18. The Role of Small and Medium Forest Enterprise Associations in Reducing Poverty

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18. The Role of Small and Medium Forest Enterprise Associations in Reducing Poverty



It is not easy for the poor to capture opportunities in forest harvesting and wood processing. It should be readily apparent, however, that small and medium forest enterprises (SMFEs) currently offer a significant proportion of those opportunities. They constitute 80–90% of all forestry enterprises and over 50% of forest sector employment in many countries (Macqueen and Mayers, 2006). But SMFEs face many obstacles, including insecure natural resource ownership and access rights, weak social stability and cohesion, little access to capital, poor market information, weak bargaining power, lack of technological know-how, geographical isolation and poor infrastructure, and limited knowledge of administrative and business standards and procedures.

External support for SMFEs is often absent, weak or poorly directed. Local collective action is therefore often the only option. Interventions that take local institutions seriously can enhance the already substantial benefits of collective action.

This paper draws heavily on lessons from field surveys of forest enterprise associations. IIED country research partners conducted surveys in Brazil (Campos et al. 2005; Figueiredo et al. 2006), China (Weyerhaeuser et al. 2006), Guyana (Ousman et al. 2006), India (Bose et al. 2006), South Africa (Bekula and Memani, 2006) and Uganda (Kazoora et al. 2006). Macqueen et al. (2006) provide a summary of these. We define associations as: “user groups that band together about a common purpose and create organized institutions for collective decision-making.” This paper particularly targets external supporters wishing to enhance the contribution of such associations.

Forest-based associations take on different institutional forms (i.e., informal groups, associations, cooperatives, and companies). They also produce different types of forest products and services. Some manage private or common-pool resources, while others deal with processing activities far from the forest. Some involve local groups of individuals (often community-based) in which the association is the forest enterprise. Others are large umbrella groups that represent multiple enterprises. Local forest enterprise associations are recognised to be particularly important for poverty reduction.

Many recent studies have already examined how and why groups are successful (Futemma et al. 2002; Ostrom, 1999). Generic lessons about what makes groups successful include (Macqueen et al. 2006):

This paper complements previous analyses in two ways. First, it adds information specific to forest-based associations, and second, it focuses on how to provide such associations with effective support.

Elements of poverty that forest-based associations address

Poverty is multifaceted, comprising:

Working together through an association is one way to tackle each of these elements of poverty. Sometimes members join forces reactively in response to outside requirements or threats. Sometime they join proactively to pursue perceived opportunities.

Increasing access to basic needs

In many cases, the aims of associations extend beyond economic success to explicit social and environmental ends (Macqueen et al. 2005). In India, the Harda District Timber Merchant Association collects money and makes loans to particularly needy members who have suffered losses beyond their control (Bose et al. 2006). But these wider aims are not always present. For example, many associations in Brazil formed solely to take advantage of a government credit program, and they soon collapsed once this aim was achieved (Campos et al. 2005).

Associations can help reduce input prices and share transaction costs. They can also use collective bargaining to improve returns from sales. These options make member enterprises more profitable, which in turn helps members to get access to basic needs. For example, in South Africa the Kwangwanase Association of small timber growers hires a truck at harvest time to reduce members’ transport costs. The Sakhokuhle Association, an umbrella body with 1,400 small-grower members, has successfully negotiated better transport rates for association members wishing to sell their timber products. The Swayimane Small Growers Association in Warburg shares the costs of joint training workshops for its members on small-grower forestry (Bukula and Memani, 2006).

Eliminating unnecessary intermediaries increases the benefits for poor producers. While some brokers play important roles in matching supplies from diverse producers with demand, this position of power can result in a poor deals for producers. To combat such problems, the Cooperativa dos Agricultores de Medicilândia in Brazil formed with the express intention of restructuring the cocoa market chain. The aim was for producers in the State of Para to challenge the power of middlemen and large traders and so obtain prices comparable with other areas in Brazil (Campos et al. 2005).

Enhancing security and resolving conflicts

Associations have often proven effective in securing access to forest and financial resources. For example, the Guyanese Upper Berbice Forest Producers Association enabled members to gain access to a forest concession (Ousman et al. 2006). In Uganda, members of the Kamusiime Memorial Rural Development Association combined their land, allowing them to meet the required size required of 25 ha to be eligible for grants under the European Union-funded Sawlog Production Grant Scheme (Kazoora et al. 2006).

Conflicts often arise when authorities do not consult local people or recognize their rights. For example, Indian authorities introduced a new sales tax procedure (Form 38), which made tax collection much more cumbersome for local enterprises and led to unrest. The District Yamunanagar Plywood Manufacturers’ Association took up the case in 2002. They called a general strike until the government withdrew the offending Form 38 (Bose et al. 2006). In central Africa, the Uganda Investment Authority created an industrial park encompassing areas with trees planted and managed by local farmers. The Uganda Wood Farmer’s Association was formed specifically to sue the Uganda Investment Authority. The presiding judge in the case ruled in favor of the farmers. He granted compensation equivalent to four tree rotations (Kazoora et al. 2006).

Inevitably, there are many examples where conflict emerges from the management of associations. In India, the Saharanpur Wood Carving Association in Uttar Pradesh, formed in 1960, initially succeeded in campaigns seeking favorable tax incentives and export policies. But disputes broke out among office staff in 2004, ultimately resulting in the resignation of the president. He then established the Saharanpur Wood Carving Manufacturers and Exporters Association, a direct competitor to the original association (Bose et al. 2006).

Overcoming social isolation and powerlessness

Individual SMFE’s are often unaware of various support opportunities available to them, but associations can pool the knowledge and contacts of their members. They can also provide resources for dedicated people to undertake networking responsibilities. For example, representatives of the Kabakaburi Handicraft Association in Guyana secured funding from the Inter-American Institute for Cooperation for Agriculture, which enabled joint enterprise training in pottery, joinery/carpentry, sewing and craft making (Ousman et al. 2006).

Larger associations can create extensive networking opportunities for their members. For example, the Federation of Rajasthan Handicraft Producers in India has instituted awards for outstanding handicraft producers, organizes an annual symposium to share designs and runs seminars on trends in home furnishing. Visual merchandising and procedures for setting up export-orientated units are also a focus of the association. The association organizes workshops to promote exports of novel handicrafts, and leading members are provided with the opportunity to participate in European trade fairs (Bose et al. 2006).

In many instances, forming an association helps to secure training opportunities. For example, the Uganda Community Tourism Association used membership fees to provide training for members in tourism marketing, organizational strengthening and craft making (Kazoora et al. 2006).

On a cautionary note, associations can suffer from “elite capture” or corruption. Representatives of associations do, in some cases, abuse their positions to negotiate personal deals that can sometime leave associations in debt to outside interests. For example, the third board of directors of the Association of Rural Workers in the Boa Esperança/ Entre Rio settlement in Brazil became involved in the illegal sale of land plots and timber – taking a cut from each sale (Figueiredo et al. 2006).

Providing good employment opportunities

Joint investment through associations can create new jobs. For example, the Brazilian Cooperativa de Produção Agropecuária e Extrativista dos Municípios de Epitaciolândia e Brasiléia has already established a Brazil nut processing plant and has begun to expand operations to cover a wide range of ventures. It is now investing in salting, flaking, filling, and other processing equipment, and has plans to develop animal feed from Brazil nut shells. It also plans to launch a new range of rubber products, and to establish a pulp processing project for local palm fruit (Campos et al. 2005).

Associations are also more successful at attracting donor support for improved working facilities. Individual enterprises would, in most instances, find it very difficult to attract such funding. The Kamuni Women’s Handicraft and Sewing Development Association in Santa Mission Village, Guyana, successfully applied to the Canadian International Agency for a new craft centre fitted out with water tanks, five sewing machines and new furniture (Ousman et al. 2006).

In many instances, associations have facilitated group certification or fair trade initiatives, which are generally too costly for individual members. Certification support schemes provide detailed guidance on workers’ rights, health and safety standards, and record keeping requirements. In the case of fair trade, they also sometimes provide a price premium for producers. In Papua New Guinea, community representatives established a company called FORCERT in 2003. The company links separate producers with Central Marketing Units that facilitate sales of products to overseas buyers. It has achieved certifications from both the Forest Stewardship Council (FSC) and the International Federation for Alternative Trade (IFAT) as a Fair Trade Organization (Dam 2006). The benefits have included increase employment opportunities, better working conditions, and the realization of a 20% price premium on the sale of the certified products.

Associations and unions have been at the forefront of the fight to help SMFEs remain viable and improve working conditions. For example, the Gujarat Timber Merchants’ association in India has fought the closure of small sawmills due to strong conservation legislation (Bose et al. 2006). It should be noted that salary levels, worker’s health and safety are often worse in SMFEs than within larger enterprises (May et al. 2003; ILO 2001). In addressing these shortcomings, associations face the challenge of overcoming scale inefficiencies, poor access to capital and a disabling policy environment.

Preventing environmental degradation

Local SMFEs are generally more accountable to local people than large external companies. There are many examples of good environmental management as a result. For example, indigenous peoples in the southern states of Mexico resented the degradation of their forests by outsiders. A group fought a successful campaign against imposed concessions. They won rights to operate their own micro-enterprises adhering to their own environmental values (PROCYMAF 2000).

In Guatemala, a company called FORSCOM was established by 11 member communities. The company manages community concessions and is FSC certified, a prerequisite of the concession agreement (Leon 2006). While this can be considered a success, community level certification is relatively rare due to multiple complicating factors including:

Additionally, issues of scale and power often favor larger enterprises in resource allocation, policy formulation and enforcement. The result is that SMFEs and their associations frequently cut environmental corners in order to compete. Associations can counter this tendency by using their collective voice to lobby for a fairer policy environment for SMFEs. For example, a member of the Guyana Manufacturers and Services Association lobbied for a new land-use strategy based around SMFEs that would increase forest revenues and employment without compromising sustainability (Mendes and Macqueen, 2006).

Strengthening cultural identity

Cultural identity is extremely important to the many forest peoples of the world. It can be defined as: “a set of distinctive spiritual, material, intellectual and emotional features of society or a social group, and that it encompasses, in addition to art and literature, lifestyles, ways of living together, value systems, traditions and beliefs" (UNESCO 2002). Various methods have been developed to determine cultural and sacred values in landscapes and in forest decision making (Rowcroft et al. 2006).

Cultures of forest peoples are not only rich source of human diversity. They are also often deeply linked to the sustainable use of forests. For example, the indigenous peoples of the Upper Caura river basin in Peru formed an indigenous association, registered their cultural knowledge, mapped their customary land-use system and have developed sustainable management plans for the area – including co-management of existing protected areas (Colchester 2006).

Makushi communities in Guyana formed an association known as the North Rupununi District Development Board. The association developed small tourism enterprises that promote local language, dance and weaving. When self-assessing the most important assets within their communities, the Makushi identified culture as a key resource (Ousman et al. 2006).

Internal procedures that maximize association benefits

The benefits of forest enterprise associations in poverty reduction only come if associations are resilient and distribute costs and benefits fairly. A number of observations from country fieldwork show how this has been achieved in some cases.

Autonomous origins

There are considerable benefits associated with independent organizational beginnings, free from external interference. In Yunnan, China, political interference is strong, which leads to associations being weak. For example, the narrowly construed Yunnan Forest Products Industry Association currently does little more than hold an annual meeting. Another example exists in Uganda, where USAID supported COVOL in 1995 to improve shea nut butter production across 400 community-based organizations. This amalgamated into the Northern Uganda Shea Producers’ Association. The combination of USAID’s withdrawal in 2000 and subsequent disruption by the Lord’s Resistance Army rebels led to the collapse of the association (Kazoora et al. 2006).

Many of the associations surveyed that had their origins in external support were in a state of crisis. In Brazil, the state agricultural extension agency founded the Associação dos Produtores Rurais em Manejo Florestal e Agricultura as a timber management project. Interviewees described little ownership by members, little trust in the leadership and little unity among members (Campos et al. 2005).

Accountable leadership with a history of social commitment

Members who have served well in a voluntary capacity are likely to make good leaders. For example, Ugandan informants regarded previous experience as the most important leadership quality after the ability to read and write. Many of the financially poorest associations have benefited from leaders who initially subsidized association activities, demonstrating deep personal commitment to the collective interest (Kazoora et al. 2006).

It also makes sense to invest in future leaders. For example in the association of the Settlement Project California in Mato Grosso, Brazil, young people make up 12% of the association members. The association has worked in partnership with the municipality and jointly they have developed programs at local high schools and built sports facilities in the settlement (Figueiredo et al. 2006).

Evolving procedures

Dynamic leaders can carry an association at the beginning, but long-term survival depends on well understood rules and procedures. For example, in Nova California in Brazil, two small rural producer associations joined in 1988 to form the cooperative called Reflorestamento Econômico Consorciado e Adensado. Founding members defined the initial objectives, but the cooperative has now evolved a unique organizational structure. Regional coordinators manage each area (male and female). A one-year membership trial period helps to build membership quality. Clear rules governing decision-making and the partitioning of costs and benefits are a major strength (Campos et al. 2005).

Associations that do not develop robust financial procedures quickly unravel. For example, doubt surfaced over financial mismanagement in the Amerindian Handicraft Association in Guyana due to a lack of clear procedures and accountability. Members quickly became reluctant to pay the 10% fee to the association required on the sale of craft products, with many opting instead to sell direct to buyers (Ousman et al. 2006).

Restricting focus to a few long-term issues

Keeping things simple at the start allows time for core expertise to develop. Most successful associations do a few things sustainably and well. Associations therefore need to balance immediate goals, such as markets for products, against longer-term interests, such as sustainable resource management. The Chico Mendes association in Acre, Brazil, originally started through Brazil nut collection alone. But it is now developing tree nurseries based on superior genotypes to reforest particular areas (Campos et al. 2005).

In Guyana, the Upper Berbice Forest Producers Association formed to achieve more secure jobs. Secure access to forests improved the viability and sustainability of timber production, while recognition of the low allowable timber harvest led them to diversify. New options include replanting manicole (heart of palm), fish farming and processing of non-timber forest products, but all these planned activities maintain a strict focus on strengthening working conditions for association members (Ousman et al. 2006).

Ensuring democracy and representation

Investing in democracy is one of the best guarantees of equity. For example, the Guyana Forest Products Association has monthly meetings of the 12-member elected executive committee requiring a quorum of six members, plus less frequent general membership meetings (Ousman et al. 2006).

Men and women often have very different livelihood concerns, yet the predominant trend is for there to be fewer women in leadership positions. For example, Ugandan women made up 53% of the members of the 62 associations surveyed, but only 44% of its leaders (Kazoora et al. 2006). A strategy in many countries is for women to create their own associations in order to have their interests represented. In the Caetés Settlement in Brazil, women producers formed the Association of Caetés Women because the two existing producers’ associations failed to represent their interests (Figueiredo et al. 2006). In exceptional cases, associations develop strict gender equity requirements.

Larger associations frequently under represent smaller members. A large industrial association in South Africa, Forestry South Africa, has an executive committee dominated by large timber growers (five members), which carry more weight than medium growers (three members) and small growers (two members). The flourishing of many alternative small producer associations is one outcome (Bukula and Memani, 2006). In some instances, very large associations can benefit from sub-groups that deal with specific issues. For example, a papermaking sub-group may develop within the Yunnan Provincial Forest Products Industry Association in China (Weyerhaeuser et al. 2006).

Making costs and benefits transparent

Trust grows when members know what their rights and obligations are. Developing clear procedures for costs and benefits and sticking to them can avoid corruption and abuse by powerful elites. One of the main contributors to the success of the Kamuni Women’s Handicraft and Sewing Development Association is the meticulous financial record keeping of the stock held in the newly built craft sales centre (Ousman et al. 2006).

It is also vital that members perceive some advantage over non-members. Graded membership can build loyalty for continuing membership and can improve inclusion of the poor. In India, the FORHEX association has three types of members; founder, chartered and associate members. The latter pay reduced fees and receive partial benefits in comparison with the former two categories. The Madhya Pradesh Minor Forest Produce Cooperative Federation Limited has a set membership fee, but it distributes profits in line with particular activities: 50% to primary collectors, 20% for forest regeneration and 30% for infrastructure development (Bose et al. 2006).

Building in additional social benefits for marginalized groups can strengthen association unity. In Brazil, association barbecues and games proved to be an often-cited reason for belonging to the Association of the Settlement Project California (Figueiredo et al. 2006).

Developing clear conflict resolution procedures and effective sanctions

Personality differences and poor representation can lead to a fragmentation of associations, which negatively impact on their bargaining power. One useful strategy is to ensure space for “non-standard” meetings. Such meetings deal with contentious issues, new developments, the hosting of important visitors or discussing new government policies. In Uganda, 95% of the associations that remain have procedures in place to call such meetings (Kazoora et al. 2006).

Rewarding members and penalizing free riders helps to ensure the satisfaction of those who sacrifice the most. The credibility of the association (and the willingness to pay membership fees) often hinges upon how people who fail to pay are treated. For example, the Guyanese Orealla Fruit Cheese Women’s Association, which makes forest fruit jams, stipulates an annual membership fee, commitment to waged work in the “fruit cheese” production facility and regular participation in meetings. The association expels members if they fail to pay the annual membership fee or if there is a two-thirds majority vote for expulsion (Ousman et al. 2006).

Effective support

With a recognized emphasis on the importance of autonomous and democratic decision-making in associations, what role should external agencies play in order to effectively support them? The following are suggestions for such support.

Make it easy and fair for SMFE associations to operate

Kaimowitz (2006) highlighted several major constraints for SMFEs; overregulation, trade liberalization with subsidies for the rich, and weak support services (credit, information and training). Overviews of SMFEs in six countries highlight the need for governments to level the playing field, with inequities in business registration, resource access and taxation being seen as endemic (Auren and Krassowska, 2003; May et al. 2003; Saigal and Bose, 2003; Sun and Xiaoqian, 2003; Thomas et al. 2003).

One general rule for support is to foster what already exists rather than impose or create what does not. In many cases, successful support emerges through genuine partnerships or response to demand from the association itself. In Mexico the Union of Zapotec and Chinantec Forestry Communities (Uzachi) was established autonomously in 1989 following decades of private exploitation of their natural mixed pine oak forests. The Union then approached FSC and obtained certification in 1996. It has subsequently been able to attract greater financial and technical support and has increased status in the eyes of the environment ministry (Markoupoulos 2003).

Before rushing to push external loans or technical support programs, it is worth exploring what internal credit unions or revolving loan funds already exist. For example, the North Rupununi District Development Board in Guyana runs a women’s revolving loan scheme, providing small loans at 5% interest rate. It also finances a larger North Rupununi Credit and Development Trust geared towards business start-up. This is initially repayable in 6–9 months, at which time borrowers can access a second larger loan (Ousman et al. 2006).

Likewise, forcing particular models of association can cause lasting damage. In Uganda there is a highly negative reaction to the “cooperative” form of association because of the high failure rates among government sponsored cooperatives in the 1980s (Kazoora et al. 2006). Years after the fact, this negative perception still persists.

Underwrite communication networks that link forest enterprise associations, markets and service providers

In very poor countries, the infrastructure to connect SMFEs and their associations to registration authorities, consumers and service providers is often absent. This may give the perception of poorly organized, informal enterprises, dispersed economic activity and excessively high risk. This in turn discourages government authorities, financial institutions and technical support services from attempting to assist these entities.

One of the most productive forms of support connects forest enterprise associations to the outside world and vice versa. For example, some of the success of the North Rupununi District Development Board in Guyana came from the tireless engagement and promotion of its activities by the Iwokrama International Centre for Rain Forest Conservation, which helped to link the association with various other donors (Ousman et al. 2006). In China, the Zhaijaiwa Village’s Persimmon Association posted information about its products in the Baoshan Forestry Bureau’s publications and secured buyers from as far away as Shanghai (Weyerhaeuser et al. 2006). Umbrella associations such as the Budongo Forest Conservation and Development Organization or the Uganda Honey Association in Uganda act as support hubs for the development of better communication networks (Kazoora et al. 2006)

Many associations would also benefit from exposure to similar groups that can facilitate connections with those outside the association. Support through printed or radio bulletins, or by financing visits to trade fairs can be very useful. The Essential Oil Association of India publishes a journal entitled “Indian Perfumer,” which presents the latest research and market information. It also sponsors workshops and seminars for member entrepreneurs (Bose et al. 2006). In Guyana, the Ministry of Amerindian affairs usefully sponsored a craftswoman from Kabakaburi community to train the Orealla Women’s Group in the making of tibisiri1 craft (Ousman et al. 2006).

1 Tibisiri straw comes from the young shoots of native Guyanese palms and craftswomen then weave it into items that are very popular with tourists and local tradesmen.

Provide ways of distinguishing, and increasing the returns to, local forest enterprise associations in the market

Consumers are often willing to pay a premium for the social benefits linked to local forest enterprise associations, which are often community-based. The fair-trade movement already offers price premiums for many crafts made from timber and non-timber forest products. Such products are marketed and sold by Fair Trade Organizations when certified by the International Federation for Alternative Trade (Macqueen et al. 2006). Major timber buyers have expressed an interest in developing fair-trade timber in order to secure such premium prices (Roby 2005). Unfortunately, there is currently no product-specific label for timber available from the Fair Trade Labeling Organization that might allow mainstream traders to engage in the market for fair-trade products, such as those not certified by the International Federation for Alternative Trade. .

Despite well-publicized social concerns, the three major timber certification schemes (FSC, the Programme for the Encouragement of Forest Certification and SFI) fall short. They do not distinguish between small community-based products and products originating from large multinationals, a factor that disadvantages small local forest enterprise associations. They continue to face disproportionate costs for certification without seeing many economic benefits (Bass et al. 2001). A new alliance is calling for market mechanisms to address this deficiency, but such mechanisms will need to address the major gaps in mainstream trade, certified trade and fair-trade systems.


Small and medium forest enterprise (SMFE) associations can and do work where there is little else available to improve livelihoods and alleviate poverty, and therefore warrant support. Three priority areas require attention:


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