SosteNica’s pilot reforestation project with CEPRODEL in Nicaragua is not just about planting trees. There are many organizations and government initiatives reforesting Nicaraguan hillsides. What makes the project in Nagarote unique is it’s marriage between financial credit and reforestation. Why would – and should – small rural farmers accept trees on credit when they can get them for free from other sources? Last weeks workshop on farm planning and development strategy shows why.
SosteNica borrowers that chose to participate in the project are invited to workshops every Saturday, where the financial officers of CEPRODEL along with university professors work in small groups and individually with each farmer to create five-year farm development plans. The plans include labor intensive projects, such as digging ditches for irrigation or ponds for water retention, along with projects that require financial resources such as purchasing irrigation equipment and fencing. The aim is to help the farmers balance labor, debt, and natural resources to create realistic goals for strengthening the economic and environmental sustainability of their farms. By linking the environmental and financial resources together, and supplying trees, organic fertilizers and pest control methods as well as financing the purchase of irrigation pumps and fencing materials, our micro credit services provide a much more integral support system for the rural poor than the normal rural credit line of loans to purchase cattle without any additional support.
Success depends on how you measure it. The micro credit industry has been extolled for creating a viable (and profitable) solution to poverty and also criticized for the same profitability and high interest rates. Most micro credit institutions in developing countries are evaluated by the number of loans they make and their payback rates, which are important from the investor’s perspective, but the actual impact of the loan is much harder to measure. Micro credit organizations aim to reach as many borrowers as possible and keep repayment rates high. I’d like to see more micro credit organizations aim to educate their borrowers, to work with their borrowers so that their loans have a long-term effect, and to find creative ways of adding value to a loan through linking technical assistance and additional resources. We are just beginning to see how this can influence a small farmers business over the years, and one thing that’s clear is that how we measure success and impact needs to change to incorporate not just the needs of the investor, but the needs of the borrower as well.