Microfinance and Forest-Based Small-Scale Enterprises

Communities around the world rely on forests for their livelihoods, not only for domestic uses but also for income, frequently obtained through small-scale, often family-run enterprises. The sustainable development of such enterprises is increasingly recognized as a key to poverty reduction but is often hindered by lack of financial inputs or poor access to microfinance services. This publication reviews the specific microfinance needs of small-scale enterprises given the often seasonal and unpredictable nature of forest-based activities. It analyses the constraints they face when trying to obtain microfinance services and identifies ways to overcome these challenges. The publication examines the role that different types of microfinance institutions, such as banks, non-governmental organizations, cooperatives and credit unions, can play for small-scale enterprises and forest communities. It discusses, in addition to microcredit, a comprehensive range of services including savings, group lending, leasing, insurance and cash transfers. The strengths and weaknesses of different approaches are illustrated through four case studies in Nepal, Guatemala, the Sudan and Peru. This book will be a useful reference for those involved in designing policies and projects for the development of forest communities, as well as for those providing financial services to small enterprises in rural areas.