New Innovative Credit Line to Fund Sustainable Land-use Transitions in San Martin, Showcases how Peru can Deliver on its Sustainable Development and Climate Change Commitments in the Land-use and Forest Sector

Sep 19, 2016, 10:53 ET from The Global Canopy Programme

OXFORD, England and LIMA, Peru, September 19, 2016 /PRNewswire/ --

Agrobanco and CEDISA working in partnership with the Global Canopy Programme sign a Memorandum of Understanding to develop a new credit line of up to USD 88 million to finance the sustainable transition of seven supply chains across San Martin, Peru in order to reduce deforestation and improve livelihoods.

The Global Canopy Programme, CEDISA and Agrobanco today announce the signing of a Memorandum of Understanding (MOU) to pilot a credit line facility for up to USD88 million to enable smallholders in San Martin, Peru to access competitive rates of finance and technical assistance to sustainably transition and scale up production in seven supply chains: coffee, cocoa, palm oil, palm hearts, rice, sacha inchi and aquaculture. These are the main supply chains in the Department of San Martin, which together have significant impacts on deforestation and ecosystem services.

Almost 90% of Peruvian deforestation is caused by agricultural expansion, with 75% of annual deforestation being caused by small scale agriculture. In addition, deforestation is Peru's largest source greenhouse gas emissions. Further unsustainable agricultural production is likely to result in an additional 7.3 million hectares of forests being cut down by 2050.

Simone Bauch, Latin America Director, Global Canopy Programme said "With Peru's current NDC commitments requiring GHG emissions to fall by at least 20% by 2030 and government zero deforestation targets of reducing deforestation by 54 million hectares of primary forests to zero by 2021, the country's current economic development, which is largely predicated on deforestation, will need to rapidly transition to a more sustainable landscapes approach and the Unlocking Forest Finance approach developed by GCP and its partners in San Martin provides a replicable and scalable model for doing this."

San Martin is Peru's largest rice and coffee producer and also produces other key agricultural products including cocoa, palm oil, palm hearts and sacha inchi. There is little or no access for farmers to low cost formal credi, and little availability of technical assistance, a critical component of any sustainable landscapes transition strategy. The Unlocking Forest Finance (UFF) project is part of the International Climate Initiative (IKI) and is lead and coordinated by the Global Canopy Programme. UFF is a consortium of organisations that have been working in San Martin for the past 3 years to design an effective transition strategy for San Martin to implement sustainable production models, restore degraded lands, conserve forests, improve rural livelihoods and reduce carbon emissions. These activities are part of an investment portfolio designed to generate positive social, environmental and financial impacts.

The credit line differs from existing credit lines as it includes all credit elements into a single product (i.e. credit for working capital and credit for upfront capital investments). It also aims to reduce the interest rate as a mechanism to engage farmers in the transition, incorporate insurance, guarantee credit and allow producers to pay for technical assistance as part of the package. A safeguarding framework demonstrating the 'greenness' of the credit line which links deployment of resources to environmental and social impacts will be implemented.

Agrobanco's outgoing President, Enrique Diaz Ortega, stated the bank's excitement about signing this MOU. "The work being undertaken in the San Martin region serves as an irrefutable proof that it is possible to fund sustainable land-use transitions and it's also highly replicable in different locations in Peru, as well as other countries."

Diaz Ortega highlighted Agrobanco's aims to promote green production in Peru through financing productive, environmentally friendly activities including reforestation and agroforestry processes. "We are completely engaged in the collaboration with innovative projects such as UFF, to generate a scalable pipeline of investable green projects that are attractive to both public and private sector financing in order to ensure that Peru can successfully deliver on the commitments made under the Paris Climate Agreement."

Enrique Delgado, Head of Economic Development in the San Martin regional government, said "The Regional Government strongly supports this effort to facilitate technical assistance and integral financial resources for small producers in the main regional supply chains. The regional government supports this initiative as part of its policy to incentivise the development of these supply chains in a competitive, sustainable and environmentally friendly way."

Cesar Renfigo, CEDISA's Executive Coordinator, said "I welcome the agreement with Agrobanco as it provides an excellent opportunity to continue with the progressive implementation of financial mechanisms that enable supply chains to transition to production systems that reduce pressure on forests and ecosystem services, conserve forests and improve the livelihoods of rural producers. The main challenge will be to ensure that innovate financing is put within people's reach."

SOURCE The Global Canopy Programme