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Guatemala - progressive forest governance in support of small- and medium-sized enterprises (SMEs)


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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.

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Guatemala - progressive forest governance in support of small- and medium-sized enterprises (SMEs)

  1. 1. 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. 2. 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. 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
  4. 4. 4 Anna Bolin December 8th, 2016 Fedecovera: social business and financial service provider
  5. 5. 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. 6. 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?
  7. 7. 7 Anna Bolin December 8th, 2016 Author name Date Anna Bolin December 8th, 2016 Thank you!