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Supporting Small Forest Enterprises: A cross-sectoral review of best practice

— sector: Forestry and natural resource management
— theme: Environment and climate, Industry (greening of), Sustainable Enterprise/Value chain development
— country: Global
— type: Reports

This report reviews the growing consensus on best practice in small enterprise support, both within and outside the forest sector. It describes how a framework known as ‘market system development’ unites attempts to: strengthen enterprise associations, facilitate better provision of financial and business development services, and improve the business environment. It concludes with specific recommendations for support to SMFEs.

Dancun Macqueen
Publishing Year

IIED Small and Medium Forestry Enterprise Series No. 23

Small and medium forest enterprises (SMFEs) are the norm in many developing country contexts. They often make up 80–90% of enterprise numbers and more than 50% of forest-related jobs. While there is little evidence that large-scale commercial forestry plays a substantial role in reducing poverty, SMFEs offer better prospects – especially when they work together in associations.

SMFE associations offset scale disadvantages and cut costs, allow surpluses to be used in strategic upgrading, and strengthen bargaining power. They also help to reduce poverty in that they: accrue wealth locally, help to secure resource rights for local communities, empower local entrepreneurship, foster the creation of social capital as they strengthen their voice in local associations, engender greater local environmental accountability and maintain cultural preferences and diversity.

Despite their potential, SMFE associations often struggle, especially in weak economic contexts. Poor transport and communication infrastructure exacerbate business deficiencies. The burden of taxes and regulations often forces SMFEs into informality. This leaves them isolated from markets, ignored by Financial Service (FS) and Business Development Service (BDS) providers and marginalised by prevailing patterns in the Business Environment (BE) – for example, they are often discriminated against in forest access and use legislation or overlooked in the national forest programme (nfp) development processes. The central problem is often lack of connectedness.

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