multipurpose tree species research for small farms: strategies ... - part

loan, the decision is based on the ability to pay it
back. In some cases, a soft loan may be granted
to assist developing countries. Where this is the
case, benefits for the people in the true sense of
social forestry could be one of the criteria for
project pproval. However, none of the
analyedp injects listed this among their
criteria. Most of them mention helping people
as a result of the project, but it is not a major
focus.
A project to be funded by a financial
institution is appraised using different criteria
than a bilateral project between two countries,
In the latter, the decision whether to fund the
project has been decided far in advance,
involving agreements known only between the
countries. For a multilateral loan, the appraisal
is-as rigorous as a loan from a commercial bank.
Appraisal Method
In all cases, the projected financial and
economic benefits were enumerated as well as
the costs. The rate of return was calculated and
compared to a standard rate varying by country.
All the projects analyzed for this study had rates
of return well above the cutoff, or standard level.
Analysis of sensitivity and risk are other
standard appraisal tools. Although many
projects did not require cost recovery from each
of the components, the project as a whole still
passed the rate of return tests. The prominence
of this section in the project document/appraisal
report leads to the conclusion that it must be a
very important part of the process.
Commentary
It is evident that the internal rate of return is
the major criterion used to appraise a project,
financially and economically. In all cases,
positive rates of return far higher than the rate
established in the guidelines were projected.
For commercial projects such as the Tree Crops
Project in Sri Lanka and the Woodfuel
Production Project in Thailand, it is logical. But
in social forestry, when helping the people to
raise their standard of living is the main
objective, it leaves some room to be desired.
Social forestry has generally been undertaken
in poor, lesser developed countries with the
marginal sectors of the population, utilizing
scarce national resources. Financial
justification of such programs is very difficult if
they are based on humanitarian or political
7(0
grounds. At times, even a soft loan with a low
interest rate is a burden when there are many
other important programs to be undertaken.
Community development programs are often
criticized as they can not justify the investment
in economic terms because the return is lower
than for competing programs.
In order to pass the internal rate of return test
all possible outputs from social forestry projects
must be valued and counted as a benefit. In
addition, environmental impact, aesthetic value,
and natural conservation can be counted as plus
factors.
Financial criteria alone overlooks many
important developmental and redistributional
goals of developing countries in projects that
are intended to assist the poor. Therefore,
using strict guidelines of financial or economic
internal rates of return may have caused many
poverty stricken communities to miss out on the
opportunity to participate in potentially
beneficial projects.
Project Sketches
Community Forestry in the People's Republic
of Bangladesh
Benefit sharing. The projec, provides
seedlings for individual planting on private
homesteads with all benefits realized by the
people who plant them.
The land along the roadsides belongs to the
government. The strip plantings on these lands
are to be planted by the Forest Service and the
people will be allowed to intercrop in the
plantings and collect minor forest products such
as fodder, mulch, etc. Benefits such as
fuelwood and/or timber will be shared with
those who provide protection services for the
plantation.
The Forest Service will pant block fuelwood
plantations on state land. All the timber will
belong to the government and the people will be
allowed to cut grass in the plantation.
Demonstration agroforestry will be undertaken
on state land under the supervision of the Forest
Service and the produce will belong to the
participants.
Cost recovery. During the project design
phase the plans originally called for the people
to be charged for the cost of fruit tree seedlings