An IUCN concept for an inclusive finance fund is a finalist in the Global Innovation Lab for Climate Finance – 2019. We hope that this is just a start.
On 20 February in Frankfurt, Germany, at a meeting of advisors of the Global Innovation Lab for Climate Finance, a concept for a fund to scale up IUCN’s mechanism for inclusive community level finance called MaliVerde was recognised as a finalist in their call for proposals. The ‘Lab’ aims to incubate innovative ideas like this one to bring investment into climate action. The Lab advisors are drawn from financial institutions and development banks.
“This is a great validation of this mechanism that we have now been working on for seven years,” said Charles Karangwa, Regional Head of Forests, Landscape and Livelihoods Programme for IUCN in Eastern and Southern Africa. He continued, “We have found the revolving fund at the community level combined with a community land-use plan, community by-laws and sustainable value chains to be a powerful mechanism for communities to build resilience to climate change and support sustainable land use and conservation.”
MaliVerde - GreenWealth MaliBuluu – BlueWealth
MaliVerde is a name derived from the Swahili – ‘mali’ meaning ‘wealth’ and the Portuguese ‘verde’ meaning ‘green’ – thus meaning green wealth. For coastal and marine communities, the equivalent is MaliBuluu also from Swahili with ‘buluu being ‘blue’.
The MaliVerde – GreenWealth Fund
The MaliVerde /MaliBuluu Fund is a global-level concept for a US$ 2 billion fund that aims to rapidly scale up the application of the MaliVerde Mechanism (community level land-use plan plus small community revolving fund) across communities in multiple countries. It aims to make resources available to communities to establish the mechanism at scale. Mark Ellis-Jones, a Director of GreenFi and lead designer of the fund stated, “Given the advice of the IPCC, we have to act very rapidly, indeed, to transform the way we manage land, the MaliVerde / MaliBuluu Fund aims to be ‘Business Unusual’ and transformative across multiple communities and whole landscapes.”
How does the mechanism it work?
The MaliVerde Mechanism links and packages three elements:
- Community land-use plan with by-laws;
- Community-level revolving fund; and
- Sustainable land-based value chains.
A community develops their own land-use plan and by-laws that build resilience to climate change and restore ecosystems for sustainable use. Then, as a performance grant, they receive (a) training to establish and operate their own revolving fund, and (b) an initial grant to capitialise the fund. The fund is open to all households in the community who demonstrate that they are implementing the community land-use plan either on their own plots or on communal land. Compliance by households, with both the community-determined environmental conditions and the return of loans to the fund, is ensured by the implementation of the community by-laws.
Once in place at the community level, the MaliVerde Mechanism remains as a long-term community asset that will not only grow but will also promote the increased productivity of community lands including: farmlands, wetlands, forests, rangelands, and coastal and marine resources. The mechanism is now being used in Kenya, Malawi and Tanzania – the latter with coastal communities on the Tanzanian island of Pemba, Zanzibar.
Why is this important?
It has been recognised that governments and donor agencies will not have the resources to make the necessary climate transformations alone and thus private sector resources need to be fully engaged, which is the objective of the Global Innovation Lab. The vast majority of rural community members in the developing world are considered too risky to be given loans. A risk that is actually increasing as climate change disrupts weather patterns and farming systems. In Uganda alone, 30 out of 45 million people would be unable to receive climate loans. This presents a serious and largely unrecognised barrier in terms of engaging the private sector.
A study carried out by IUCN and partners indicates that small-scale farmers might actually be the largest private sector, and the model is expected to consolidate significant community private resources to climate change resilience. Small scale land and sea managers will need incentives to make the shift and invest in sustainable management and resilience building which the MaliVerde mechanism provides.
“We think that despite the challenges of no immediate expectation of a return on investment from MaliVerde communities, the private sector is still going to want to support the establishment of and contribution to fund it,” said Jules Roberts, Founder of GreenFi. He continued, “this mechanism could support the several commodity chains that have out-growers, including tea, cacao, coffee, shea nut... Some of the large companies could invest in the fund as it will help their out-growers become more resilient to climate change, and help secure their businesses.”
Other potential private sector investors into the fund could be those requiring ecosystem services. The MaliVerde model would help the proper management of water catchments so hydropower plants and downstream water users could support scaling up as an investment in ecosystem services. The same would go for biodiversity and tourism and potentially for carbon markets.
GreenFi manuals and tools
Given the ambition of the fund, it is very important that both the loan funds and the environmental measures are well monitored so that contributors to the fund can be assured that the improvements to community resilience are taking place. GreenFi has developed a set of tools and manuals that will not only help implement the mechanism, but also monitor both the management of the finances and the environmental measures. A key tool is a mobile phone application, currently in advanced development.
Community Environmental Conservation Fund (CECF) in Uganda
MaliVerde started off as the Community Environmental Conservation (CECF) Fund in Uganda, in 2012. With funds from the Austrian Development Agency, IUCN worked with displaced communities in Northern Uganda returning to their land after 20 years of war. “We thought – why not support communities to manage the rehabilitation funds,” said Barbara Nakangu, then Head of IUCN in Uganda and now a Senior Programme Officer in IUCN Washington, “that way we would enhance capacity for financial management and inclusive local resources governance, and leave a long-term asset at the community level. We saw the CARE International Village Savings and Loans Association Model was working very well in the communities but did not include the environmental dimension. So we adapted that model and included an environmental sustainability component.” CECF is now operational in 130 groups and with approximately 20,000 members in Uganda.
Moving forward with the MaliVerde/Malibuluu Fund
Recognising that being a Climate Innovation Lab finalist will help to further the development of both the mechanism and the fund, it is hoped that this positioning will also raise awareness among the climate change community to the critical issue that small scale farmers, fishers and foresters are often unable to receive commercial loans. The fact that these same households may form part of the world’s largest private sector and that their own investments in climate resilience are not insignificant, is a huge opportunity. Ultimately, we hope that the MaliVerde Mechanism and the MaliVerde/MaliBuluu Fund may prove catalytic in harnessing the capacities and energies of this global majority of small scale producers in effective climate action.
A blog by Robert Wild, former Technical Coordinator for Forests and Drylands for IUCN in Eastern and Southern Africa.
IUCN report download 2018: The world’s largest private sector? Recognising the cumulative economic value of small-scale forest and farm producers https://portals.iucn.org/library/sites/library/files/documents/2018-025-En.pdf
CECF Web story Jan 2018: The conservation and livelihoods power of a community fund in Uganda:https://www.iucn.org/news/forests/201801/conservation-and-livelihoods-power-community-fund-uganda
CECF Policy brief 2017: Community Environment Conservation Fund: A pro-poor incentive mechanism for benefit sharing in the natural resources sector. https://www.iucn.org/sites/dev/files/content/documents/iucn_cecf_policy_brief.pdf