BY CARLA NEEFS | DECEMBER 23, 2019
TDI Sustainability and Solidaridad have partnered for this blog series, reflecting on insights gained from a recent research report commissioned by Solidaridad and carried out by the Global Initiative against Transnational Organized Crime; and TDI’s ongoing research in this field, funded by planetGOLD, as well as drawing from our first-hand experience through building The Impact Facility for Sustainable Mining Communities, enabling blended finance solutions for ASM. In this introduction blog, we take a bird’s-eye view of the issue of ASM gold and formal finance and discuss some important key findings that emerged from the research by the Global Initiative.
A young woman at work in the artisanal and small-scale mining (ASM) gold sector
The ASM gold sector is witness to many harmful practices, which have a negative impact on both people and the environment. Moreover, illicit trading channels for ASM gold further fuel money laundering by criminals. The sector is in dire need of change.
The research carried out by the Global Initiative ultimately shows that not financing ASM mines is a bad choice because it makes it impossible to improve the current situation and fosters the negative status quo. Non-engagement with ASM cannot be described as a neutral position; on the contrary, the negative financial, social, and environmental outcomes of not engaging can be more accurately described as risks of non-engagement.
Artisanal and small scale mining provides 25 million people worldwide with an income and accounts for nearly 550 tonnes per year of gold production, or around 15% of the global supply (Metals Focus 2019). This represents a trade value of roughly 25 billion US dollars.
Men and women at work in the artisanal and small-scale mining (ASM) sector in Ghana. Globally, 30-40% of ASM miners are female.
Inclusivity is an important aspect that needs to be addressed, and it can potentially open opportunities for responsible investment in the ASM sector. Gender and youth inclusive investments are crucial. Around 30 to 40% of the people who work in the ASM sector are women. Statistics have also shown that women are more likely to pay back their loans compared to men. Inclusivity thus offers a smart strategy for investors looking to get involved in ASM financing. Together with partners Simavi and Healthy Entrepreneurs, Solidaridad is working on implementing this strategy in our joint Golden Line programme in Ghana and Tanzania.
ESG (Environment, Social, Governance) criteria in the financial sector are gaining popularity, but can turn out to be counterproductive in the case of ASM gold. The financing of the ASM sector comes accompanied with high risks: both corruption and money laundering are a major issue in the sector. The current situation of not financing, however, perpetuates this system. We can only break through the current negative cycle by gradually formalizing finance for the ASM sector, asking for the financial sector to adopt a “do good” financing strategy instead of a risk avoidance strategy.
The complexity of ASM requires us to be realistic: the sector requires the combination of impact investment and grant funding, as impact investment money alone won’t create enough impact to change the status quo in the ASM sector.
The women miners involved in our Golden Line programme in Ghana and Tanzania, implemented in partnership with Simavi and Healthy Entrepreneurs
The researchers at Global Initiative have interviewed a variety of actors in the gold industry. The following are the key findings of the research report:
Mine workers at an ASM gold mine in Tanzania, washing out the grinded gold to separate it from the sand and gravel
Men and women at work in a Ghanaian gold mine
Together with a variety of stakeholders throughout the value chain, Solidaridad works towards facilitating more responsible sourcing of gold in our projects worldwide. When accompanied by controlled financing, formalization, and positive engagement, the ASM sector offers huge potential for improving millions of lives and protecting the environment, along with providing value for financiers and impact investors.
In our next blog post we will address the challenge of ASM gold being abused by criminals for smuggling and money-laundering. You can also view and download our 2-pager publication with the main findings of the research.
Read more on our work in gender inclusive ASM gold in this recent blog on the gender stakeholder statement. This statement was developed by Women’s Rights and Mining in cooperation with the OECD, and signed and endorsed by Solidaridad and many other stakeholders.
Read more about the Solidaridad gold programme.
Read more about The Impact Facility.