Community microfinance provides smallholder producers with local and sustainable funding for sustainable natural resource management and resilient livelihoods. FFPOs, given their close relationship with and understanding of their members, smallholder value chains and livelihood activities, are well-positioned to provide financial products on suitable terms. When successfully implemented, microfinance offers business and value chain development opportunities, supports resilience and adaptation activities, and provides social services across communities.

FFF’s support for microfinance includes linking grassroots organizations to banks, encouraging the development of village savings and loans associations (VSLAs), and working with producers to strengthen their business to allow them to present bankable proposals.

There are a number of existing community-managed funds over the world through which international climate funding is channelled to IPLCs. By pooling funding from international donors and dispersing it at the local level, these initiatives can have a greater impact on the ground. Using Indigenous-led mechanisms to channel finance can have positive outcomes for Indigenous Peoples and their communities, as these mechanisms prioritize their priorities and offer tailored funding and support. Moreover, these mechanisms are built around Indigenous governance structures, ensuring autonomy in decision-making, as per Article 321 of the UN Declaration on the Rights of Indigenous Peoples.

One such fund that supports Indigenous-led mechanisms is the Shandia platform, which comprises Indigenous Peoples' organizations from Mesoamerica, the Amazon, Indonesia, and Africa. Shandia uses various channels and pathways to ensure finance reaches communities, emphasizing support to existing territorial funding mechanisms. However, local-led finance mechanisms face several challenges, such as compliance, visibility, and perceptions of risk, that hinder them from scaling up their services. To overcome these challenges, efforts must focus on documenting performance and increasing visibility, providing enabling investments, reorienting the role of intermediaries towards trusted capacity-building partners, and upscaling finance through these mechanisms.

Indigenous Peoples organizations have extensive experience in locally-led finance initiatives, which can be shared with FFPOs to enhance their understanding of community mechanisms for territorial finance. Exchange of experiences promotes innovative financing methods that meet the needs of different territories and strengthen community organization to ensure the protection of rights, better management of initiatives, and improved livelihoods. By bringing together various actors with common goals, financial systems can be developed to strengthen local knowledge and capabilities for designing and implementing financing mechanisms that combine different types of funds.

In October 2022, 43 representatives from Indigenous Peoples and Local Communities (IPLC) organizations, FFPOs, international organizations, and resource partners met in Morelia, Mexico, to share knowledge and experiences about locally-led mechanisms for facilitating access to finance. During the event, several locally-led funds were presented to demonstrate their nature, accomplishments, challenges, and potential for investment in territorial development, forest protection, locally-led adaptation, and improved livelihoods. These initiatives aim to deliver local climate action that can have a global impact.

To effectively combat climate change and ensure global food security, smallholder forest and farm producers must receive fair compensation for their sustainable land management practices. In order to attract investment, banks and impact investors must improve their risk management strategies for forestry, agroforestry, and agriculture.

The FFF has been successful in shaping the design of large-scale programs, such as the Dryland Sustainable Landscapes Impact Program by the Global Environment Facility (GEF). The FFF Approach, outlined in the working paper "Delivering Climate Resilient Landscapes and Improved Livelihoods: A Guide for Program Developers," explains the strategic logic and practical approaches utilized by the FFF to support forest and farm producer organizations in delivering climate-resilient landscapes and improved livelihoods on a large scale. This approach can be followed by GEF and Green Climate Fund projects worth over USD 1.16 billion to maximize their impact on the ground.

Grassroots organizations are advocating for their important role in securing international environmental and development finance for farmers, Indigenous Peoples, and local communities. It is crucial to ensure that the voices of these groups are heard on issues such as land tenure, the environment, local-to-global governance, and justice.

In 2022, smallholder farmers' organizations led a campaign, supported by FFF, to obtain climate finance for their sector in preparation for COP27. They participated in over 20 events and dialogues with donors, global climate funds, and government officials, while also working to increase their media visibility.

Better communication and collaboration between stakeholders can help to reduce perceived risks and create opportunities to explore new and innovative approaches for support. FFF facilitates these linkages between the private sector, government, international donors, local investors, grassroots organizations and governments by organizing roundtables and advocating for legal recognition of the role of FFPOs.

In 2022, FFF brought together representatives from FFPOs, governments, international organizations, and other stakeholders from different regions to share innovative examples of inclusive climate-resilient business models, financing structures, enabling policy environments, and messaging championed by FFPOs. The conference, hosted in Viet Nam, aimed to enhance peer learning, stimulate upscaling of best practices, and promote knowledge exchange between FFPOs, governmental institutions, private sector, finance institutions, and other relevant stakeholders. The conference also aimed to generate a body of knowledge developed and owned by FFPOs to mainstream gender and youth concerns and draw on Indigenous and traditional knowledge.

Beneficiary grants are an investment modality, focusing on improved agro-forestry production and value chains. As such, beneficiaries may be private individuals (e.g. farmers); not-for-profit entities (e.g. producer organizations) or for-profit entities (e.g. small-to-medium sized enterprises in the forestry and agricultural sector.

FFF regularly disburses grants to successful applicants, committing to support 80 to 90 percent of the investments in the application workplan, with the remaining investment made by the FFPO themselves.

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