NMI is setting up a new Climate Smart Fund (CSF) with support from The Norwegian Ministry of Climate and Environment. Through loans and agricultural assistance, the climate fund is to make Indonesian smallholders intensify work on their existing farmland, instead of clearing rainforests. NMI is working with Plan B for the implementation in Indonesia. The the loans to the farmers will be administered by 3-6 local and well-established microfinance institutions (MFIs) in West-Kalimantan. Satellite monitoring in combination with close local follow-up shall ensure that climate goals are achieved. In the first phase of the project, we have USD 10 million of which 6 million will be on lent and we expect to lend working capital to 3,000 farmers. In the next phase, when the fund is fully capitalized to USD 100 million and aims to reach 25,000 smallholders.
For the successful implementation of the programme, partnerships with private sector partners will be critical. We see four types of private sector organisations we need to develop partnerships with:
With regards to the financial institutions, we have currently a partner, a BMT. In order to further scale up the programme we need to add more partners that can channel and manage the farmer loans. We have in particular looked at BPR’s and Credit Unions. Options that were recommended to us by OJK were Fintec Companies or P2P Operators. Multifinance organisations has also been suggested. In order to broaden our search for partners, we need the advisor to give an overview of Fintec and Multifinance Companies and identify those the CSF can consider partnering with. The selection should take into account the strategy of the organisations, overlap with CSFs interest and the pro’s and con’s of working with them, including regulatory constraints as well as based on experience dealing with these types of organisations (output 1.1). For this NMI has already engaged with law firms and this would form part of the basis for the analysis.
Based on the types of institutions selected, a list of potential partners will be made (output 1.2). In order to make our programme attractive for these financial institutions, we would seek advice on what are potential incentives for them to join our programme (output 1.3). This could be us teaching them working with long terms loans, helping to find clients etc. Once the incentives are clear, we would need the advisor to help integrate these messages in our communication materials used to engage with the financial institutes and jointly deliver to selected organisations.
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Ideally we find a mill we can partner with, as they can help on the implementation of a traceability system, certification and collection. We would need the advisor to help us identify incentives for selected mills (secure long term offtake, high quality material etc.) and help identify what kind of support they can give to the programme (output 2.1). Based on the incentives, would it be possible to do the collection and payment of the interest by deducting from the FFB, will they be able to take part of the credit risk on the farmers, what kind of price agreements may be possible (output 2.2). With the information collected by our partner as well as the target area, we would need the advisor to help select mills based on their supply chain links and potential interest in partnership (output 2.3). For the selected mills we would need a clear communication on their role and benefits and expectations to be jointly presented with the country manager for Indonesia (output 2.4).
One of the key challenges for farmers replanting old plantations is the reduced income until the plantation becomes productive. During this period we would still hope the farmers can cover their cost of living and pay (partially) the interest. To this end CSF is developing support for farmers to generate additional income through horticulture. We have selected 7 crops for which detailed cash flow projections have been made. Based on these projections a scheme has been designed that can be used to propose to farmers as an additional source of income. We would need the advisor to review the numbers and check if these are realistic, in particular on the market price (output 3.1). For the selected crops, we ideally would have offtake agreements with traders to ensure the produce can be sold once ready. We would need the advisor to identify potential partners and develop an agreement for off-taking the produce in the form of an MoU (output 3.2). Once the MoU is drafted and target off-takers have been identified, a presentation is developed and made to these off-takers, aiming to make an off take agreements with specific volume and as much as possible a (formula for) price (output 3.3).
1: Partnerships with Financial Institutes (11 days)
2: Partnership arrangement CPO mills (13 days)
3: Partnership offtakers vegetables (8 days):
The work is expected to be executed between 1 November until 31 December 2020.
The Advisor will report to the country manager of CSF in Indonesia
