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3.4 Disbursing funds to farmers

  • Investors already working in the area may already have a channel for disbursing money to farmers.
  • When the investor is an international business or organisation, it will be necessary to work with local partner organisations on the ground.
  • All partners will need to agree on a disbursement model which describes how the money will flow to farmers and back to the investors.
In the simplest case, the investor will already have the experience and infrastructure needed to invest in land use in the region. For example, if the investor is a local bank or has local branches and already has existing credit lines for agriculture or forestry, the investment plan could be financed through a tailored credit line for sustainable activities and be disbursed to farmers through their usual channels.
Farmers' produce in a Brazilian market. Image credit: Bastos

If the investor has the local infrastructure but no experience in land use financing, it may be necessary to help this investor understand the intricacies of this type of investment and how it differs from other types. Staff from the investor organisation may also need specific training to work with sustainable landscape initiatives.

If the investor does not have the local knowledge nor the local infrastructure, it will be necessary to partner with a local institution that can act as a financial intermediary at the local level. This will be the case when investors are international private investors or multilateral development banks.

It will then be necessary to select local financial institutions and include them in the design of the financial mechanism. An important consideration will be the level of ‘concessionality’ of finance to be given to producers – in other words, whether interest rates and terms are favourable.

As part of the design process, all parties will need to agree a disbursement model, describing how the money will flow to farmers and back to the investors. They will also need to agree on fees, responsibilities of each party and monitoring mechanisms.

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