European Tropical Forest Research Network

Table of contents
News 47/48 homepage

FOREST-BASED SMALL AND MEDIUM ENTERPRISE ASSOCIATIONS

By Duncan Macqueen

Support for forest-based small and medium enterprise associations can make a substantial contribution to the MDGs. Achieving the MDGs is an intensely local affair – it involves meeting the needs of hundreds of millions of people who derive local livelihoods from natural resources. An estimated 60 million people live in rainforests. A further 350 million in developing countries rely on dense forests for subsistence and income and 1.2 billion people use trees on farms to generate food and cash. Some rough extrapolations from existing information suggest that small and medium forest enterprises (SMFEs) are highly significant, comprising:

• About 80-90% of forestry enterprises in many countries
• Over 50% of all forest sector employment in many countries
• Employment for over 20 million people worldwide 1
• Over US$130 billion/year of gross value added worldwide 2

For many, SMFEs therefore provide the basic subsistence and cash income required to address MDGs 1 - 6. They are also the local embodiment of environmental responsibility addressed by MDG 7. But most importantly, they comprise key local partners with whom a global partnership for development needs to be struck (MDG 8).

The contribution of SMFEs to the MDGs faces many constraints – which include the:

• Complexity of establishing links with SMFEs in often remote locations
• Diversity of constitution of SMFEs (plagued by informality, and insecure tenure and resource access)
• Lack of managerial capacity and political power to deal with the demands of bureaucracy
• Inadequate market information, design capability and technology
• Unfair market deals due to small sales volumes and low bargaining power
• Lack of collateral to attract investors or offset risks themselves

Associations can overcome such constraints where few other support structures exist. Unsurprisingly, an ongoing project on SMFE associations in China , Brazil , Guyana , India , South Africa and Uganda found many thousands of forestbased small and medium enterprise associations. For example, there are 2000- 3000 active forest-based associations in Uganda alone. Many such associations arise spontaneously from strong collective interest. Some fail, but many succeed.

The objective of ongoing research is to improve the understanding of how forestbased associations can work better for the poor. Results suggest that successful associations help to overcome the constraints listed above in three important ways:

• Reducing transaction costs
• Facilitating strategic adaptation to new opportunities
• Lobbying for more supportive policies

Reducing transaction costs is a central function of associations. For example, in South Africa the Kwangwanase Association of small timber growers hires a truck at harvest time to reduce members’ transport costs. Associations improve information flows and skills training. For example, In Uganda the Uganda Community Tourism Association was formed to promote community tourism by providing training in marketing, organisational strengthening and craft making. Associations can also cut out unnecessary intermediaries. For example, the Brazilian Cooperativa dos Agricultores de Medicilândia (COOPERSAME) formed with the express intention of restructuring the cocoa market chain such that producers in the State of Para could challenge the power of middlemen and large traders to obtain prices comparable with elsewhere in Brazil . Associations can also act to improve the bargaining power of marginalised groups including women. The Kamuni Women’s Handicraft and Sewing Development Association in Guyana has played a key role in building women’s entrepreneurial capacity in handicraft production and marketing and thus contributing to the empowerment of women (MDG 3).

Strategic adaptation is also a feature of successful forest-based associations. For example, the Indian Madhya Pradesh Minor Forest Produce Cooperative Federation has opened a retail outlet (Sanjeevani) in Bhopal for medicinal plant sales. It has also invested in drying, grading powdering and packing in various districts to enhance product value. The Brazilian Cooperativa de Produção Agropecuária e Extrativista dos Municípios de Epitaciolândia e Brasiléia (CAPEB) has established a processing plant for Brazil nuts and hopes to add value through salting, flaking, fillings etc. Initiatives such as these all have an important role to play in supporting efforts for poverty reduction (MDG 1).

Political lobbying is also an effective role for associations. For example, the Uganda Wood Farmer’s Association successfully sued the Uganda Investment Authority for creating an industrial park and overlaying areas of trees managed by farmers. In short, lower costs, strategic adaptation and political lobbying can lead to an improved income for SMFEs and impacting directly on the achievement of the MDGs 1-6.

Most associations have strong social and environmental objectives as well as economic goals. In India , the Harda District Timber Merchant Association collects money and provides loans to particularly needy members who have suffered losses beyond their control. The Chico Mendes Association in Brazil both collects Brazil nuts and manages tree nurseries set up to produce superior genotypes with which to reforest degraded areas. The strong environmental aims in many articles of association are an excellent entry point for ensuring environmental sustainability (MDG 7).

How then might a global partnership for development (MDG 8) include forest-based associations? Research findings suggest that the most useful support tends to be responsive rather than imposed – making associations both easy to set up and a conduit for securing central support. Appropriate support through umbrella groups can often strengthens associations. For example, the Budongo Forest Conservation and Development Organisation and the Uganda Honey Association in Uganda help to represent diverse interests of member associations and target support more effectively.

Support that improves information flows is particularly valuable (e.g. on bureaucratic procedures, product design, markets, finance and technological innovation). Making available finance work for such associations is also crucial – but often best managed through the association itself. For example, the North Rupununi District Development Board in Guyana runs a women’s revolving loan scheme for small loans at 5% interest. It also finances a larger North Rupununi Credit and Development Trust geared towards business start up – initially repayable in 6-9 months at which time a second larger loan can be accessed.

In summary, the evidence suggests that forest-based associations can play a pivotal role in achieving in the MDGs. But the question in the age of direct budgetary support is: “Are donors willing to work with them?”

Notes:

1. There may be an additional 140 million people working in informal forestry micro-enterprises mainly in developing countries
2. For comparison: total global value of imports of wood based products is about US$141 billion/ year – most of which is produced by large enterprises.

Further information:
Duncan Macqueen
Senior Researcher
Forestry and Land Use Programme
International Institute for Environment and Development
4 Hanover Street
Edinburgh EH2 2EN , UK .
Email: duncan.macqueen@iied.org

Top of page