The Amazon rainforest provides an important environmental service by absorbing carbon dioxide from the atmosphere. Therefore, when the forest is under pressure, the impacts are severe: Globally, deforestation accounts for nearly 20% of all greenhouse gas emissions — more than the world’s entire transport sector. 

To help smallholders in the Amazon implement forest conservation practices and mitigate climate change, the Financing Fund for the Agriculture Sector (FINAGRO) is testing a methodology developed with support from the CGIAR Research Program on Water, Land and Ecosystems (WLE).

Peru and Colombia – accounting for 23% of the Amazon rainforest – are aware of their importance as providers of ecosystem services at the local, regional and global level. They support efforts to design viable land use and management alternatives that can reduce pressure on the Amazon rainforest.

The objective of the Sustainable Amazonian Landscape (SAL) project, led by the International Center for Tropical Agriculture (CIAT) with WLE support, was to support the development of science-based practices to enable farmers to improve their well-being, while enhancing their capacity to mitigate and adapt to climate change. Sustainable land use alternatives were co-designed and pilot-tested jointly with a network of 42 farmers on 262 hectares in Colombia and Peru.

The farms in Colombia then participated in a pilot led by FINAGRO to simulate the application and viability of a new agri-environmental financial incentive, as part of the Vision Amazonia program, led by the Ministry of Environment of Colombia.

This financial incentive (called Instrument for Sustainable Productive Transformation) is designed for small- and medium-size landholders to promote the conservation of the remaining forests and restoration of deforested areas, while concentrating cattle ranching activities in less fragile, but more productive areas. Under this scheme, farmers receive a soft loan that includes benefits such as low interest rates (56% less than ordinary credit), guarantees and conditions of access, and flexibility of payment, including an incentive for releasing pasture areas for restoration, for up to 25% of the value of the credit.

After the simulation exercise with farmers, FINAGRO selected a first cohort of potential beneficiaries. Currently, 14 farmers from the SAL project and another 40 farmers that did not participate in the SAL project have been selected for receiving the soft loan.

One of the bottlenecks in the adoption of new and more sustainable practices is access to technical assistance. Therefore, the protocols developed by the SAL project for implementing the new practices were shared with FINAGRO to help them design technical assistance protocols for new farmers, who will benefit from this incentive.

It has been estimated that this FINAGRO-led financial incentive scheme could, by 2019-2022, benefit 4,413 farmers with an investment of USD 12.9 million, USD 13.1 million in the second period (2023-2026) and USD 13.5 million for the last period (2027-2030). The funds could be provided by public and private banks, international cooperation for the conservation of the environment, private investment funds, the Ministry of Agriculture and Rural Development, and regional and local governments. At the national level, the 12,043 farmers across 546,235 hectares could potentially benefit in the future.