Our affordable farm-credit program is unique in the region, and a powerful forest-conservation tool.
The Tree Bank’s Crédito Forestal (“Forest Credit”) element was established in 2011, and allows participating farmers to use the native forest remaining on their farms as a kind of low-cost credit card. The arrangement provides a rare and valuable commodity — low-cost farm credit — and creates a strong incentive to conserve forest.
Here’s how Crédito Forestal works. An applicant must first be certified as credit-worthy by the executive committee of our partner association, the Asociación de Productores de Bosque Los Cerezos. The applicant then declares a “Forest Credit Reserve” on a portion of his or her land. The prospective reserve is measured and its forest quality is assessed by the Association. (Very poor farmers, whose lands no longer hold forest, can declare a forest restoration area.) If the area is accepted as a reserve, the Association places a conservation easement on it: the land does not change ownership, but the farmer relinquishes his or her right to cut any native trees growing on it. If the area is wholly or partly deforested, the farmer also assumes an obligation to replant it with native trees from the Tree Bank Vivero. (There is no charge to the farmer for the trees.)
Once the Reserve has been established, the farmer can borrow against it. The credit limit is determined initially by two factors: the size of the reserve, and whether the reserve is established forest or a restoration area (established forest commands a higher initial credit limit). A third factor comes into play after the first loan: repayment history. The cost of the loans is determined, not by a compound interest rate, but by simple arithmetic: loans cost 5 Dominican pesos per month for every 1,000 pesos borrowed (plus a small fee for bank charges). A typical loan is for 20,000 pesos (about $465 by mid-2015 exchange rates). The usual term is 9 months and the charges generally amount to 1,090 pesos, or about 5.5 percent of the amount borrowed.
As a conservation tool, Crédito Forestal offers three big advantages over our earlier direct-payment approach (Parcelas Sembradas). First, it is uses money much more efficiently, since we can lend far more money than we could ever afford to pay out directly. Second, it allows us to conserve established forest, which, obviously, is far more valuable than recently planted areas. And third, it allows us to supply a badly needed but rarely available social resource: reasonably priced, small-scale farm credit.
Crédito Forestal is the first low-cost farm credit program in the region, and the region's first forest easement system. In 2018, the program lent $29,833 to about 50 farms with easements covering about 250 acres.
Banner: View from a mountain near the Tree Bank Nursery. The forested slopes are on the Dominican side of the border; the deforested ones are on the Haitian side. Photo by Chris Bright.