Frédéric Huybrechs

Green Microfinance for Ecosystem Services - An Empirical Quantitative Study of a Project's Results, the Variables Influencing Its Outcomes and the Effectiveness of the Related Conditional Payments

Recently there has been growing interest in green microfinance, referring to the role of microfinance to support environmental management by micro-enterprises and poor households. Worldwide, the number of green microfinance projects increases, yet there seems to be little discussion on how green microfinance interacts with rural development, and how effective it is in achieving its environmental goals. This paper aims to position itself in this debate as it assesses the role, outcomes and limitations of a green microfinance programme in biodiversity conservation and rural development.For our case study, we look at the first large-scale green microfinance programme for biodiversity conservation: Proyecto CAMBio (Central-American Markets for Biodiversity). It was implemented in five Central American countries in the period 2007-2013 and consisted of a combination of credits for agroforestry, silvopastoral practices or other environmentally friendly rural activities; technical assistance to support the adoption of these practices; and conditional payments for environmental services (PES) linked to a number of environmental objectives. We focus on its implementation in Nicaragua by the Microfinance Institution (MFI) Fondo de Desarrollo Local (FDL) and the NGO Nitlapan. We perform an in-depth econometric analysis on a database from a survey we conducted on a sample of 128 rural producers. We thereby assess the clients’ characteristics that influenced the evolution of the environmental value of their farm – as defined by the indicators we used – on a span of five years, and we assess Proyecto CAMBio’s possible role in this evolution. Moreover, we further look into the effectiveness of PES in rewarding environmental betterment.Our results underline the importance of the local territorial dynamics and the complexity of the socio environmental system, challenging a simple response to individual green credits or environmental rewards. It appears that – although the project was carefully implemented in line with the guidelines, and performed well financially – green microfinance programmes specifically designed to foster environmentally sustainable and economically rewarding rural practices do not necessarily manage to influence the evolution of the environmental value of the clients’ farm. Other factors, related to livelihoods pathways – such as the decision to change the main economic activities, or clients’ strategies or opportunities in land accumulation – have instead a significant influence on the evolution of the environmental value of the farm. Moreover, the PES does not seem to be able to reward environmental improvement. Embedded in the credit logic, it rewards the more credit-worthy activities, and it appears that it mostly benefited producers that plant fewer trees per hectare and have more access to land and credit.On the basis of this analysis, we call for a more proactive role of green microfinance, which aims to reshape existing livelihood strategies toward more socially inclusive and environmental friendly pathways, through a necessary articulation with local actors and broader territorial dynamics. At the practical level, specific policies for green credits should be integrated as fundamental tool in the green credit provision and allocation. These should aim to balance the social and environmental outcomes, going beyond a sole focus on the financial profitability or credit risk of the product and its participants.

Green MicroFinance in Latin America and the Caribbean: An Analysis of Opportunities

The inclusion of environmental criteria in microfinance products to promote sustainable activities, access to clean or more efficient use of energy or to reduce climatic and environmental risk for low- income households or microenterprises (i.e., green microfinance)—is a dynamic and growing market in Latin America and the Caribbean (LAC), with existing and forthcoming opportunities. However, client outreach, clear strategies and institutional buy-in are still limited. Better coordination and appropriate tools, products and strategies need to be developed to achieve the potential of a very promising green microfinance sector in LAC.

Microfinance plus for ecosystem services: a territorial perspective on Proyecto CAMBio in Nicaragua

Drawing from discussions on the panacea problem in microfinance and natural resource management, we scrutinize a ‘green microfinance plus’ programme – Proyecto CAMBio – in a specific setting in Nicaragua, focusing in particular on its interaction with local development pathways. The programme was designed to promote biodiversity-friendly land uses through the combination of credit provision, technical assistance and conditional economic incentives. In our case study, we highlight the focus on individual producers, the implicit targeting of more established medium-sized producers, and the uncritical promotion of a particular technical model of production. The project might thereby have failed to identify and revert some negative processes of environmental degradation and did not consciously engage with the dynamics and political arenas of sustainable development. We call for a more holistic territorial perspective that is conducive to more strategic thinking about the interactive socio-technical dynamics and ensuing opportunities and constraints for different producer types and technical-commercial models. Such strategic reflection is both inevitable and political, as it impacts on the opening and closing of avenues for more or less socially inclusive and environmentally sound development pathways.

ES Thinking and Some of Its Implications: A Critical Note from a Rural Development Perspective

Abstract This chapter looks at ecosystem services-thinking from the perspective of rural development and land-use dynamics in developing countries. In this context, the concept of ecosystem services seems to be prevalent as a foundation for market-based conservation and development policy tools such as Payment for Ecosystem Services (PES). We assess a PES scheme in Nicaragua and show the importance of the broader context and the cognitive-motivational frameworks that influence land-use management, which go beyond the mere individual and economic rationale underlying mainstream PES. We link our findings to recent evidence that calls for a more integrated institutional approach to PES, emphasizing the need to take into account the complexity of rules and motivations present in the socio-ecological system with which such interventions inevitably interact.