By Monica Evans
Private investment in community-owned resources is a little-explored pathway to sustainable development
Cultivating lemongrass, palmarosa and citronella for essential oils in the forested foothills of the Himalayan mountains might sound, to some, more idyllic than revolutionary. But for the women of the Chisapani Community Forest User Group in Nawalparasi, Nepal, it represents a seismic shift in their social standing and economic well-being.
Dadhikala Poudyal is one such woman. She’s a farmer and an elected member of her group’s council. “Before, I used to be known as somebody’s wife,” she says. Now people recognize me for who I am and what I do – all because of the rights I have! It gives me a lot of confidence and pride.”
Since Nepal devolved significant tenure and extraction rights to forest-dependent communities in 1993, about 20,000 forest user groups like Poudyal’s have been established, overseeing around 30 percent of the country’s forested land. A huge range of community-owned enterprises have sprung up as a result, in areas such as eco-tourism, timber production, and growing and processing natural products, like the essential oils produced by the Chisapani group.
Partnering with investors to take their businesses further seems a logical next step for many of these enterprises, says researcher Anukram Adhikary, “because the groups may not always have the capital or the equipment to process and produce what they want to.”
But investing in community-owned resources and enterprises is still somewhat unconventional, and methods for doing so effectively remain relatively unknown.
It’s for this reason that Adhikary and three (CIFOR) researchers have published a exploring the investment that is already happening in community-tenured land in four countries: Nepal, Guatemala, Mexico and Namibia.
As paper co-author and Director of CIFOR’s Equity, Gender and Tenure research program, Steven Lawry, explains, “These four countries have all undertaken major shifts in policy to give communities tangible rights to resources. We wanted to see what happened next. How do communities make use of their rights in terms of developing new kinds of enterprises? And how do investors respond?”
Given global commitments to large-scale environment and development initiatives such as the (SDGs), there’s a clear in sustainable land development. “The costs of shifting to more sustainable production practices and value chains is going to be huge, so ensuring that private capital is targeting environmentally and socially sustainable enterprises is critical,” explains CIFOR research consultant and paper co-author Sophia Gnych.
But finding investors to put money into community-owned land initiatives can be a challenge. While much of the world’s remaining forested land is held in common, many Western academics have dismissed the idea that community land tenure can yield efficient, cost-effective and sustainable solutions for land management and local livelihoods.
As argued in Garrett Hardin’s famous 1968 treatise on the “tragedy of the commons”, without clear property rights, people will race to capture resources, leading to exploitation. Productivity will also be reduced, as people won’t have an incentive to invest if they cannot generate individual returns. This work has been refuted widely, but the co-authors found that it bears truth: concerns around the economic efficacy of community tenure still stand in the way of attracting private investment to the commons.
“The main issue is that investing in community-owned resources is a relatively unknown model for commercial investors,” says Gnych. “Ultimately with investment, it comes down to risk and reward, and if your job is to make some sort of profit, then you have to have some guarantees. So it’s important to start providing better information on the investment potential.”
I used to be known as somebody's wife. Now people recognize me for who I am and what I do
CONFRONTING THE ISSUES
With the above in mind, the paper outlines some of the main perceived barriers to investment in community tenure and teases out some of the measures already confronting these challenges.
One barrier is equitable distribution of a resource’s benefits, particularly given entrenched social inequalities. “So we’ve shown some of the mechanisms that have emerged to address that,” says Lawry.
In the Nepalese case, for example, where social power is highly stratified in a caste system, the government and community user groups included a provision in the law that 35 percent of income generated by enterprises be set aside for members of lower castes.
Excessive interference from government agencies can also obstruct effective commons management, says Lawry. The community land tenure model places responsibility for many forest management decisions in the hands of community groups, requiring forest agencies to give up certain powers that they may be reluctant to relinquish.
And it’s understandable, he says. “These agencies have been mandated and organized to protect against loss of forest. We can’t expect them to change overnight.”
Adapting to new community-management circumstances requires some important rethinking for officials about how to relate to communities in a supportive way. “The state’s regulatory role on behalf of the larger public interest is valid and important,” Lawry acknowledges. “But all these things need to be re-calibrated in line with the fact that communities are meaningful rights-holders.”
The nature of these rights differ from context to context, depending on the type of reform that has occurred, says co-author and CIFOR post-doctoral fellow Iliana Monterroso. For example, in Guatemala, land in some protected areas still belongs to the state, yet concession rights were devolved to community-based organizations that have since successfully developed forest enterprises, established linkages with private banks and found new ways to engage with socially responsible finance.
In short, the case study “challenges the notion that ownership is the mechanism to secure tenure and ensure investment,” says Monterroso.
Importantly, while barriers to investment in community-tenured land do exist, they can often be resolved by devolving more rights, not less. This is reflected well in the Mexican case. Rights devolution began with agrarian reform in the 1910s, but even though communities possessed formal rights to large areas of forested land, they were not allowed to make management decisions, limiting their ability to benefit.
In the 1980s, community mobilization led to further land reform and regulatory changes that allowed indigenous institutions to make decisions over forests within their jurisdictions. A range of viable community forest enterprises emerged as a result.
It's not only investors that want to reduce their risks, but communities need to protect their assets too
READY, OR NOT?
While there is huge variation in the experiences of the different communities it studied, the research team was able to draw out some conclusions about the pathways taken to attract profitable and mutually beneficial private-sector investment.
The team identified three main stages of what it calls ‘investment readiness’. First, communities invest inward into housing, education and health, and forming institutions, which often requires significant donor and public-sector investment.
Finally, in the third phase, communities leverage their own ‘social capital’, or social strengths, to attract new forms of financial capital, enabling them to build and scale up their enterprises further.
Gnych highlights the important work that NGOs can do within this process.“They play a bridging role – connecting investors with communities and translating between the two. It’s incredibly important for getting the investments going, especially at the beginning.”
It also reduces risk for all parties. “It’s not only investors that want to reduce their risks, but communities need to protect their assets too. There have been countless cases of exploitation in the past that have made communities skeptical of private sector and government involvement,” she says. “The need for capacity-building, knowledge and education is on both sides.”
There’s also a clear need for more research on existing private sector investment, and on the changing capital needs of community user groups as they develop and grow. Quantitive data is still lacking.
But most importantly – and encouragingly – the research makes clear that while investment in community-owned land projects carries specific risks and challenges, they are not insurmountable. “These are problems to be solved,” says Lawry. And the solutions are within reach.
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Related to SDG 5: Gender equality and SDG 8: Decent work and economic growth
