Paper

Microfinance and Forest-based Small-scale Enterprises

Helping microfinance reach out to small-scale enterprises in forest areas
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This publication focuses on finance issues for forest-based small-scale enterprises. It:

  • Examines microfinance needs and constraints of small-scale enterprises.
  • Analyzes:
    • The role that different types of MFIs can play in the forest sector given the characteristics of small enterprises and forest communities;
    • Their impact on local livelihoods and environment.

The paper argues that:

  • A purely forest microfinance approach based on MFIs exclusively dedicated to financing small-scale enterprises in the forest sector is unlikely to be sustainable.
  • The income of many forest-dwelling households derives from a wide range of activities, not only forest-based.
  • A key issue is to establish and support the provision of microfinance services on a viable basis for the sustainable development of small-scale enterprises.

The paper:

  • Aims to provide a basis for orienting decisions when trying to expand the outreach of MFIs in forest communities;
  • Examines literature reviews, documents of international development organizations, documented project experiences, inputs from international financing institutions and four case studies from three different countries.

It recommends that:

  • MFIs develop innovative ways to deliver services and improve capacity;
  • Microfinance be delivered by different kinds of formal and semi-formal institutions, non-financial and informal sources;
  • Government and donor programs consider the nature of constraints, the existing financial infrastructure and adopt an approach that best suits the local situation.