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Performance-based Financing for Promoting Resilient Ecosystems

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Presented by Lalisa Duguma, Peter Minang, Divine Foundjem, Serge Mandiefe at SBSTA 50 side event: Results based financing for REDD+ - experiences and way forward

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Performance-based Financing for Promoting Resilient Ecosystems

  1. 1. Transforming Lives and Landscapes with Trees Performance-based Financing For Promoting Resilient Ecosystems Lalisa Duguma, Peter Minang, Divine Foundjem, Serge Mandiefe Email: l.duguma@cgiar.org; p.minang@cgiar.org PRACTICAL INSIGHTS FROM COMMUNITY FORESTS SBSTA 50, UNFCCC Side event: Results based financing for REDD+ - experiences and way forward
  2. 2. Transforming Lives and Landscapes with Trees Community Forests in Cameroon Ecology and Society 23(3): 34 https://www.ecologyandsociety.org/vol23/iss3/art34/ Fig. 1. Distribution of community forest (CF) governance outcomes from case studies in Cameroon. massive technical support and training from civil society were crucial in the development of community forestry in Cameroon in the past (Duguma et al. 2018; Minang, Duguma, Bernard, et al., unpublished manuscript). This might require concerted effort across a couple of government departments that have traditionally not intervened in community forestry. For example, the Ministry of Finance (MINFI) and Ministry of Small and especially true for some communities with chiefs as president or delegates in the CF management committee. They are often respected, and community members are often devoted to work with their chief. The influence of positive elites in the east region has contributed significantly to community development in the area (Cuny et al. 2007). This can be explained by the fact that these communities are often small and can easily collaborate. The • Community forests are legally recognized entities to manage forests. • Over 260 CFs (> 1.3 Million ha secondary forest) with approved management plan • Most CFs are not operational and are not delivering on their objectives. Hence, deforestation and forest degradation is high. Mandiefe et al 2019
  3. 3. Transforming Lives and Landscapes with Trees § Poor technical capacity § Lack of investment capitals § Weak enterprise management skills § Poor infrastructure § No market linkages § No value addition on forest products § Limited access to credits and financing schemes Why are Community Forests not delivering? Factors for success or failure of CFs (Duguma et al 2018)
  4. 4. Transforming Lives and Landscapes with Trees Financing Sustainable Community Forest Enterprises in Cameroon (Dryad) Project objective To enhance viable community forest enterprises (CFE) with sustainable livelihoods and environmental benefits through performance-based public finance and support mechanisms.
  5. 5. Transforming Lives and Landscapes with Trees Why? • As they are, CFs could not attract private investment due to the underlying risks of failures. • Communities do not have the capital to run viable enterprises due to the poor livelihood conditions. The theory of change: a new approach is needed! Time Breakeven point Profit making Process readiness Private financing Public financing Startup Investment Technical support & business advisory Technical support & business advisory High De-risking needs Low Minang et al. in preparation.
  6. 6. Transforming Lives and Landscapes with Trees Performance monitoring 0%# 25%# 50%# 75%# 100%# 75%# 50%# 25%# 0%# 25%# 50%# 75%# 100%# Year#1# Year#2# Year#3# Year#4# Repor1ng# Peformance# c ani i i anc a financ c i ni ing i ign to simultaneously collect social, economic or enterprise and environmental performance data of community forest n i i inn a i c ni enterprises to collect, save and send data monthly which i n an c anag c an in a n a an a c i c no access to electrical energy issues in these areas. Sate ic i c nn c a c ni i g a acc in n i c ni n a a i c c c an n a a c c n i i a ig challenge. These pose challenges with pro data transfer. Figure 3. ni ing in a an i c n n Enterprise performance - Costs - Revenue - Assets and others Social (Community wellbeing) - Income - Ecosystem goods and services (wood, feed, edible plants, etc) Environmental benefits - Forest cover and health - Incident reports (e.g. Illegal logging) - Other additional indicators Data hub (Computers & servers) Mobile devices (loaded with Field Monitoring System) Community forests Monthly data collection Data sent to back-end Satellite relay Memory cards ac ca anc a challenges in Dryad Duguma, Minang, et al 2019. Community operated [CFs and Supporting local NGOs] ICRAF & TMP [Technical analysis] Telephone and internet service providers Feedback to communities
  7. 7. Transforming Lives and Landscapes with Trees Making CFs ready for investment: investing in processes § A new partnership model was needed – Research institution, Local NGOs, Financial institution, Community forests. § Process investment and operational cost ~ 20,000-60,000 £ per CFE over 10 years § Investments in diligent process of selecting enterprises viable for investment de-risks the investment by 66%. CFE Teaser development Teaser assessment and approval 1-2 reviews and interactions with IOs CFE selection Baseline Contract negotiations- Disbursement plan and indicators Periodic disbursement Training/ technical support CFE data collection FMS deployment Contract negotiations- Disbursement plan and indicators Due diligence Agreement executed Investment memorandum development Feasibility review Training plan Financial modeling Annual verification – performance, Audit, etc. Performance based review Figure 1 The processes behind the financing decisions for a community forest enterprise within the Dryad project Processes as precursors for performance In Dryad, community forests with valid management agreements sign an investment contract with the World Agroforestry (ICRAF). The onboarding process for community forest enterprises in Dryad involves rigorous processes to enable effectiveness, efficiency and sustainability. It mainly includes four key steps (see figure 1 for details): i. Development of business plans (with technical support); ii. Financial modeling and appraisal of business plan; iii. Due diligence, negotiations and contracting; and iv. Training and implementation (including field monitoring systems for monitoring)
  8. 8. Transforming Lives and Landscapes with Trees Contracting Activity planning Reporting formality and schedule CFE onboarding process Performance reporting Performance analysis and continuity decision Enterprise operationalization Training and technical support Implementation Making CFs ready for investment: Simplified version
  9. 9. Transforming Lives and Landscapes with Trees TEASER, 663.00 , 3% INVESTMENT MEMORANDUM , 3,596.00 , 18% DUE DILIGENCE, 642.00 , 3% EIN, 2,018.12 , 10% MONITORING SYSTEM (FMS), 543.99 , 3% EVIDENCE BASE CREATION, 4,191.00 , 21% FOLLOWUP AND SUPPORT, 4,956.75 , 24% TRAINING, 3,676.47 , 18% Big process investments § Follow up and support (24%) § Evidence base creation (21%) § Training (18%) § Investment memorandum (18%) Note: Values in £ per CFE from a preliminary analysis of selected CFE.
  10. 10. Transforming Lives and Landscapes with Trees The progress so far Sector Typology of enterprises Typology of finished products Target markets NTFPs Collection and sale Business as usual Wholesalers Pre-processing and packaging Honey in 1l and 50l containers. Packaged njansang Super markets and other niches Timber Timber exploitation Wood processing and joinery Openers, Pens, key holders Brewery Companies, NGOs, embassies Agriculture/ agroforestry Plantain production Plantain, egussi or melon seeds Manioc Supermarkets Service sector Eco-tourism Eco and cultural tourism § 34 enterprises managed by 29 CFs under the project now. § Close to 100,000 ha of secondary forest with clear commitment of adopting sustainable practices e.g. reducing deforestation and forest degradation. § Numerous community development projects are planned to be built from the proceeds of the enterprises.
  11. 11. Transforming Lives and Landscapes with Trees Wages and Operating Profit Estimation 2.34 3.20 4.09 4.15 2.51 1.53 3.36 3.36 4.04 0.88 - 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 ADNG (Njansang) BOPO (Plantain-pistache) COBABA (Manioc) CODEL (Manioc) CODEM (Rattan) CRVC (Njansang) Libock (Plantain-pistache) Nguimbock (Plantain-pistache) Tinto (Bush mango) Tinto (Njansang) Income from wage (£) in 10 years time 2.13 1.53 6.58 6.49 3.86 0.89 1.69 1.69 2.38 5.60 - 1.00 2.00 3.00 4.00 5.00 6.00 7.00 ADNG (Njansang) BOPO (Plantain-pistache) COBABA (Manioc) CODEL (Manioc) CODEM (Rattan) CRVC (Njansang) Libock (Plantain-pistache) Nguimbock (Plantain-pistache) Tinto (Bush mango) Tinto (Njansang) Operating profit (£) in 10 years time For every £ invested in CFEs the projected return in 10 years time is … Note: These preliminary estimates are without including the process investments.
  12. 12. Transforming Lives and Landscapes with Trees SUSTAINED POSITIVE CASHFLOW is crucial, otherwise the enterprises will be ‘bankrupt’ !! The significance of cashflow (2,000,000.00) - 2,000,000.00 4,000,000.00 6,000,000.00 8,000,000.00 10,000,000.00 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Cashflows for Pistache enterprises Bopo Pistache Libock Pistache plantain Nguimbock Pistache Plantain - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Cashflow for selected Njansang enterprises ADNG Njansang CRVC Njansang MEKOM Njansang Tinto Ngansang Note: Values are fCFA. Ricinodendron heudelotiiCitrullus lanatus
  13. 13. Transforming Lives and Landscapes with Trees Take home messages § Attracting investments to community managed settings requires a blended approach. § Public financing for making the entities ready for investments and private investment to finance and run the enterprises. § If our efforts to conserve ecosystems do not generate values that directly translate to solving the problems of communities, the motivation for sustainable management in such a setting remains a challenge. § Then deforestation and forest degradation become persistent problems rather than being solvable issues. § Sustained POSITIVE cashflow is even more important than high profit margins since communities do not have the capacity to run enterprises if cash flow falls below zero.
  14. 14. Transforming Lives and Landscapes with Trees Some documents: For practitioners Minang PA, L A Duguma, S P Mandiefe, D Foundjem, et al. 2017. Community forestry as a green economy pathway: two decades of learning in Cameroon. https://www.worldagroforestry.org/publication/community-forestry-green-economy- pathway-two-decades-learning-cameroon Duguma L., P Minang, D Foundjem, P Mandiefe, et al. 2019. Prospects for Performance Based Financing of Community Forestry in Cameroon. Technical Brief No. 1. World Agroforestry. Nairobi, Kenya. http://www.asb.cgiar.org/Publications%202018/Prospects%20for%20Performance.pdf
  15. 15. Transforming Lives and Landscapes with Trees Copyright © 2019 by the author(s). Published here under license by the Resilience Alliance. Minang, P. A., L. A. Duguma, F. Bernard, D. Foundjem-Tita, and Z. Tchoundjeu. 2019. Evolution of community forestry in Cameroon: an innovation ecosystems perspective. Ecology and Society 24(1):1. https://doi.org/10.5751/ES-10573-240101 Research, part of a Special Feature on Twenty Years of Community Forestry in Cameroon: Opportunities and Challenges for Sustainable Development Evolution of community forestry in Cameroon: an innovation ecosystems perspective Peter A. Minang 1,2 , Lalisa A. Duguma 1 , Florence Bernard 1 , Divine Foundjem-Tita 3 and Zacharie Tchoundjeu 3 ABSTRACT. Cameroon introduced community forestry (CF) in 1994 as a means of improving community engagement in forest management, enhancing forest conservation, and reducing poverty for forest-dependent people. More than 20 years on, reflection on uptake, conceptual evolution, and innovation is necessary to understand how best community forests can contribute to Cameroon’s post-2015 sustainable development goals. We investigate, review, and reflect on how community forestry has evolved from an innovation ecosystem perspective, with a view to enhancing innovations and performance. Interest and momentum in community forestry remains strong in Cameroon, with the number of community forests growing, reaching 430 and covering 1.7 million ha (7% of total forest area). Major innovations identified are the introduction of pre-emption rights and steps toward sustainable forest management (ban on industrial logging, development of certification standards, and the introduction of the environmental notice in lieu of a full environmental impact assessment for CF activities). Little or no innovation is registered in areas related to forest enterprise (i.e., products and services value chains) and in terms of practicing sustainable forest management. Evidence suggests that knowledge generated directly feeds innovation. Coincidentally, areas for which little progress was made (enterprise and sustainable practices) also recorded few publications, suggesting that partnerships aimed at improving knowledge generation and sharing could help catalyze innovation. Other options for unlocking innovations within community forestry discussed include: enhancing intercommunity forest and private sector community forests partnerships and collaboration, increased capacity development and capital investments, and deploying incentives (financial and nonfinancial). Together these options can potentially transform community forestry in Cameroon. Key Words: Cameroon; community forestry; evolution; innovation ecosystems INTRODUCTION Community forestry (CF) can be defined as forest management in which communities manage and use forests, often with some form of legal authority to do so, and it is primarily driven by local community benefits and ecological sustainability goals (Arnold 2001, Ribot 2002). Community forestry is one of the fastest growing forms of forest management. Since its emergence in the 1970s, it has grown tremendously with communally managed forests being the main source of livelihood for more than 1.2 billion people (Agrawal et al. 2008). Community forestry has been practiced in several countries around the world including Mexico, Nepal, Philippines, Tanzania, Kenya, and others. It was founded largely as an alternative to state-managed conservation. It was Ojha and Kanel (2005) also reviewed 25 years of community forestry in Nepal based on inputs from more than 200 stakeholder contributions through 82 papers based on proceedings from a national workshop. They found that community forest conditions had improved overall compared to other forests; the participation and contributions of women had increased significantly; and the legal and institutional framework had been well developed. On the downside, they highlighted the general lack of evidence of any livelihood improvement as a result of CF; a deficit in the distribution of community forests around the country with the middle hills hosting most CFs whereas the Terai and high hill regions had very few; inequities in control, with representation in decision making dominated by wealthier families and therefore Copyright © 2018 by the author(s). Published here under license by the Resilience Alliance. Duguma, L. A., P. A. Minang, D. Foundjem-Tita, P. Makui, and S. Mandiefe Piabuo. 2018. Prioritizing enablers for effective community forestry in Cameroon. Ecology and Society 23(3):1. https://doi.org/10.5751/ES-10242-230301 Research, part of a Special Feature on Twenty Years of Community Forestry in Cameroon: Opportunities and Challenges for Sustainable Development Prioritizing enablers for effective community forestry in Cameroon Lalisa A. Duguma 1 , Peter A. Minang 1 , Divine Foundjem-Tita 2 , Parmutia Makui 1 and Serge Mandiefe Piabuo 2 ABSTRACT. Cameroon, in its Forestry, Wildlife and Fisheries Law 94/01 of 1994, supported local communities to engage in managing forests and benefit from them economically and environmentally. Three main objectives underlie this law: (1) enabling local communities to have access rights to forests in their surroundings, (2) Improving rural livelihoods, and (3) promoting sustainable forest management. Despite a gradual increase in the number of community forests, their effectiveness in delivering on the above objectives has been low. Our aim is to examine the typologies of the enabling factors (enablers) that could improve the performance of community forests in achieving the objectives underlying their creation. Content analysis was applied to 41 documents focusing on community forest issues in Cameroon. Benefit generation, partnership, monitoring, and policy support were the most frequently mentioned enablers with 47% of the total frequency of enablers assessed. The second enablers set, with close to 33% of the total frequency, are technical support, governance, financial support, practices choices, and institutions. We found a strong degree of association between the enablers in general.Ownership,performance,andpartnershipdominatethiswithpositiveassociationwith12,11,and10otherenablers,respectively. These results point to two policy and technical implications in the area of community forestry in Cameroon. First, the emergence of key sets of enablers and clusters of associations can help identify and emphasize critical leveraging points for improving effectiveness and efficiency. Second, it points to the need for holistic or integrated approaches in addressing enablers to improve community forests’ performance. Further research might be needed in identifying and prioritizing corresponding policy instruments required for intervention. Key Words: Cameroon; community forest; effectiveness; enablers Copyright © 2018 by the author(s). Published here under license by the Resilience Alliance. Foundjem-Tita, D., L. A. Duguma, S. Speelman, and S. M. Piabuo. 2018. Viability of community forests as social enterprises: A Cameroon case study. Ecology and Society 23(4):50. https://doi.org/10.5751/ES-10651-230450 Research, part of a Special Feature on Twenty Years of Community Forestry in Cameroon: Opportunities and Challenges for Sustainable Development Viability of community forests as social enterprises: A Cameroon case study Divine Foundjem-Tita 1 , Lalisa A. Duguma 2 , Stijn Speelman 3 and Serge M. Piabuo 4 ABSTRACT. Since the concept of community forests was instituted in Cameroon in 1994, there has been an upsurge of such forest Some documents: Scientific backing
  16. 16. Transforming Lives and Landscapes with Trees World Agroforestry (ICRAF), United Nations Avenue, Gigiri, P.O Box 30677-00100, Nairobi, Kenya Phone: +254 20 722 4000 Fax: +254 20 722 4001 Email: icraf@cgiar.org Website: www.worldagroforestry.org Thank you! Email: L.a.Duguma@cgiar.org; p.minang@cgiar.org The project is supported by UK Aid. Implemented by