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1 BUILDING BUSINESSES AND LIVELIHOODS THROUGH SUSTAINABLE TRADE FINANCE May 18th, 2011 Presented by: Petra Hamers The Amazon Alternative

2 FILLING THE FINANCIAL GAP FOR SUSTAINABLE SMEs Millions of the world's poorest producers of agricultural and forestry lack access to the basic financial resources essential to the sustainability and prosperity of their businesses and communities.

3 DEVELOPMENT OF PO S AND SME s AND ACCESS TO FINANCE Banks Access to Finance Non traditional Financial Institutions and Banks NGOs, MFIs, Development Agencies, Informal lenders Coyotes Level of Development

4 GLOBAL OUTREACH FOR LOCAL CHANGE FAST ensures the continued growth of sustainable production and trade by increasing the number of sustainable SMEs in developing countries who can successfully access affordable trade finance and related financial risk management tools. Supporting SMEs in this regard also means supporting local communities in their development by helping create jobs, increase families income and improve basic social conditions.

5 FAST MEMBERSHIP FAST Secretariat is located in Montréal, Canada 109 members in 24 countries in North, Central and South America, Europe, Asia and Africa. Social and environmentally oriented lenders, Producer groups in developing countries, Certification agencies, NGOs, Social investors, Supply chain stakeholders. For example:the Coffee Development Fund, Rabobank, Triodos Sustainable Trade Fund, Root Capital, Calvert Foundation, Project CAMBio of the Central American Bank of Economic Integration, Conservation International Verde Ventures Fund, TechnoServe USA, Rainforest Alliance, UTZ, TransFair Canada, Société Générale de Surveillance (SGS) Data as at October 30, 2010

6 FAST GLOBAL SCOPE IN SUSTAINABLE TRADE FINANCE

7 FAST GOALS Ensure the continued growth of sustainable SMEs in developing countries

8 2009: PAVING THE ROAD FOR FOREST FINANCE Congress: Sustainable Finance: The Trade Finance Opportunity Washington, D.C., USA; co-hosted by FAST and GFTN Research on Financial needs and Financial Literacy; to find the financial gap. Surve amongst 12 forestry certificate holders of Rainforest Alliance in CA; 11 forestry SMEs in Peru and Bolivia in coordination with GFTN/ WWF Sustainable Finance Forum; Managua, Nicaragua. Organized by FAST- Project CAMBIO (CABEI) RAMACAFE-HIVOS IFC. = Need to learn about risk management related to lending in the sustainable trade sector = Recognition of social and environmental benefits of sustainable SME financing = Interest of local banks to invest in the sustainable sector. = Need to know where to invest, the amounts, terms and other details Advancing Sustainable Forest Management Through Responsible Investing and Financing Mechanisms. Side event at World Forestry Congress (WFC); hosted by FAST / GFTN. Buenos Aires, Argentina.

9 FAST Financial Fair Based on the results of the forum and other events with financial institutions and local banks (supply): FAST developed a common pre-application form based on the information of requirements of 14 financial institutions members and partners of FAST including: Rabobank, Triodos Sustainable Fund of Triodos Bank, Mercur Bank, Root Capital, Alterfin and others. Based on the common application FAST finds the specific demand for money through the FAST Financial Fair (FFF). At this stage four successful fairs have been carried out with participation of the following sectors: coffee, banana, pineapple, ecoturism, cocoa. Questions raised by financial institutions of where to invest, the amounts, terms and other details of were answered. 9.5 million USD in credits have been provided to sustainable SMEs through the facilitation of FAST in only six months with tthe FFFs in two Fairs.

10 FAST s STRATEGY FOR FOREST FINANCE 1) Promote and increase sustainable forestry SMEs access to finance along the value chain. Including the organization of a FAST Forestry Financial Fair. 2) Promote and increase investment opportunities for social and environmentally-oriented financial institutions and social investors including local and mainstream banks. 3) Finance for sustainable forestry as added value to certification

11 MAIN COMPONENTS 1.Supply: Financial Institutions (FIs), including FAST members (socially and environmentally oriented financial institutions), and local financial institutions (including mainstream banks lending in these countries). 2. Demand: Forestry Producer Organizations and Small and Medium Enterprises. 3. Linking supply and demand: Bringing together financial institutions that can meet the specific needs of sustainable POs and SMEs of the forestry sector in Peru, Bolivia and Brazil. 4. Advocacy: Promoting investment in the forestry sector

12 FSC Certified Forest Management & Timber value chain development

13 IDH tropical timber programs Tropical FSC timber to 33% in Nl Linking Europe: 3 x 10% increase in Europe Certification of 4 million ha FSC forest in Brazil/Peru/Bolivia Certification of 4 million ha FSC forest in Cameroon, DRC, Congo- B and Gabon Certification of million ha FSC forest in Indonesia

14 Targets Brazil: + 2 million ha (1,2) Peru: + 1,2 million ha (0,67) Bolivia: 0,8 million ha (2) Better market access for FSC Certified timber on domestic and Dutch/European market Effective, long lasting cooperation between all actors involved (FSC National Offices)

15 Participants Private enterprises (24): private forest owners, concessionaires, sawing mils, timber industries, importers construction firms, housing corporations, retail Forest communities and their social enterprises 1 forest community cooperative; 4 forest community organizations Timber purchasing and prescribing institutions

16 FSC National Offices Allies Governments: on national, regional and local level; in the Netherlands and Amazon region ICCO GO / RO WWF Netherlands, Peru, Bolivia Rainforest Alliance and local NGOs Financial Institutions Service providers Dutch Embassies Research institutions Labor Unions Other sponsors

17 Main strategies (1) Increase demand (local/europe): market information, brokering, incidence purchasing policies, promotional species Certification FM and CoC: Training; Manuals, studies on HCVF; Cooperation companies & communities; final evaluations Efficiency: forest inventory & management, timber processing, product development Enabling environment: governmental policies; financial institutions!!!!!!!!!!

18 Linking Forestry Businesses to the Financial Sector in the Amazon Business performance: profile / database (ForeFinance) Financial literacy (FAST) Investment plan Introducing Sustainable Forestry to Financial Sector (FAST) Linking Forestry & Financial Sector (FAST et al) Development of specific instruments (FAST et al)

19 PO/SME business profiles are the key to market identification, risk mitigation and capacity building Commercial farmers (estates / FO s) $$$ Commercial banks + Social lenders Professional farmer organizations $$$ Informal finance $$$ Subsistence smallholders Emerging farmer organizations Entrepreneurial smallholders $$$ Missing Middle Micro Finance Institutions Level of management maturity ForeFinance

20 CRAM: Credit Risk Assessment Methodology Management of biological& natural risks -Weather risks& natural disasters -Biology& environmental risks Management of supply -Pricerisk -Quality - Supply security Internal Management - Governance, management - Operations, GAP, GMT -Sustainability performance - Financial admin +mgmt -Financial performance Management of markets -Pricerisk -Quality -Logistics Management of service providers - Financiers - Business Development Services - NGO support ForeFinance

21 Pilot & April forestry companies assessed: 2 companies that work with international capital 2 family owned companies 1 producers organization enterprise

22 CRAM Profile Example Example profile overal score + Financial figures/ performance + Sustainability indicators ForeFinance

23 Training for Financial Institutions & First FAST Forestry Financial Fair Lima, Peru. May 25 th to 27 th, 2011

24 The First FAST Forestry Financial Fair Lima, Peru. May 25 to 27 th. Identification of financial institutions with a social/environmental approach and training of the Financial Institutions (supply; 10) Pre-selection of the sustainable small and medium enterprises (demand; 9) Linking supply and demand = FAST Forestry Financial Fair Follow up and evaluation

25 Example of cases in Peru Name of the company A, family owned business Credit required Term Collateral Other info. available Working Capital: $ 30,000 USD Machinery: $ 30,000 USD 2 years Real property: $ 70,000 USD Sales contracts: $ 80,000 USD -Credit history -Financial statements -Business plan -Info of production and sales -Decision making bodies -FSC certification status

26 Example of cases in Peru Name of the company Credit required Term Collateral Other info. available B, young company; working with international capital Total: $7'827,175 USD Infrastructure $300,000 USD Machinery: $5'955,000 USD Land acquisition: $1'120,000 USD Regeneration) $452,175 USD According to each credit required Not specified -Financial statements -Business plan -Info of production and sales -Decision making bodies -FSC certified -CRAM

27 Example of cases in Peru Name of the company Credit required Term C, family owned business Total: $400,000 USD Working capital: $200,000 USD Machinery: $200,000 USD 1 and 3 years respectively Collateral Real Property: $35,000 USD Sales contracts: $766,000 USD Other info. available -Financial statements -Business plan -Info of production and sales -Decision making bodies -FSC certification status

28 For more information: Noemi Perez Executive Director Tel: Petra Hamers Program Director