These are contingency mutual funds, supported by FAO in Honduras and Guatemala, which are created and managed by producer associations to support their members in cases of emergency.
According to the FAO (Food and Agriculture Organization of the United Nations), these funds allow financing activities to alleviate the problems of the most vulnerable families affected by an unexpected calamity, such as droughts, hurricanes, floods and earthquakes.
Contingency mutual funds promote good agricultural practices, income-generating activities, disaster early warning systems, and community risk management plans. Credit: FAO
"They are aimed at households that do not have access to formal financing systems or insurance that allows them to protect their livelihoods," explained Anna Ricoy, FAO Risk Management Officer, in her regional office for Latin America and the Caribe, in Santiago de Chile.
In addition, they can finance a variety of activities, such as purchasing inputs for a new agricultural season when the harvest is lost, supporting household food security during an emergency, or carrying out productive and commercial activities when the community loses. sources of income.
Contingency mutual funds provide greater sustainability to the livelihoods of family farmers, strengthening their organizations. Being solidary, they generally have an interest rate lower than that of regular loans.
More than a savings mechanism
The funds not only provide a disaster safety net, but promote good agricultural practices, income-generating activities, early warning systems for disasters and community risk management plans, which are seen as preconditions for access to these funds. .
“In this way, communities not only save and support each other in solidarity, but at the same time they also increase the resilience of their livelihoods to threats and disasters,” said Ricoy.
The funds also have positive effects in terms of gender: according to the FAO, both in Honduras and in Guatemala, the participation of women is the majority, they play a fundamental role in the sustainability of these funds, by ensuring compliance with payments for the saving.
How Are Contingency Mutual Funds Built?
In Guatemala and Honduras, members of associations and rural savings banks raised money and seed capital to create 40 percent of the fund. Another 40 percent was a direct contribution from FAO. The remaining 20 percent is constantly capitalized through activities such as the production of handicrafts and community stores for the sale of food, among others.
Between 2014 and 2015, community funds established with the FAO project in Guatemala and Honduras loaned $ 170,000 to their members for income-generating activities and invested $ 23,000 in community projects.
In addition, $ 85,000 was reinvested to ensure the operation and sustainability of the funds and $ 19,000 was loaned for post-emergency rehabilitation activities.
Multiple positive effects
A condition for members of an association to have access to contingency mutual funds is the adoption of a pre-established number of good agricultural practices for risk management.
These include, for example, no burning, stubble management, creation of living fences (trees that mark land), agroforestry systems, community native seed banks, horticultural gardens, and water purification methods.
Associations must also develop income-generating activities: each association prepares a business plan for the development of a parallel community activity that generates income, recapitalizes and sustains the fund.
Early Warning Systems: Contingency mutual funds are activated when the community declares an emergency situation, which it identifies through an early warning system.
"This system is a tool fed by community commissions that evaluate the availability of food, its access, the consumption and biological use of it, and risk management," explained Ricoy.
Communities must also develop risk management plans to identify threats and vulnerabilities that communities face and work to remove them.
The sustainability of these funds also depends on good management and administration. For this, each association strengthens its statutes, regulations and internal organization. In addition, its members are trained in loan administration and transparent management of community funds.
Facing climate change and climate threats
According to the FAO, Central America is one of the regions of the world most exposed and vulnerable to climatic threats and climate change. This is particularly true for the dry corridor, which includes areas of Guatemala, El Salvador, Honduras and Nicaragua, Costa Rica and Panama, and is regularly affected by droughts and an increasingly irregular pattern of rainfall.
“For every five harvest cycles, three suffer significant losses. Rarely is what is harvested enough to meet the nutritional needs of families, ”explained Ricoy.
On average, 62 percent of the population of the dry corridor lives from the production of basic grains, which is why FAO is supporting countries to improve the resilience of these communities through the Program to Strengthen Resilience to Disaster Risk in the dry corridor.
The program works to strengthen risk management institutions and policies, developing monitoring systems for issuing early warnings, improving preparation and coordination for emergency response and the adoption of risk prevention and mitigation measures to reduce the vulnerability of the communities.
This article was originally published by the FAO Regional Office for Latin America and the Caribbean, based in Santiago de Chile. IPS distributes it through a special dissemination agreement with this FAO regional office.
Reviewed by Estrella Gutiérrez
Inter Press Service - IPS Venezuela