Overview: Convergence awarded a feasibility study grant to Wildlife Conservation Society (WCS) through the Asia Natural Capital Design Funding Window, funded by the RS Group. This funding will support the design of the Bukit Barisan Selatan (BBS) Landscape Fund, a financing mechanism that will provide technical assistance to smallholder coffee farmers around the Bukit Barisan Selatan National Park, and increase farmers’ access to credit by incentivizing lending from local financial institutions. WCS has been active in the BBS National Park in Sumatra for over 20 years – this feasibility study builds on this longstanding partnership and also supports the work of the BBS Sustainable Commodities Partnership – a collaborative public-private initiative designed to halt commodity driven deforestation across the landscape, engaging farmers, National Park authorities, and coffee buyers like Olam, Jacobs Douwe Egberts, Louis Dreyfus and Nestle.
The BBS Landscape Fund, once fully mobilised, will have the potential to support the livelihoods of 20,000 farmers by increasing the productivity of their coffee production, providing access to markets, and building their technical, financial, and organizational capacities. These investments in turn could catalyse a reduction in over 20,000 hectares of deforestation, avoiding over 13 million megatonnes of CO2 emissions through 2050, and supporting the protection of the BBS National Park, a critical habitat for rare species such as the Sumatran tiger.
The feasibility study will initially focus on furthering engagement with local financial institutions to design an appropriate credit enhancement mechanism, as well as determining what capacity building support these financial institutions may require. Additionally, WCS will conduct market testing with local farmer groups to ensure smallholder coffee farmers will benefit from the initiative while being able to repay loans.
Design question and learning potential for the market: How can financial institutions be incentivized to extend credit to smallholder farmers in the forest frontier to transition to sustainable farming practices, avoid deforestation of critical habitats, and protect threatened species?
The BBS Landscape Fund will build on the conservation trust fund (CTF) model which will have two components: a) the provision of a credit enhancement mechanism, such as a guarantee, to local financial institutions to mobilize domestic lending to farmers, and b) the provision of direct technical assistance and capacity building to farmers and financial institutions.