«Growing Assets Collateral Management»

Testing the suitability of the GRACOMA idea

Magunguli, spring 2023. Our local partner and trustee Elibariki Tweve visits a forest plot of farmers in Magunguli. He is about to register the trees growing there as loan collateral. Five farmers intend to use the loan to invest in seeds and work force. Each of them intends to cultivate one acre (just under half a hectare) of beans. With this small-scale test run, farip is testing the suitability of the GRACOMA idea, which was developed by the farmers themselves: GRACOMA (Growing Assets Collateral Management) is designed to enable farmers who previously had no access to credit to offer growing trees as collateral for loans. “If this experiment succeeds as the farmers envision, we will have made an important breakthrough for the independent financing of projects in rural areas,” Ueli Scheuermeier, CEO of farip, is pleased to say.


Magunguli, 2022-06-09. Ragpa lives with his young family in the remote village of Magunguli on the edge of Udizungwa National Park. Almost every family there also grows their own Pinus and Eucalyptus trees on their own land. Ragpa started a tree nursery in 2018 with loans from farip. He is now growing Pinus and Eucalyptus, but also indigenous trees such as the Mikusu.

One day, the trees will bring in good money for the wood – but the farmers have to wait 15-20 years. To bridge the gap, they came up with a great idea: using their still growing trees as “collateral” – security for much-needed loans. Understandably, lenders want to be sure the trees are protected until the credit is repaid. The association of tree planters in Magunguli therefore set up GRACOMA «Growing Assets Collateral Management ». The organisation documents tree growth and reports to the lenders. The Swiss-based Ithaka Institute also got interested. As a CO2-certifier, they demand strict registration and careful checking.


2019-12-09. While the tree nursery makes a lot of sense on its own, the project has to be seen in the context of the ideas around “GRACOMA”. A loose group of 60 farming families, the “Mgololo Tree Planter Association”, has been exploring forestry loan collateral for years.

The idea is to be able to offer their own growing trees as security for credits. It quickly became clear that there is huge economic and also ecological potential in planted trees. Active implementation, however, remained a challenge.

The central requirement is that lenders who accept trees as collateral have to be able to prove over many years that the trees are still there, being nurtured, and owned by the people who took the loans.

The farmers soon realised that this would require an independent organization for supervision, monitoring and control of the forest plots on behalf of the lenders. This led to the idea of setting up a company called Growing Assets Collateral Management (GRACOMA). This company would train people from the village to inspect specially registered forest plots, and also empower the farmers to make the most of their forests in a sustainable way. They would then call such forest wardens “Watunza Misitu” (singular Mtunza misitu).

To help with the early phase of this business idea, farip volunteered to temporarily simulate a “GRACOMA” company and cover the risk. This allowed Ragpa to launch his tree nursery and experiment with forest registration as the first regularly paid Mtunza Misitu. He is starting with his own forest plots to secure his farip loan. Other initiators have also offered to secure future farip loans with trees for their own projects.


The farmers do not have spare cash available. The model is therefore that they allocate trees per hectare of registered forest to GRACOMA every year. When the trees are harvested in a few years, they would earn GRACOMA’s credit sum plus a profit. But it takes up to 20 years for GRACOMA to get any money at all … so GRACOMA itself would have to get long-term loans, which in turn would also be covered by the signed-over trees, and so on.  It is complex.
Which financial institution would actually be willing to give short-term production loans on such long-term – but interestingly, rapidly more valueable – collateral? For example, to invest in vehicles, pumps, seeds, mills, irrigation equipment, cows, fruit plants, metal silos, etc.?

farip is strongly challenged here to follow the thought processes and considerations of the tree planters of Mgololo. When we asked how they could make it simpler, the now deceased old Kandidussi replied: “If it is simple, it cannot work. It is complex, many things have to interlock”. An important lesson learned for farip. The whole GRACOMA experiment still needs to be thought through in detail. It turns out that it is better to make progress with concrete small implementations.

The basic idea of the farmers in the Mgololo area is captivating! From farip‘s point of view, this is a highly interesting environment because it has potential leverage effects for financing many projects in rural areas. And most importantly, it also allows poor people to use their labour and attention to nature (e.g. forest fire protection) as their own resource to access much-needed capital for their investments. They can put well-supervised trees on the line as assets. They thus avoid being mere aid recipients, and become real business partners. This is the main idea driving the project.

Detailed elaboration and testing of the mechanisms takes a lot of time. The current bottleneck is that farming families do not yet see the point of registering a forest plot with GRACOMA without getting a suitable loan for it within a short time. Ragpa, on the other hand, has already demonstrated the feasibility. He got a loan from farip for a motorbike, using his own forest plots as security.

How can these tree planters from Mgololo convince credit institutions of the viability of this long-term model? And how can the main problem of credit institutions, namely the unacceptably high transaction costs for small loans in these remote areas, be solved? farip is looking to simulate a credit institution with its own loans. This gives people a chance to show that it works – or at least to be able to make mistakes until they see how it can work.

What will happen to Ragpa and his tree nursery? Action can be taken quickly. First and foremost, Ragpa needs production orders for the tree nursery. farip, acting as GRACOMA, has taken on a sales guarantee for seedlings of indigenous trees, for the tree nursery to get into production.