Access to Finance for Artisanal and Small-Scale Miners: Imagining Alternatives and Creating Opportunities – USE-CASE #1

USE-CASE #1: Downstream Buyer Support For Women Miners in Indonesia

 

In this series, CIRDI is working with our global partner mix to highlight models for tackling a critical problem – how to ensure artisanal miners seeking to make the move to cleaner and more efficient production methods can access the capital they need under fair and inclusive terms?

The series presents these tested solutions in the form of “use-case” studies to better understand the challenges and opportunities that improved access to finance can present for artisanal miners. By providing holistic accounts that trace access to finance models in the ASGM sector from inception to deployment, these “use-case” studies will map actors involved, explain the specific financial instruments designed and institutional platforms deployed, as well as identify key variables that lead to impact, as a potential guide for future action.

 

BACKGROUND

The artisanal and small-scale mining (ASM) sector provides an essential livelihood for 100 million miners globally and produces approximately 20% of the world’s gold and 85% of certain gemstones. These populations are globally diverse, and can include a high percentage of women and indigenous communities.

According to the Global Environmental Facility, ASGM (artisanal and small-scale gold mining) represents the largest source of anthropogenic emissions of mercury, which is a pollutant of global concern. Mercury use in ASGM is widespread in emerging economies, and sound chemicals management is a critical policy intervention space for countries seeking to address this problem. Mercury represents a serious threat to maternal health and early childhood development. Due to the complex socio-ecological linkages associated with ASGM, any meaningful dialogue must consider its role in local communities, regional cooperation, global markets, and broader sustainable development initiatives. The Minamata Convention on Mercury is a global treaty to protect human health and the environment from the adverse effects of mercury. With its adoption in 2013, the global community urgently requires solutions to advance, sustain, and support artisanal miners and their families.

Moving towards safe, scalable and equitable benefits for marginalized and mining-dependent communities working in ASM worldwide requires capital and resources. This would enable ASM miners to invest in technologies that would help eliminate mercury from the supply chain of gold, create economically viable small and medium-sized enterprises, and help generate better livelihood opportunities for communities. Given that ASM is broadly situated in the informal economy, miners are often unable to access formal forms of finance from banks and lending institutions for a variety of reasons such as lack of collateral and low financial literacy. Community and family-based informal lenders tend to dominate this space and leave the door open for predatory lending terms with few opportunities for compliance terms related to optimum environmental and social performance at scale.

CIRDI is especially concerned about how increased capital flows to the ASM sector will affect existing patterns of marginalisation and exclusion for women miners. In certain ASM communities, traditional belief systems create social inequalities that lead to abuse of labour, human rights, and unequal distribution of benefits for men, women, boys, and girls. Equal opportunities for economic empowerment and decent work often fail to materialize for women in the ASM sector, who are then streamed into the precarious and hazardous roles in the value chain.

Unfair allocation of property rights and patriarchal social norms may disadvantage women in pursuing ownership, education, enabling technologies and employment opportunities related to the sector. All of these dynamics point to the additional resilience of women ASM miners, whose unique needs and concerns need to be better accounted for in the scaling up the uptake of finance for the sector. A first step to improving the design and delivery of access to finance models for artisanal miners is to share knowledge and information on what has been tried and with what effects. While a comprehensive typology of access to finance mechanisms is outside the scope of this series, our goal is to at minimum identify a cross-section of debt and equity vehicles, and as well as illustrative models that are specific to ASM communities, including but not limited to:
  • government-backed credit schemes
  • government-backed tax reinvestment schemes
  • community savings funds
  • direct grant funds
  • revolving funds
  • equipment leasing schemes
  • downstream buyer support
  • private/informal loans
  • formal lending/commercial loans
  • bridge-financing
  • peer-to-peer lending
  • equity investments
  • blended finance
  • philanthropic gifts or corporate community investment programs
  • impact investment/social return vehicles
  • social impact bonds
  • crowdfunding campaigns

ABOUT THIS USE-CASE

Recent estimates show that 500,000 people are directly involved in artisanal and small-scale mining in Indonesia, with 3 million people dependent on income generated by ASM activities (CIRDI, 2017). In the Central Kalimantan Province, artisanal and small-scale gold mining (AGSM) is central to the livelihoods of many rural communities– including in Tewang Pajangan. Baseline data collected through projects conducted by a local NGO called Yayasan Tambuhak Sinta (YTS) showed a gap between men and women miners, especially around access and control of mining resources and incomes generated from mining. This case study covers the application of a downstream buyer support model to support a collective of women panners called “Pamuan Jaya Panners” in the village. Through facilitated partnerships with the local village government and a socially responsible jewelry company based in Bali, YTS has helped develop access to finance model that continues to support 25 women miners in Tewang Pajangan. This case study will provide local context and existing challenges at the village level, in addition to analyzing the development, implementation, and results of the model. The case study concludes with lessons learned and suggestions for scaling this model in other areas of Indonesia.

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Read more:

USE-CASE #2: A Government-backed Credit Scheme for Miners in Rwanda