The role of capital formation in contributing to sustainable community forestry in Nepal: A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Resource Studies at Lincoln University

The Nepalese Forest Act 1993 clearly identifies the roles and rights of forest user groups (FUG’s) and gives them the legal right to manage all forest products from their forests in return for forest protection. In the 1990s, community forestry in Nepal has taken a holistic approach that embraces forestry as a source of income, employment and community development. Many of the FUG’s in Nepal have used community forestry as a source of income and to gain capital for investment. This thesis investigates the roles of capital formation in contributing to the sustainability of community forestry in Nepal using a case study approach based on 23 FUG’s. The approach uses questionnaire surveys and semi structured face to face interviews with key informants and government and non government staff working in community forestry. The study examines the sources of incomes and expenditures, people's beliefs on fund management in terms of sustainable development and the effect of capital formation on community forestry development. Through cluster analysis and triangulation approaches attention is also focused on the elements necessary for a FUG to be successful in capital formation. The analysis of results shows that manageable mature forest, accessibility, high prices, a system of charging for all kinds of forest products and the sales of surplus forest products outside the FUG are the key elements for successful capital accumulation in a FUG. Three groups of FUG’s were identified with the help of cluster analysis: successful, moderately successful and unsuccessful clusters. The results further suggest that successful capital formation in community forestry changes the people from destroyers to protectors. The multiple benefits of funds, community development and forest improvement changed people's vision and behaviour, their attitude towards and understanding of community forestry. This has increased the people's interest and awareness in community forestry, which has stimulated thinking about the sustainability of community forestry among users. This kind of local people's initiative makes community forests more secure, protected and wisely managed for sustainable development. However, capital formation has led to resource acquisition thinking among those FUG’s seeking higher incomes. The study finishes by discussing a number of issues identified by the research and concludes that capital formation is an effective medium for moving local people toward sustainable management of forests and it has brought a new vision to community forestry. Future research needs are identified and recommendations are made to increase the benefits of community forestry for local people.