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Leaf 6: Update on Forest Credit

A leaf from:

This Broken Land of Promise:

A Chronicle of Conservation in the Hispaniolan Border Country

On Monday, April 24, the annual loans from the Tree Bank’s Crédito Forestal (“Forest Credit”) program were distributed to our partner farmers. This year, we lent 1,025,500 Dominican pesos (about $22,789 dollars) to 35 farmers. The value of this distribution is a record for the program, although the current number of borrowers is not.

Crédito Forestal makes modest lines of credit available to qualifying farmers in exchange for conservation easements on forests that they own. To qualify for credit, farmers must be members of our partner association, the Asociación de Productores de Bosque, Los Cerezos (the Los Cerezos Forest Producers Association), and be judged credit-worthy by our two Dominican Co-Directors, Cosme and Manolo, who are themselves farmers and members of the community that the Tree Bank serves.

Borrowers must also define a “Credit Reserve” — a forest fragment on their land — and agree not to cut any native trees within it. The reserve is visited by our Co-Directors, to gather some basic information about it. The size of the reserve determines the maximum amount of any loan. (A farmer can usually borrow up to 1,100 pesos, or $24.44, for each “tarea” in easement. A tarea is the local unit of land measure; there are 6.436 tareas in an acre.) Interest is not charged on the loans but there are small, easy-to-calculate fees, usually amounting to 4.5% of the principal over the nine-month life of the typical loan. Most loans are used for standard operating expenses: to purchase seed and fertilizer, and sometimes to purchase a heifer — a baby cow. Crédito Forestal was founded in 2011 and is the region’s only low-cost farm-credit program.

Here follows a by-the-numbers update.

First, a quick note on the rate of exchange: I give most of the financial numbers in US dollars. Where I convert from Dominican pesos, my rate is a relatively modest 45 pesos to the dollar. At the time I wrote this, was quoting a “mid-market” rate of 47.41 pesos per dollar, but that is really just for large-volume conversions. If you or I were buying pesos for a trip, we would probably end up around 45 to 1.

That record distribution of $22,789 is a 25% increase from the 2016 figure of $18,233. The previous record was set back in 2014, at $19,750. After that, credit-worthy demand for loans declined somewhat, because the coffee leaf-rust epidemic eliminated most of the Dominican Republic’s coffee trees, a process that was more or less complete by the end of 2015. Coffee was our region’s most lucrative crop and the basis for most of our loans; its loss made a lot of poor people even poorer. (This is why we have spent the last few years replanting our coffee groves with rust-resistant coffee cultivars.)

This year saw a slight decline in the number of borrowers; there were 35 this year, down from 36 in 2016. (Not every qualifying farmer borrows every year.) Our record year for borrowers was 2014, when 40 people took out loans.

Our largest loans this year were for $1,111 (50,000 pesos). There were two of these. The largest loan last year was for the same amount, but there was only one. Our smallest loan was for $222 (10,000 pesos), versus $178 (8,000 pesos) in 2016.

The average loan value this year was $651, versus $511 in 2016. The median was $733, versus $489 last year.

Want a definition of “average” and “median”? Here goes: The average is the sum of the numbers in a set divided by the number of members that the set has. The median is the middle member of the set when all the numbers are arranged according to value — assuming that the set has an odd number of members. If it has an even number, then the median is the average of the two middle values. The median is a useful measure when a set has outlier values that differ greatly from the rest of the set. Outlier values exert a strong influence on averages. (My apologies if you have to read this twice to understand it.)

Of this year’s 35 borrowers, 10 are women. That’s three more than last year. All of the program principals — Manolo, Cosme, Yinabel, Matt, and I — we would all like to lend to more women, but this is not an easy thing to do because most farms are run by men. We might be able to address the gender imbalance by lending for projects that women can adopt, more or less independently of their husbands. But if we’re already lending to those husbands, the arithmetic would get complicated quickly. We can’t take money away from a family’s reliable bean field, run by a husband, to pay for a less remunerative project run by a wife. We don’t yet have good answers on this front but we’re looking for ways to help.

One other very important number: the amount of forest now protected by Crédito Forestal is about 195 acres (including all the credit reserves, not just those owned by this year’s borrowers). That’s about two-thirds of all the land protected by the Tree Bank as a whole.

That reserve total is a sort of book-value figure, but the program is now large enough to require some caveats in determining its actual extent. Here are the two most important cautions.

First, it’s always possible that a landowner could repudiate an easement. I think that’s most likely to happen when a property is sold. Properties do change hands in our region, although not very often. But as far as I know, no one has ever repudiated an easement. The economic incentive to maintain the easements is very strong — as is the community pressure in the same direction. Even so, I can’t exclude the possibility of losing an easement at some point.

Our easements are founded on signed contracts, just as are conservation easements in the US. (The contracts aren’t with the Sangha — they’re with our partner association.) But I wouldn’t want to ask a court to enforce one of these agreements. The only thing certain about such a proceeding would be thousands of dollars in legal fees. And even if we prevailed, we would risk a Pyrrhic victory that could very well alienate other landowners. I think that a better option is to focus on community norms. Get the details right in the contract, get the economics right on the ground, and don’t worry too much about legal niceties: that has been our approach thus far and it seems to be working.

A second kind of ambiguity is more positive: some of our borrowers have told us that they are conserving additional forest — forest not yet enrolled in their credit reserves — in case they decide to apply for more credit later on. My estimate does not address this type of anticipatory conservation.

So much for the numbers. Now for the actual lending. When I organized this program six years ago, I thought a great deal about how the loans should work and how the Credit Reserves should be defined. But I didn’t think much about the money itself. I have since learned that managing the fund — distributing the loans and collecting them — involves a lot more work than managing the reserves. Checks and debit cards aren’t realistic options in the Dominican countryside, so we have to do our lending in cash — and in the DR, that’s dangerous, so planning is important.

I asked Cosme for an account of this year’s distribution. Here’s a condensed version of what he told me.

The credit fund is kept in a branch of ScotiaBank, in the city of Dajabón, about 25 miles from Los Cerezos. Four of our farmers went to fetch the money: Cosme, Manolo, Eduardo, and Chulo. They made the trip doubled-up on a couple of motorcycles, the standard means of transport in the Dominican countryside. They weren’t sure how large a wad of cash the withdrawal would produce, so they wore heavy coats to disguise any lumps. At the bank, Manolo went in to make the withdrawal, while the others stood around outside as Manolo’s security detail — inconspicuous, I’m sure, with their heavy coats in the 90-degree heat. Eventually, Manolo emerged with all of the cash in a single big envelop stuffed under his shirt, lump obscured by heavy coat. Then the whole party puttered back up the mountains to Los Cerezos.

Once there, they unlocked the Association community center and arranged cash and forms on a battered wooden table in the meeting room. This little concrete-block building with steel mesh over its windows is the only secure facility in our project area. We built it in 2012 as a meeting place and a coffee storehouse.

The store-house section is a separate room; you enter it from the meeting room, but first you need the key to its heavy, metal door. Locking up coffee was a critical step in the Tree Bank’s development. We needed to centralize coffee storage in order to dry all the beans uniformly, but farmers were reluctant to deposit their harvest with us because of the possibility of theft. Hence this building. The locals usually just call it “the Association.”

Manolo and company hadn’t told anyone else that they were bringing in the fund — another security measure — so various neighbors were dispatched to round up all the borrowers. The money was counted out under the watchful eyes of both the borrowers and our agents, and receipts were issued — something that you may consider unworthy of notice but it took me years to convince everyone that receipts are important. Then, as evening laid the day to rest, the borrowers disappeared down the road. The whole effort was completed in less than 12 hours.

It’s possible that not all of those loans will succeed. We have made some bad ones over the years. This should not be surprising, given the poverty of our clients, their rudimentary experience with credit, and the collapse of coffee — a few of the reasons why regular banks aren’t making these loans!

Last month’s accounting showed a total of $3,089 (139,000 pesos) currently overdue from eight people, from 2014 onwards. (Of that amount, $2,722, or 88%, is debt that was due at the end of last December — a scenario that is irritating but, by local standards, hardly extreme.) Three of our eight truant borrowers have not repaid anything at all; the other five are making payments — usually sporadically. I think that all or nearly all of these loans will eventually be paid back. All of our truant borrowers are longtime members of our community, and community pressure to agree to a payment plan can be pretty intense, although it’s not very systematic. There are group visits to the borrowers’ homes and public censure at meetings of the Association. Most people eventually work something out.

Of course I think it’s important for truant borrowers to get right with the program, but I don’t see truancy at this level as a major problem, for a couple of reasons. First, we’re a charity; unlike a bank, we’re not trying to make a profit from the loans — something that commercial lenders, even those working in micro-credit, are usually required to do. And second, even the truant loans are saving forest. Those reserves are still out there, still intact.

I think that Crédito Forestal is a fairly efficient way of conserving forest fragments in what I would define as Tree Bank Terrain: a largely deforested landscape managed by poor, smallholder farmers. This is a common scenario in much of the tropics. Currently, our maximum liability to protect an acre of forest is about $157. Of course, it’s possible, as I mentioned above, that we’re not really buying protection that is “permanent.” (It’s hard to say what “permanent” means in this context.) But I have seen parks in the DR, and other countries as well, where the protection is as permanent as the law can make it, and you would not even know that these places are parks. Cut-over, burnt, converted to banana or beans — after a few visits like that, community protection starts to look pretty good.

But I also think that the program can be greatly improved. We want to make the program bigger, to protect more forest and help more farms. We want to help people make better use of their credit. We want to plant tree buffers along some of the reserves, and develop forest corridors between them, so that they can support more plant and animal wildlife. We want to make better, non-consuming use of the reserves, as seed sources and for study. And most of all, we want our partner farmers to profit from the creation of forest, rather than its destruction.

“This Broken Land of Promise” is my attempt to describe and interpret our Tree Bank Hispaniola program. I welcome your comments and questions. Please write me in the comment box below or email me at

— Chris Bright

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Banner: Late October in a mixed stand of hickories, oaks, and American beech at Fountainhead Regional Park, on the northern shore of the Occoquan River, in Fairfax County, Virginia. Photo by Chris Bright. 

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