Green Microfinance. Lessons from Proyecto CAMBio in Nicaragua. Frédéric Huybrechs. University Meets Microfinance Frankfurt, 03/07/2014

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1 Green Microfinance Lessons from Proyecto CAMBio in Nicaragua Frédéric Huybrechs University Meets Microfinance Frankfurt, 03/07/2014

2 Introduction Part of PhD in Development Studies - Payments and Microfinance for Ecosystem Services - Lens of complexity theory + Territorial development Analysis of Green Microfinance project Work in progress 1

3 Outline Green Microfinance - Conceptualisation - Case: Proyecto Cambio Research question and methodology Results Discussion 2

4 Green Microfinance Focuses/acts on (multiple) linkages between microfinance and the environment 3

5 MFI Microcredit and other services Economic activities Socio-economic situation Client Global / Local community Access to natural resources Local effects water quality and quantity, pollution, microclimate, Global effects CO2, biodiversity, Climate Change

6 Green Microfinance Several possible objectives / entry-points - Focus on client; local community; global ecosystem services; risk for MFI; marketing; funding; - Do no harm or active natural resource management Different sorts of intervention: 5

7 Proyecto CAMBio CAMBio = Central-American Markets for Biodiversity GEF, UNDP, CABEI Objective: increasing biodiversity and connectivity in biological corridors Reducing barriers for MSME to produce biodiversity-friendly products (micro)credit +technical assistance + Bio-award 6

8 Proyecto CAMBio Project functioning, FDL case - FDL - producer Check capacity to pay and interest in green product - Contact between Nitlapán and producer Environmental objectives and indicators 7

9 Proyecto CAMBio Explaining the functioning of the project - Receiving the credit and technical assistance - If objectives reached Bio-premio (20% of credit; 14% to producer and 6% to MFI) 8

10 Research question What effect does Proyecto Cambio have on its recipients biodiversity-friendly land-use decisions? How does it relate to wider social and environmental dynamics in the region? Lessons for (green) microfinance more generally Broader framework of complex systems approach to rural development 9

11 Research area Research area: - Municipalities of El Cuá and La Dalia in Northern- Central Nicaragua 10

12 Research area 11

13 Research area: Research area - Municipalities of El Cuá and La Dalia in Northern- Central Nicaragua Biological corridor Macizo de Peñas Blancas = important in ecological/conservationist debate in Nicaragua 12

14 Research area: Research area - Municipalities of El Cuá and La Dalia in Northern- Central Nicaragua Biological corridor Macizo de Peñas Blancas = important in ecological/conservationist debate in Nicaragua Tensions between production and conservation - Water and deforestation - Strong environmentalist actor 13

15 Research methods Interviews, and participant observation (Master student) agrarian systems diagnosis Interviews with project staff Survey 14

16 Survey Info about land-use evolutions last 5 years Perception of Proyecto Cambio Sample - From database of Proyecto Cambio participants - From database of A clients of FDL After non-response and rejection of unreliable data 130 surveys [88 PC 42 No-PC] 15

17 Results Who has access to Proyecto CAMBio? - A-clients (good payment history) - Within this group, bigger (and older?) clients star credit/product Premium for loyalty Environmental goal? 16

18 Results Evolution in Biodiversity? - Based on a Biodiversity Index, related to land-use E.g. staple crops = 0 improved pasture with < 30 trees = 0,3 shade coffee = 0,7 - Comparison group means - Regression model for understanding evolution in BI/ha 17

19 No (significant) effect from being part of Proyecto Cambio Results Most significant variable: height of initial BI/ha (neg.) Importance of change in main economic activity - Towards coffee (pos.) - Towards cattle raising (neg.) 18

20 Results What about link between award (payment) and evolution in Biodiversity Index? - Small negative correlation - Equal mean bio-award whether increased BI or not 19

21 Impact on land-use decisions? Results Did you already apply this practice before? 79% Yes Will you keep applying this practice? 100% Yes Mostly referring to saveguarding the environment Would you have made the same investments without the award? 80% Yes YES: Mostly referring to the need of shade and the protection of the environment NO: wouldn t have had the resources (sometimes referring to the credit rather than the premium) 20

22 Discussion With used indicators, no significant effect of PC - But difficult to compare, very different outcomes within groups - Key = interaction with context 21

23 Discussion Main impact = change to coffee as main activity - A step with heavy credit constraints - Other reasons Credit, price, diseases (coffee rust!), organization, perception of risk and profitability, access to land, history - Promoted practices are traditional 22

24 Project goes to better clients Discussion - Trade-off between financial goal and environmental goal? Cf. analysis in Matiguás-Río blanco + Social Impact? Bankability, growth, - Incentive: Higher credit = higher award 23

25 Bio-award - No link with whether BI improved or not - Potential feedback effect? - Putting a prize on nature Discussion What/how impact on value chains and markets? - Unequal access to quality market / certification / organization / - Removing barriers? 24

26 Discussion What about the key environmental pressures? - Larger producers in the core of the natural reserve? - Farmers moving into (pushed into) the agricultural frontier Relation to environmental rules and regulation - Why focus on biodiversity? - Who participates in decision-making around environmental regulation locally? - How is (micro)credit an actor herein? 25

27 Key points (Green) Microfinance does not operate in a void Social, ecological and economic factors are interlinked - Interacts with interventions - Active reflection on who to work with, why and how - Understand the barriers before you can remove them Political role through support/transformation of given context/structure 26

28 Implications for practice and analysis In general discussion on Green Microfinance: Parallels with discussions second bottom line - Multi-dimensionality of the problem - What vision on poverty and social exclusion? - Questions of trade-offs and mission drift Lessons from natural resource management - Collective action, motivations, leakage, - Structural problems / Green economy 27

29 Q & A 28