Forests Sourcebook - HCV Resource Network

must be distinguished from products and services that can
be critical steppingstones out of poverty.
Improve information flows. SMFEs generally suffer
from poor market information, and global communication
technology and market access favor large multinationals,
often to the detriment of SMFEs. Timely market
information, through local radio networks or electronic
media, can shift the balance back in their favor. For some
products, local cultural tastes and the origin of production
still count, which gives SMFEs local competitive
advantages.
Help break up market monopolies. Market monopolies
tend to exclude SMFEs—especially where large enterprises
and government officials collude. In India, for example, the
negative impact on small-scale producers of government
marketing corporations has been well documented.
Systematic attempts to break up monopolies (and
associated collusion and corruption) require action at many
levels. Mobilizing local legal support groups or independent
forest monitoring can be useful tactics.
Support appropriate economic incentives or
campaigns against unreasonable subsidies and trade
barriers—depending on circumstances. Free trade can
be biased toward larger enterprises because of inequities in
power and scale efficiencies. Depending on the context, it
may be necessary to ensure that trade reforms and
economic incentives do not result in accumulation of
power in the hands of a few, marginalizing small-scale
producers.
Strengthen the capacity of SMFEs to attract
investment. Building capacity for accurate risk
assessments, installing policy interventions to underwrite
collateral, and developing financial administration all can
serve to attract investment. Transaction costs hamper the
attempts of financial institutions to reach SMFEs—who
often rely on their own savings (Spantigati and Springfors
2005). In some cases, group forest certification has been a
useful tool for unlocking credit (see note 3.2, Forest
Certification Systems).
Strengthen the capacity to negotiate financial
deals with investment agencies and big business. The
potential often exists to combine financial capacity
development, group lending schemes, and market
development (see box 2.9 for an example from Guatemala).
Seeking support through local institutions deserves wider
application. Also, risk assessments should better reflect
forest timeframes, seasonality, returns, and constraints so
that banks are better able to do business with SMFEs.
Build capacity in product or service design.
Specialization is often critical to ongoing success.
Information about what customers want can be obtained
through training courses in design, trade fairs, pooled market
research within an association, benign middlemen, or
specialized information services, such as market chain
workshops. Consumer concerns for fairer trade and more
sustainable forest management drive networks that
specifically target SMFEs and build their entrepreneurial
capacity—even if all of the final product or service is not
distributed through such channels.
Develop economic incentives or grants to support
the needs of forest enterprise associations. Forest
enterprise associations can help shape the policy
environment, reduce transaction costs, and invest in
adaptive strategies to take advantage of new opportunities.
Specific administrative, financial, and technical training
can be extremely useful if properly targeted through
existing associations (see box 2.10 for an example from
Brazil).
Devolve control over forest management to local
SMFEs to reduce the risk of forest conflicts, which
are endemic to many forested areas. 2 Insecure rights and
inequitable resource use in remote forest areas breed
Box 2.9
Building SMFE Negotiating Capacity
In Guatemala, community forest enterprises in the
heavily forested Petén region managed to obtain
credit from two banks, Banrural and Bancafé. This
achievement was based heavily on (i) support for
clear tenure rights, such as the legal establishment
of a community concession system; (ii) technical
support from business development providers;
(iii) strong partnerships (including advance payments)
with the timber industry and a dedicated
joint marketing company (Forescom); and (iv) an
association, Forest Communities of Petén, that
provided bridging loans.
Source: Macqueen 2006.
NOTE 2.2: SMALL AND MEDIUM ENTERPRISES 79