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

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



When discussing community forestry, the forests often referred to are large, contiguous, natural forest areas with communities surrounding or living within the forest. However, small-scale agro-forests are a prominent type of community-owned forest in many developing nations and millions of people throughout the tropics rely on agro-forests to provide the majority of their income and subsistence. Such agro-forests usually consist of a wide diversity of trees, providing an impressive array of timber and non-timber forest products. Slow-growing, high-quality timber trees are often included in small-scale agro-forestry systems as a form of low-labor, long-term savings for farm families.

In Indonesia, small-scale farmers are already providing teak wood to local, regional, national and even international wood markets (via national factories). However, farmers selling such high-grade wood receive only a small portion of its value due to the long and complex supply chains involved in bringing the wood from the farmer to the end purchaser, and prohibitive licensing laws preventing farmers from having more direct market access. They are similarly often overlooked for certification due to the complexity of organizing and sourcing from hundreds to thousands of small-scale agro-forests, despite the fact that many farmers’ forest management practices already meet much of the certification criteria for sustainably-managed forests and that such community-produced wood could have a strong appeal to niche markets that focus on ‘green’ or ‘socially responsible’ products.

Another challenge when dealing with the management of agro-forests is how to ensure consistency and sustainability of supply. Most of the resources regarding sustainable forest management are focused on large-scale, contiguous forests. Even ‘small-scale’ forest literature often deals with forests of 50-500ha in size. Articles on silviculture and sustainable management techniques for agro-forests on the scale of 0.5-5ha are lacking. Creative twists on traditional forestry techniques must be applied when managing small-scale agro-forests which together comprise large areas of the landscape, but are being individually managed by many stakeholders with diverse goals. A successful example of such a creative twist is the Cooperative for Sustainable and Successful Forests, or KHJL, an organization which is the focus of this paper.

Historical background

In the early 1970s the national government decided to convert 38,959 ha of natural forest in Konawe Selatan (KonSel) District, Southeast Sulawesi, to teak plantations. People from local communities were hired to do the forest clearing and teak planting, and many simultaneously planted teak trees on their own allocated village lands at this time. The agro-forests that have since developed in the region contain a mixture of cash crops, including pepper, cocoa and cashew nut, as well as traditional crops. Trees also include fruit, firewood and timber trees (primarily teak - Tectona grandis).

Around 1999/2000 the KonSel teak plantations that were planted in the 1970’s became mature for harvesting, but due to the lack of clear legislation, it was not apparent who was responsible for managing the area. In the absence of strong government control, the forests were being began to be recklessly cleared through widespread illegal logging. It was in this context that regional NGOs in Southeast Sulawesi became alarmed by the rapid disappearance of the teak plantations and decided to develop the concept for a Social Forestry Program in the KonSel District.

The Social Forestry Program in KonSel

The goal of the Social Forestry Program in KonSel was to stop illegal logging and improve community livelihoods by turning management of the state teak forest over to the villages surrounding the forest. The program was instigated in 2003 by a network of community-based, non-governmental organizations in Southeast Sulawesi known as Network for the Forests, or ‘JAUH’ (Jaringan untuk Hutan).

To begin, JAUH organized interested community members living in the 46 villages surrounding the state teak forest into groups at the village-level. JAUH did this through trained facilitators who were each assigned to live in the villages and help each village group to organize its meetings, elect group officials and determine group rules. These village groups, together with local government forest staff, were then engaged in participatory mapping of the state forest adjacent to their villages, using Ground Positioning System (GPS) units.

After each village group was developed, the elected leaders of the group were sent to a district-wide forum to develop general rules for inter-village communication and organization. This forum was named the Organization for Communication between the Groups, or ‘LKAK’ (Lembaga Komunikasi antar Kelompok). Here the elected representatives also elected a secretariat committee in charge of convening meetings. They then officially applied to the national government for the right to manage the state teak forest. The government, however, insisted that only a legally registered business organization could apply for the right to manage the state teak forest, not an unofficial affiliation like LKAK. This requirement prompted the LKAK representatives to establish the Cooperative for Successful Sustainable Forestry, Koperasi Hutan Jaya Lestari, or ‘KHJL’. The KHJL’s Management Committee (MC) was comprised of community leaders elected by the LKAK. Also, as part of the legal requirements for cooperatives in Indonesia, a Monitoring Body of 3 community members was elected to monitor the activities of the KHJL Managing Committee and staff..

It was through this process that the communities created a strong, legally-recognized group structure in which members held decision-making and management power, and over which they felt ownership. Since the communities were involved in the design of the group structure from the beginning, they also had a strong understanding of its rules and the responsibilities of its members and leaders. This structure could then be used for communal decision-making, group marketing and as a legally-recognized structure through which smallholder farmers could get wood-related permits and sign sales contracts with factories or other market actors.

Once created, the KHJL then submitted its application to manage the state teak forest to the Ministry of Forestry for Indonesia. Unfortunately, the application was not immediately approved due to a perceived conflict between the Social Forestry legislation and previous Community Forest legislation regarding the process for granting state forest management licenses to communities. For one year, while the Ministry of Forestry and various national NGOs discussed this issue, the KonSel Social Forestry Program came to a standstill and illegal logging continued at a rapid pace. To date (over 3 years later) the matter has yet to be resolved at the national level.

Partnering with the Tropical Forest Trust (TFT)

As the state forest was being degraded, JAUH was losing community support for the Social Forestry Program. JAUH was also hampered by a lack of trained foresters or business managers on staff, and thereby had no one who knew how to manage the forest area sustainably or market the forest products. It was at this point that JAUH opened communication with the Tropical Forest Trust (TFT). The TFT provided the benefits of being able to provide training in sustainable forestry techniques and wood product processing, as well as a ready market for their teak and potential business investors.

The TFT specifically seeks to work with forests producing wood species that TFT member companies need for their supply chains. Since teak was in high demand among TFT members, the TFT was able to guarantee that there would be a ready market for the KHJL teak. The next condition allowing TFT to become a partner in the program was that the KHJL was willing to work toward FSC-certification of the forests it managed and had to agree to give preference to TFT members in wood sales contracts, as long as they matched the best-offered price for the teak. In June 2004, JAUH and the KHJL signed a Memorandum of Understanding with the TFT, which agreed to train and facilitate the KHJL in the sustainable management of its members’ forests and business structure, as well as provide access to environmentally-conscious teak markets.

Institutional structure and legality

Initial discussions with the community members and JAUH revealed that, although the communities had formed the legally-registered cooperative, they had little understanding of what a cooperative was or how it functioned. Therefore, one of the first tasks for the TFT was to help them understand the structure and purpose of cooperatives, the concept of member ownership and dividend payment, the way cooperatives were democratically governed, and how profits were calculated and distributed. This training process was fundamental to raising members’ understanding and faith in the cooperative system, as well as creating well-educated members with the capacity to hold the KHJL accountable to the laws governing cooperatives.

In most cooperatives, the Annual Member Meetings are open to all members and serve as the primary rule-making body of the cooperative. This function is difficult, however, when the members are spread out over a large area and those living far away are less likely to be able to attend such important meetings. As a result of the orientation on cooperative governance, the KHJL members decided that the KHJL Annual Member Meetings would instead be comprised of one elected representative from each village group, similar to the structure of the LKAK. However, since members still strongly wanted dividend payments paid to individual members, individuals still formed the membership unit, rather than groups. The participants of the cooperative’s Annual Member Meeting then took on essentially the same structure as the original LKAK. It was therefore decided that the ‘KHJL Annual Member Meeting’ and the LKAK would be synonymous. Next, the meeting led to the decision that the elected LKAK Secretariat was desirable, but was to be incorporated into the KHJL structure by writing it into the KHJL constitutional by-laws. Through these by-laws, the two original organizations became one legal structure that the communities understood and felt ownership over.

Incorporating community teak into the business of the KHJL

While waiting for the communities to receive the license to manage the state forest, the TFT and JAUH were eager to train the village groups in forest management techniques. They thus decided that the KHJL could gain some basic organizational and forestry skills and earn some start-up money by engaging in the management and trade of teak that had been planted on the village and transmigration lands, commonly called ‘community teak’. Since the original trees had been planted at the same time as the state forest, they were also now ready for harvest.

Once the basic structure of the cooperative was established and agreed upon by the community groups, the focus shifted to management rules for the community teak. A sustainable management system must be in place before market access is enabled, so that the international market does not quickly deplete local forests. FSC would be used as the standard for a sustainable management system. It was decided that the KHJL would apply for FSC-Certification under the Group Rules for Small and Low-Intensity Managed Forests (SLIMF). In this structure, the KHJL Management Team would act as the ‘group manager,’ ensuring that each of the individual members’ teak management met the KHJL’s general group standards. The document Group Certification for Forests; A practical guide (Nussbaum 2002) was used to guide the process.

Establishment of group rules needed to be done in such a way that the rules were created by the community members, based largely on the way they already managed their teak. Similarly, rules and processes would need to be tested on a small scale for applicability before being implemented in all 46 villages. Thus, 12 ‘pilot villages’ were selected by the KHJL All Member Meeting to undertake initial implementation of all new rules before they became officially part of the overall KHJL structure. In general, establishment of the group rules was conducted using the following circular process:

  1. Through Participatory Rural Appraisal (PRA) techniques, village groups were facilitated to describe and document their current teak management system(s) and techniques.
  2. Community group discussions were facilitated to understand the Forest Stewardship Council (FSC) Principles & Criteria (P&C), and compare their current system(s) with the criteria.
  3. a) If the group felt that their current system already met the FSC P&C, they were supported to document the system in terms of group rules and to explain why they believe it met the FSC standards.
    b) If the group felt their current system did not meet the FSC standards, group processes were facilitated to create and agree upon simple group rules that would meet the standards, and were easy for villagers to implement.
  4. A trial implementation of the rules in pilot villages then started, with regular review to analyze whether or not the rules were being followed.
  5. a) In cases of successful implementation, the rules were made permanent by asking the All Member Meeting for ratification.
    b)In cases of unsuccessful implementation of rules, there was analysis on why the rule was not being followed, re-assessment of whether the rule was necessary and sufficient as written and simply needed better communication and enforcement, or if it could be changed slightly to better fit what members were doing while still meeting the FSC standards. If it was changed, the process went back to step 4.

To begin management of community wood, it was agreed in the All Member Meeting that 12 villages would be chosen as ‘pilot villages’, to experiment with initial implementation of the proposed group rules (step 4 above). In this way, problematic rules or procedures could be identified in the 12 pilot villages before training & implementation was extended to all 46 Social Forestry Villages. Another reason it was decided to focus on 12 pilot villages, was that it was not clear how FSC assessors would view the KHJL system. By having an FSC assessment of the structure in 12 villages only, any major problems with certification would be identified before the system was replicated in all 46 villages. Additionally, if the KHJL system in the 12 villages was FSC-certified, then, as long as KHJL applied the same basic rules to newly-registered villages, new villages could join the certified system gradually overtime without the need for an additional FSC-assessment. Instead, each FSC Annual Audit would allow the assessors to check whether or not KHJL was still implementing its original system with all new villages and members.

Based on the process described, each of the 12 groups was guided through the development of draft rules. The rules were then categorized according to whether they pertained to individual members’ teak management, institutional rules, or management protocols. The rules pertaining to individual management were combined in a single ‘Membership Agreement’ document, which all individually registered members would be required to agree to in writing. The institutional rules were ratified into the KHJL’s constitution and by-laws, and the management protocols were documented as Standard Operating Procedures (SOPs).

Challenges in creating rules for agro-forestry management

Land Tenure

Throughout the process of creating group rules and SOPs a number of challenges unique to smallholder agro-forestry management were encountered. The first was the issue of smallholder land tenure. FSC Principle 2 requires that the forest area has secure land tenure. In Indonesia, the most official type of proof for land ownership for farmers is a Letter of Ownership (girik). In practice, to obtain this farmers are required to pay a substantial fee, plus go through a bureaucratic process requiring expensive bribes to complete. Only the wealthy and well-connected can usually secure such a document for their land. Instead, most villagers rely on their district Property Tax receipts (‘SPPT’) to show proof of ownership. Due to the common availability of SPPT’s, the KHJL decided to make photocopies of this and use it as their required ‘proof of land tenure’ for each member.

Additionally, the head of each village (Kepala Desa) is responsible for keeping track of village land ownership, as well as collecting the land tax receipts. In some villages, the Kepala Desa will insist on keeping the land tax receipts, thereby denying villagers this proof of land tenure unless the villager submits a request to the Kepala Desa, (often accompanied with a bribe). Given the central role Kepala Desas play in village land tenure, letters from the Kepala Desa confirming land tenure also serve as a proof of land ownership in the region and were added to the KHJL’s acceptable proofs of land tenure. Nonetheless, in some of the villages there were conflicts between individuals and their Kepala Desas, so potential members could not secure the proof of tenure necessary. In one extreme case, the Kepala Desa had a personal conflict with the elected village unit coordinator, and withheld proof of land ownership to all of the potential members in the unit.

To overcome this problem, the KHJL decided to produce a written document making a public commitment to pay all village taxes on wood harvesting and sales (these are taxes that are often left unpaid by illegal loggers). The immediate impact of this was that many village leaders thus decided to raise their local harvesting and sales tax, but discussions between JAUH, LKAK, the village units and the village heads convinced most village governments to keep the tax rise relatively low. This effort to recognize and adhere to village tax rules won the favor of most village heads and the problem faced by members in securing proof of land ownership were drastically reduced. It also served to improve local governance since it legalized payments made to the village, while providing the village government with operating funds.

Another land tenure-related problem raised by the Smartwood Assessors was how to ensure that registered village plots did not overlap with state forest land. Since the state forest boundaries had already been determined with local participation, marked in the field, and marked digitally on provincial forest department documents using GPS under the Social Forestry Program, this problem was relatively easy to solve. A process was created so that each registered member’s teak plot location would be mapped using GPS, and the location of the plot would be marked on a digital map. Plots located within 300 m of the state boundary had to be assessed by a joint team of the member/plot owner, unit coordinator, 1 KHJL Management Committee Member and a district forest staff person. If the plot was found to be outside the state forest, an official letter was written by the Forest Department affirming its legality. If the plot was indeed shown to be in the state forest, the member was not allowed to register it with the KHJL.

The KHJL now keeps copies of proof of land tenure for each of its members. This provides a second source of tenure proof, outside that of the Kepala Desas and helps members invest more confidently in long-term crops, such as trees and teak.

Determining Annual Allowable Cut

Determination of Annual Allowable Cut for smallholder forestry plots was also challenging since teak trees were not spread out evenly across the landscape and were also of uneven age. Some registered plots would have as few as 5 trees, while others would be fully stocked with over 500 trees per plot. Plots also ranged in size from .25 ha to 5 ha. In Indonesian production forests, the most common system for determining Annual Allowable Cut is by dividing the entire production area by the rotation age of the timber tree, and creating annual harvesting blocks for each year of the rotation cycle. The wide variation in the density of teak trees per hectare for community teak made an area-based Annual Allowable Cut impossible to create.

Instead, the KHJL based their Annual Allowable Cut on the cubic meters of standing teak tree volume, as determined by a full member inventory of all teak trees over 10 cm in diameter. Teak trees with diameters 30 cm or more were considered to be of harvestable size. An estimation of teak growth rates for the region was provided by the local forest department as approximately 1.5 cm diameter per year. Based on this, it was predicted that the trees in the 20-29 cm range would take approximately 7 years to enter the 30 cm diameter range, and thus the total standing volume of the 30+ cm trees should be divided by 7 to calculate the Annual Allowable Cut.

The other challenge in determining Annual Allowable Cut is that the KHJL forest area per standing tree volume is not constant. As existing members register more teak plots, new members join, and some members may leave or pass away, the number of trees registered with the KHJL changes. Thus, the actual total standing volume for trees with 30+ cm is constantly changing, as is the Annual Allowable Cut. These changes can be monitored on an ongoing basis by the inventory team, who keeps a database of all registered teak trees per member and can calculate at any time the current Annual Allowable Cut and compare it with the volume already harvested for the year. Thus, Annual Allowable Cut monitoring is a constant and ongoing activity.

For the sake of clarity for co-operative members, Annual Allowable Cut is also calculated on a unit-by-unit basis, so that if one unit adds new members with teak trees over 30cm in diameter, their Annual Allowable Cut will go up, and if a member from that unit leaves the KHJL, the unit will see its Annual Allowable Cut go down. This helps village units understand the importance of long-term member commitments to the KHJL model, and the importance of harvesting within their Annual Allowable Cut. In practice, some units may not want to harvest their full Annual Allowable Cut each year, in which case, other units can cut more than their Annual Allowable Cut, as long as the unit that is over-harvesting realizes that in the future they will need to under-harvest, and allow other units to cut more. Thus, the total KHJL Annual Allowable Cut is set and monitored on an on-going basis, while the village units’ Annual Allowable Cuts are provided more as general guidelines for members and unit coordinators.

Harvesting Distribution

Once the Annual Allowable Cut is determined, the cooperative must decide which members’ trees will be harvested each month. Through discussions with community groups, it was found that villagers often use their teak trees as a form of savings, to cut when the household needs a large sum of money, such as for wedding ceremonies or medical emergencies. Farmers therefore cannot predict 20 or even five years into the future when they would like to harvest their teak. Instead, a highly interactive process was established to determine which farmers would harvest their teak each month (running over 3-4 months):

  1. First, the KHJL Management would send lists to each unit of which members had completed all their registration requirements and, based on the inventory of their land, had teak trees over 30cm and ready to harvest.
  2. The KHJL Management team would also send an estimate of the proportional amount that could be harvested from each unit and still stay within the annual allowable cut.
  3. The Unit Coordinators (UC) would then call a unit meeting to find out if any of the members on the list would like to harvest their teak. Based on this meeting, the UC would send a list of willing members back to the KHJL.
  4. The KHJL Management reviewed each list of ‘willing members’ and selected the members whose teak would be harvested each month.

Using this system, flexibility in the harvest timing for villagers was retained, while the KHJL was guaranteed to stay within its Annual Allowable Cut.

Harvest Licensing and Simplification of the Supply Chain

One of the major barriers KonSel smallholders faced in regard to market access was that of obtaining the licenses necessary to legally harvest, sell and transport teak from privately owned land. To legally harvest and sell more than 10m3 of teak from village and transmigration lands in KonSel District, a Community Land Harvesting License (Ijin Pemungutan Kayu pada Tanah Milik), or ‘IPKTM’, is required. According to local district law, the following list of documents is needed in order to be granted an IPKTM:

  1. Proof of land ownership, specifically an official Letter of Land Ownership.
  2. A recommendation letter from the Sub-District Head.
  3. A recommendation letter from the Head of the local Forest Department Branch.
  4. Permission letters from the landowners.
  5. A map of the land made by the Head of the local Forest Department Branch.
  6. A survey report of the standing tree volume on the lands where harvesting will take place.
  7. An approval letter from the Head of the District.

Clearly, the requirement for extensive documentation and number of government approvals involved in gaining harvesting licenses excludes most smallholder farmers from ever securing such a license for harvesting their own wood, and selling their wood directly in city markets or to factories. Due to this licensing system, a chain of production has developed in the region whereby wealthy, well connected individuals who can invest the large amounts needed to secure an IPKTM, function as wood traders buying wood from farmers, taking care of all the necessary licensing and transport, and re-sell it to factories with a large profit. Since District Heads usually only issue IPKTM licenses to one or two individuals at a time, the wood trader often has a monopoly on wood buying in the district.

One of the first challenges for KHJL was how to gain the start-up funds necessary to secure the IPKTM and take on the role of the ‘wood trader’. The KHJL however, would be a wood trader managed by communities and help local farmers by paying the highest possible price for their wood, limiting the difference between buying price and selling price to the actual costs of operations, without taking an excessive profit at the expense of farmers. This approach was taken to ensure that the participating farmers receive the best price on the market and would be less tempted to sell to outside buyers. Furthermore, it would help to avoid corruption among the cooperative’s leaders, who would be responsible for safeguarding all profits until the end of the year at the annual member meeting where profits were divided among the members as dividend payments. Many previous cooperatives in the region failed when farmers did not get fair prices up-front, and then saw their dividends disappear when corrupt leaders pocketed them. To secure the start-up funds, the TFT gained assistance from a member factory and retailer who provided the start-up funds for licensing to the KHJL as a short-term, no-interest loan, to be paid back through cash or wood sales over the first few years of operation.

Benefits of FSC certification

Once KHJL had clear member rules, registered members with inventoried teak, and an IPKTM license to legally harvest and sell teak in the region, it was ready for FSC-assessment and certification. But the question still remained: was FSC Certification really necessary, and how would it benefit the KHJL? Clearly, the main initial reason KHJL worked toward FSC Certification was because as a pre-requisite to partnering with the TFT, a partnership that brought them free forestry and business training, no-interest loans and international market access. Since TFT members were prepared to also cover the costs of the FSC assessment, applying for certification was a low-risk decision for the KHJL.

Besides partnership with the TFT, the KHJL also received other benefits from FSC certification. First, since there is already an international niche market for FSC-certified teak, the KHJL could be relatively certain that there would be a price premium associated with FSC certification. Second, FSC certification brought international recognition and credibility to the KHJL as a forest management unit with the capacity to sustainably manage forest areas. This international credibility helps the KHJL in its bid to manage the state forest area by countering the usual reason for national government officials to withhold management rights: communities’ lack of capacity to sustainably manage forests. Finally, the recognition brought by FSC Certification helped KHJL members to access national forest trainings, discussions regarding forest governance and community forest conferences. In this way, FSC certification has helped the KHJL as an institution to keep abreast of ongoing forest technologies, techniques and laws.

Keys to sustainability of the KHJL

Clear member benefits & price premium

The greatest key to the sustainability and success of the KHJL is its ability to bring a multitude of benefits to its member farmers. KHJL members all receive training in best management practices for teak, as well as free teak seedlings to plant on their plots each year. Membership fees are kept low and when KHJL makes a profit, members receive a modest dividend each year. But the most important direct benefit to members is the price premium they receive by selling teak to the KHJL. Members reported the KHJL buying price to be up to 100% higher than the previous price offered by wood traders. Many members also admitted to previously working for illegal logging companies, but decided to leave this work when they saw that they could make more money by selling the teak from their own land than that teak from state forests (It is also a KHJL membership requirement that all members refrain from illegal logging activities). As long as KHJL continues to provide a price premium well above competitor teak prices to its members, it will continue to have a growing membership and forest area for management. Similarly, the price premium indicates to farmers that there is a strong market demand for teak, and encourages them to plant more teak on their land, thus increasing the future teak supply for the KHJL.

Transparency & accountability: long-term monitoring by JAUH & TFT

Transparency of management practices and strong systems for monitoring corruption are also necessary to sustain the success of the KHJL. This monitoring depends on members understanding their rights and actively holding their elected managing committee (‘MC’) accountable for good institutional and financial management. Currently, JAUH and TFT also serve as monitors to ensure that corruption is not being practiced in the management of the KHJL. If the KHJL MC is perceived to be swindling funds, they will quickly lose legitimacy. KHJL has already selected certain MC members to be responsible for training new members and others for monitoring financial management. As long as members and the leaders assigned to monitoring tasks continue to take their jobs seriously, corruption will be minimized. Time is needed, however, for the KHJL to develop a culture of transparency and accountability independent from TFT and JAUH monitoring. Most likely JAUH & TFT will need to continue as monitors long after they are no longer needed for economic support or training for capacity building.

Economic Sustainability

Finally, economic sustainability is crucial for the KHJL. In the first year of KHJL’s operations, the KHJL made a profit in its first year of management (if profit is calculated according to the amount of money earned through wood sales, minus the amount of money paid for operations expenses and loan repayment). Approximately 30% of this profit was divided as dividend payments to members, who received up to twice as much back as they paid in membership fees at the beginning of the year. This also helped the KHJL gain legitimacy with the regional communities, and many more farmers registered as members in 2006 than 2005.

However, TFT continues to support KHJL economically by 1) allowing them to pay back the no-interest loan on a ‘per container’ basis; 2) covering the costs of FSC Certification and 3) using some of the loan money to pay 3 inventory staff salaries. If the costs of all the inventory staff salaries, along with FSC Annual Audits are figured into the profit calculation, the KHJL would still make a profit, but it would not currently make enough profit to support its Management Committee.

Future economic sustainability therefore largely depends on:

1) KHJL’s growing capacity to become economically independent through a smooth and gradual transition away from donor funds;

2) KHJL’s ability to ‘scale up’ by expanding its forest area through inclusion of more members and more village groups;

3) KHJL’s ability to incorporate ‘value adding’ activities to its business, such as a system for setting wood prices by grade and offering sawn timber or eventually furniture;

4) KHJL’s access to markets being appropriate to its scale, allowing flexibility in dealing with communities, and being equipped to gain a price premium for the wood that is FSC certified; and

5) KHJL’s ongoing ability to function efficiently enough to ensure members clear price premiums and dividend payments, while still covering its operational and staffing costs.

Conclusion and potential for replication in other regions

Keys to success

Although only two years old, the KHJL is so far a successful case of sourcing and certifying high-value timber from smallholder farmers’ agroforests. In summary, the the key ingredients in KHJL’s success as an organization so far include:

  1. The group structure resulted in a simplified supply chain and, due to the assistance of TFT and JAUH, was credible in the eyes of the government and the international market.
  2. The program began small, in 12 pilot villages, with a simple system for gradual growth over time. Monitoring is provided to ensure that the rate of production growth does not outstrip the rate of community capacity development in business management.
  3. The KHJL was linked to key niche markets of appropriate size, which were able to capitalize on the environmental and social aspects of the wood source and pay premiums for FSC-certification.
  4. Before production began, a system was put in place to sustainably manage the wood source based on actual inventory data. Well-known annual allowable cuts limited the amount of wood KHJL could harvest and sell in any given year.
  5. Intensive training and capacity-building was given to community managers so that they could meet the demands of the international markets in aspects such as;
    1. Wood Quality
    2. Reliability in meeting contract commitments
    3. Consistency of supply over time
  6. Initial start-up funds were provided together with training in business planning and management.
  7. The program has the long-term support of an outside monitoring body, and will gradually be weaned off its financial and training support.

Opportunities for replication

The question, however, remains as to whether such a model can be replicated elsewhere? In conclusion, the key conditions that have contributed to the success of the KHJL model, which would most likely need to be present for successful replication of the model elsewhere, include the following:

  1. Smallholders in the region are already providing wood to national and international markets (i.e. there is a ready supply and market for the wood).
  2. Smallholders already include the target tree species in their traditional agro-forest systems (i.e. traditional forest management systems for the trees are already in place).
  3. A complex chain of custody prevents smallholders from receiving high prices for their wood, OR regional laws or economic conditions have created a monopoly situation in which smallholders have little choice regarding who to sell their wood to, and wood traders make a substantial profit. This situation could be overcome through a group organization of farmers equipped with initial start-up funds.
  4. There is a regional NGO(s) or business network prepared to facilitate the smallholders in group structure establishment and training in forest and business management techniques; especially including documentation and formalization of current sustainable traditional techniques being used, and assistance in initial implementation and on-going monitoring.

This list clearly excludes situations in which wood produced by smallholder farmers is only used and sold locally and is not sufficient to direct to national or international markets. It also excludes situations where smallholders already have direct access to national and international markets, or where there is already a simplified chain of supply and strong competition for farmers’ wood. In these situations it would be hard for a group structure to provide much of a price premium to members, and farmers would be less likely to commit to sell their wood only to the group. However, group structures may still be useful in helping farmers gain access to capital and selling goods collectively.

This case study serves as a detailed example of a model in which a group organization of smallholders selling teak successfully gained FSC certification, but more importantly, created a system that provides clear and potentially sustainable benefits to its members. KonSel communities are already recognizing the usefulness of the group model and beginning to explore the possibility of selling other agroforest products, such as pepper or cocoa through the cooperative. It is hoped that the details about the KHJL system provided here can offer both inspiration and information for other similar programs throughout the world.


Nussbaum, R., 2002. Group Certification for Forests; A practical guide. ProForest, Oxford, UK.

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