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Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
Smallholders: 
(Possible) finance & risk perspectives ...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
•Who are ‘smallholders’? 
•Why are they important? 
•W...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
Some perspectives
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90Defined by: 
•Socio-economic characteristics: livelihood...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
Categories & Sources of financing 
Categories 
•Domest...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
Business perspectivePossible Assets 
•Land -size, fert...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90Initial thoughts on potential sources of funding (1) 
So...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
Initial thoughts on potential sources of funding (2) 
...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
Risk managementFarm / householdCommunity'Market'Divers...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
Aggregation models -financing & risk 
Model 
Sub-model...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90CARBON & PES ‘MARKETS’ 
CSR, SHARE HOLDERS 
GOVERNMENT P...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90Mechanisms –initial thoughts 
•“Know your client” 
•Aggr...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90Thank you!
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
4. Mitigation –Some Observations 
•Activities designed...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 902. Global farming systems 
•FAO Farming Systems work 
•G...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
2. Global farming systems: Observations 
Regional pers...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 905. Opportunities for engaging smallholders
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90State of flux
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 904. Mitigation –c-credit monetization opportunities Poten...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
Global mitigation schemes 
Prosfor smallholders 
Cons ...
Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 
•GmbH start-up : May 2010 
•International, national & ...
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Havemann t financing options for smallholders and mitigation july 2011

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Presentation for Smallholder Mitigation: Mitigation Options and Incentive Mechanisms - Expert Workshop
7 - 8 July 2011


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Havemann t financing options for smallholders and mitigation july 2011

  1. 1. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 Smallholders: (Possible) finance & risk perspectives with respect to agricultural climate change mitigation interventions
  2. 2. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 •Who are ‘smallholders’? •Why are they important? •Why should they care about climate change? •What makes them more likely to care? •How can we identify those that are most interested, and how can we engage them? •How do we identify those that are most important in terms of mitigation (or most at risk)? How can we engage them? Some questions
  3. 3. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 Some perspectives
  4. 4. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90Defined by: •Socio-economic characteristics: livelihoods, gender; •Resources (rather than area). For the purpose of financing, there are significant variations: •Subsistence vs. commercial; •Aggregated vs. not aggregated; •Proximity &sale; Domestic vs. local urban centers vs. international . A smallholder is…
  5. 5. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 Categories & Sources of financing Categories •Domestic vs. foreign •Dispersal mechanism (direct, through various instruments /intermediaries) •Short term vs. long term •Informal vs. formal Sources •Self-financed & controlled •Informal sources: friends & family (inside and outside country) •Domestic & government supported banks •Microfinance •Trade & value chain finance •ODA, NGO, philanthropy •Carbon finance / other PES
  6. 6. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 Business perspectivePossible Assets •Land -size, fertility, proximity •Animals •Infrastructure, tools •Labor –household •Inputs •Savings •ContractsRevenues •On farm sources •Off farm sourcesPossible Liabilities & Risks •Debts, other liabilities •Contracts •Production risks •Farmer risks •Institutional & governance risks Costs •Fixed, initial •Recurring Sources & mechanisms for financing? How to minimize / better manage? Size, timing, quality, variability, certainty of:
  7. 7. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90Initial thoughts on potential sources of funding (1) Source Pre-requisites? Pros? Cons? Self-financed •Liquidity •Savings •Confidence •Fully invested, LT •No collateral •No aggregation •Risk, high discount rate •Smallamount Informal •Liquidity •Confidence •Re-investment •No collateral •No aggregation •Disputes •Favoritism •Enforceability Domestic & government (inc.NAMA, REDD) •Scale •Commitment •[Financial literacy] •[Collateral] •[Data] •Policylandscape •Coordination •Subsidized •May be longer term •Aggregation •Policies •Linkedto economic landscape & donor trends MFI •Ability to pay back/ plan •Banks •[Collateral] •Direct •Size appropriate •Risk appetite •Reach •Density-based •Pay-back •Term •History
  8. 8. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 Initial thoughts on potential sources of funding (2) Source Pre-requisite Pros Cons Trade / value chain •Commercial •[Aggregation] •Confidence •Support Usually accompanied byincreased support & knowledge, incl. reduced risk •Quality & quantity •Farmers as price- takers •[Term] NGOs, Donors, Philanthropy •Access •Businessplan etc. •[Aggregation] •No repaymentrequirements •Usually support •[Distortions] •[Elitecapture] •Appropriateness •Longevity Carbon / PES markets •Aggregation •Data •Meths •Demand •Complementary •‘Co-benefits’ e.g. free inputs, TA •Upfrontcosts •Meths •Uncertainty •Transparency AGGREGATION….
  9. 9. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 Risk managementFarm / householdCommunity'Market'Diversify, reduce consumption, re- allocate labor, savings, sell assetsFamily, coops, buffers, jointly owned infrastructure Indemnity, index, ‘combined’
  10. 10. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 Aggregation models -financing & risk Model Sub-model Driven by smallholder Farmer-controlled institutions Associations,trusts, enterprises, coops, farmer owned companies Contract farming Leases Driven by third-party Contractfarming Highly centralized Nucleusestate Multipartite Informal Intermediary Tenant farming / share cropping N/A
  11. 11. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90CARBON & PES ‘MARKETS’ CSR, SHARE HOLDERS GOVERNMENT POLICIESAGRI- INVESTMENTS (direct) SMALLHOLDERS 'AGGREGATORS'UNFCCC UNCCDBRETTON WOODSWTONo silver bullet… Mechanism has many parts @ multiple scalesCOMMODITY MARKETS (2ndary)
  12. 12. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90Mechanisms –initial thoughts •“Know your client” •Aggregation •Risk appetites: ‘Hard’ & ‘soft’ instruments •Availability of long term capital with high risk appetite –creative PPPs •Shorter termed financing -Track record, collateral •Lack of data –financing, mitigation opportunities •Identifying synergies RESEARCH (‘CUSTOMER BASE’) POLICY & REGULATION FINANCE & RISK MANAGEMENT DESIGN
  13. 13. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90Thank you!
  14. 14. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 4. Mitigation –Some Observations •Activities designed within the farmers existing livelihood context of smallholders (including women) •Bottom-up approaches both in financing (allocating funding according to the plan elaborated with stakeholders and farmers) and project arrangements •Promoting coordination and association amongst smallholders •Literature review and review of case studies highlight the value of carbon finance linked to measurable output rather than related only to land ownership. •Gender considerations are important in mitigation project configuration (including benefit distribution and land tenure rights) •Products from carbon credit projects could be used by smallholders as collateral •Project standards should work toward streamlining procedures and reduce transaction costs •Opportunities for setting up carbon insetting activities by building the costs of ecosystem services into supply chains (e.g. by means of a scheme like Plan Vivo).
  15. 15. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 902. Global farming systems •FAO Farming Systems work •Global trends affecting farming systems: •Environmental / physical •Economic •Socio-political •Technologies •Gender •Representation of smallholders in production & forms of representation •Fundamental difference: Subsistence vs. selling •Smallholder driven: Coops, leasing •Non-smallholder driven: Contract (centralized, nucleus, multipartitie, informal, intermediary), tenant / share cropping
  16. 16. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 2. Global farming systems: Observations Regional perspectivesLatAm: Smallholders tapping international markets through premium labeled commodities. ‘Least’ favored. Asia: Huge pressures & importance of adaptation in major crops (rice) SSA: ‘Donor darling’, commercial aginterest & urbanizationObservations •Smallholder-relevant data: weak but evolving •‘Supermarketization’ & tech provides opportunities for vertical and horizontal integration and coordination •Holistic government policy formulation critical
  17. 17. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 905. Opportunities for engaging smallholders
  18. 18. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90State of flux
  19. 19. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 904. Mitigation –c-credit monetization opportunities Potential opportunities: •Conservation ag •A/R & silvopastoralsystems •Improvement management •Compost •Bio-energy •Organic farming •REDD •Eco-labeling Current opportunities for developing countries to sell units of mitigation: International: UNFCCC CDM, VCMs (under standards & non-standard offsets) Regional: US markets (California) National & sub-national: China (?), S. Korea (?), official REDD+ and NAMAs (?)
  20. 20. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 Global mitigation schemes Prosfor smallholders Cons for smallholders CDM •Well established mechanism •Recognisedat the global and national level •Hightransaction costs •Long time lag •Only A/R land use activities •LDCs poorly represented VCS •Wide range of terrestrial mitigation activities •Innovative buffer approach •Hightransaction costs GroupedProjects/ PoA •Lowertransaction costs •More flexibility and streamlined procedures •Credits become bankable earlier •Possibility to include underrepresented countries •Stillin an experimental phase •Few or no land based projects CCBS •Communitybased projects •Guarantee to investors for high quality projects •Pro-poor and adaptation gold level •Improvement in smallholders access under evaluation •It has to be combined with a carbon standard •High quality credits might mean more complexity Plan Vivo •Longexperience with smallholders •Equitable carbon sharing •Tailor-made to community/smallholder needs •Possibility to have PES along the value chain •Improve access to financial instruments (e.g. bank loans, microcredits) •Plan Vivo certificates can be also issued ex-ante •Gender inclusive 4. Mitigation –c-credit monetization opportunities
  21. 21. Tanja Havemann | tanja.havemann@beyondcarbon.ch | +41 78 664 27 90 •GmbH start-up : May 2010 •International, national & project level work •‘Theoretical’ & real •Carbon finance & non-carbon finance •Business planning & development •Cynical optimist Who am I?

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