,
Diversification, development of
working capital reserves,
affiliation to apex organisations
5% up to 14%
Working capital for harvesting and
processing, investment in machinery,
Depends. Forest Concessions returns
high, plantations only at scale. High
repayment rates at 93-100%
>5 years
>=1 years
Commercial banks
Financial management
Guarantees
(person/assets), purchase
orders, INAB certificate
Varies from region to region
10-18%
Varies. 60-100% of value
of incentive/purchase order
2 months-7 years
depending (e.g. working
capital/machinery)
Public sector
Grants for 6-10 years
Guarantee funds, INAB technical
assistance, registration of
business (SEINEF)
PINFOR: approx. 33%
covered by incentives grant
(pine 2-5 ha, 20 yrs)
INAB & Municipalities:
Intecap, business dvt
services, roundtables,
n/a but likely to be >10%
Mix of initial capital from MINECO,
regional development banks,
donors
1 year for PINFOR
plant. 6 years for
Rubber (OCCIDENTE)
Letter from INAB verifying
participation in incentives
programme
Research and engagement
on behalf of forestry SME’s
5. Anna.Bolin@iied.org 5
Anna Bolin
December 8th,
2016
Findings: needs and
priorities
• Varies greatly from region to region
depending on main product and
market
• Lower interest rates
• Financial management capacity key
• Diversification and value addition- e.g.
processing, agroforestry, restauration
and bioenergy (Probosque)
• Scaling up technical assistance and
business support
• Collaboration between NGOs, banks
and government effective in improving
access
6. Anna.Bolin@iied.org 6
Anna Bolin
December 8th,
2016
Findings: gaps
• Lack of financial options to investment
in processing and value addition -
what to do with all the plantation
wood?
• Understanding of risk and risk
aversion- what are the main needs
and risks of SMEs and vice versa for
FIs- establish more realistic
expectations on commercial banks
• What are the most suitable forms of
institutions and delivery mechanisms?
Role of cooperatives in improving
inclusive financial access and
sustainability of SMEs? What about
potential for scale?
The ‘Alianza’ or national alliance of forest communities in Guatemala
The legal framework governing Guatemala’s forestry sector is one of the most progressive in the world. Since 1989 Guatemala have been gradually evolving its forest policies and support towards forestry institutions. At that time, a new protected-areas law established the philosophy that social and economic development should be compatible with the conservation of natural resources. With the Forest Law of 1996 a new forest incentive programme emerged rewarding forest concession holders (both community and industrial), decentralised forest managers (at the municipal level) and institutions managing protected areas.
In the 2000s, the National Forest Programme further developments linked to the national forest programme (NFP) led to the formation of the National Alliance of Community Forestry Organizations (“the National Alliance”).
Today the National Alliance comprises ten second-level organizations and 400 community level organizations, representing 388,000 forest producers. Together they sustainably manage 750 000 hectares of forest, amounting to 17.5% of Guatemala’s forest cover and more than 4% of the total forest cover in Central America (FFF, 2016).
• More than 30% of the forests managed by CFO’s are certified.
Fedecovera Forestry Division (Federation of Cooperatives of Verapaces) in Guatemala – 36 member cooperatives growing FSC certified timber on a total of 4,500 ha and processed by Fedecovera’ sawmill with the capacity to process 25,000 m3 of wood annually
Impulsores Suchitecos de Desarollo Integral Sociedad Civil in Guatemala – is owned by 21 partners from the local community managing an area of 12,000 ha of natural forest in the Mayan Biosphere Reserve containing mainly natural mahogany.
Example of Fedecovera
Fedecovera is a federation of 38 cooperatives representing a total population of 25.000 women and men from the Native Maya group of the Q´eqchí´s and Pocomchís in Alta and Baja Verapaz. These areas are among the poorest in Guatemala.
The organization invests around 50% of its own resources on direct services to member cooperatives, and ultimately to individual members.
In total, Fedecovera offers 14 lines of services. Among these, social services along with other economic, financial and legal services contribute to the social protection of members.
Health –run primarily preventive health services (medical consultations, vaccinations) and dentistry services. Normally, the prices for health care is 88% less than other private clinics.
Education - Fedecovera also runs its own training programmes. One of these programmes is specifically designed to increase the occupational opportunities of 300 young members, with the objective of employing at least 30% within the cooperative network.
Inclusive financial services – Fedecovera is legally certified as type A financial mediator in Guatemala. As such, the organization is allowed to grant loans with an interest rate of only 3 to 6% on the rate Fedecovera is paying on the credit it has received from other financial institutions
Fedecovera’s capacity to effectively deliver social services to its members is subject to its financial capacity and profitable activities. However, Fedecovera still faces challenges in being recognized as a partner in social and economic development form both financial and government institutions.