'Banking' trees as loan collateral: financing approaches for small-scale forest producers in Thailand

Small-scale forest producers face financial challenges that limit their access to benefits. Using their existing natural assets such as trees as a security to access loans can bridge long gestation periods. In Thailand, such approaches are also referred to as tree collateral. The overall rollout is limited and marked by land tenure constraints as well as high perceived risks. Data acquisition relied on key informant interviews, a review of collateral registry data and related literature. Data analysis relied on loan scenarios contrasting tree collateral-based loans with conventional loans. The financial performance and practical suitability of the loan scenarios were assessed. The land and tree collateral mechanisms dominate the formal tree collateral cases despite obligatory land ownership collateralization. Local mechanisms like the two-step loan emerge as less costly and more context-sensitive options for financing in comparison to the other loan types. Recommendations include relying on prospective stand value with simplified valuation, buyback guarantees from sawmills and securitization through joint debtors.