Why It Works!
Let’s look at an illustrative example of an apple tree orchard. According to both US and Caucasus fruit specialists, it costs approximately $25,000 to import rootstock, prepare, plant, and maintain a one-hectare apple orchard for the first four years. This is the bondholder’s investment. The production cycle of apple trees is as follows:
At full maturity, a one-hectare orchard can produce approximately $95,000 in revenue; with annual farm operating costs of $40,000, this leaves a net profit (before taxes) of approximately $55,000. This is a substantial increase in income for any smallholder farmer.
“Tree Bonds” in practice will leave farmers earning more income and reducing their financial volatility through crop diversification, leading to more life choices and educational opportunities; and, it will leave the bondholders with both a financial and a social return on their investment, not to mention estimated rate of return of approximately 12% annually over six years – a higher rate than many other financial options. Lastly, the community receives healthy produce and new employment opportunities in orchard maintenance, transportation, and processing.