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Without Public-Private Partnerships, Your Morning Cup of Coffee Might Not Exist

The Partnership for Sustainable Coffee supports smallholder farmers around the world by providing access to lending and advisory services.

No one knows exactly what sparked the 2012 coffee rust crisis in Central America, but anyone could see the devastation it left behind. In the first year, the fungal disease caused coffee bean production to plummet by 16 percent, threatening the livelihoods of countless growers throughout the region and leading to widespread food insecurity. By 2014, La Roya, as it came to be known, had wiped out $1 billion in revenue across Guatemala, Honduras, Panama, El Salvador, Costa Rica and Peru.

Emerging more resilient

Coffee rust has no cure, but it can be kept in check through crop management techniques. Coffee cooperatives needed agronomic training to weather the crisis, including integrated pest management, early warning systems and crop diversification. But to emerge more resilient in the long run, they also needed to grow. Whatever shape the next crisis took, the surest way to protect farmers was through stronger cooperatives capable of providing information and resources and supporting reliable markets so that future market shocks couldn’t snowball into a full-blown existential threat.

Photo by Root Capital

But growth requires capital. Despite cultivating one of the world’s most sought-after commodities, coffee cooperatives are seen as too small, risky, or remote for many institutional lenders. The global nonprofit Root Capital partnered with Keurig Dr Pepper and Feed the Future to create the Partnership for Sustainable Coffee. Their mission was simple: set smallholder coffee cooperatives on the path to sustainable, long-term growth.

“Public-private sector partnerships have the unique opportunity to improve efficiencies along the value chain and strengthen market linkages, creating increased revenue for rural enterprises and, ultimately, higher incomes for smallholder farmers,” said Akosua Ampofo Siever, Senior Partnerships Manager for Root Capital. “The marriage works.”

Like any successful marriage, each partner contributes a vital role. Root Capital offers lending and advisory services to help farmers build a more resilient and scalable business. Keurig Dr Pepper provided philanthropic support, in addition to purchasing raw coffee beans as part of their commitment to sustainable supply chains. Feed the Future delivers extended reach, funding the riskiest loans to early-stage coffee enterprises.

“That’s where you create the most impact,” Siever said. “These are businesses that other lenders are unable to reach because of the associated risks and costs, which is where our heart really is.”

Photo by Root Capital

Your morning cup of coffee? Chances are, some of the beans came from a smallholder farm. Without the Partnership’s sustained efforts, many regional producers would simply cease to exist. But fortunately, the industry is far from going under.

“Over the last three years, Root Capital has strengthened our cooperative on professional and personal levels,” said Melba Sosa, Vice President of the Board of Directors for RAOS, a coffee cooperative in Honduras. “We look back and say, ‘Wow, we’re not the same business we were before.’”

A foundation for the future

In the last three years, the Partnership has disbursed $165.2 million in loans, generating $1.6 billion in revenue for cooperatives. This revenue, in turn, facilitated $1.43 billion in payments to more than 330,000 smallholder farmers, 34 percent of which were women. More than half of these cooperatives could not have accessed the same loan from any other lender.

In 2020, coffee farmers weathered a new crisis as the COVID-19 pandemic unfolded around the world. The Partnership was there to help cooperatives implement biosafety measures to keep farmers and workers safe. Even as the global economy plunged into a sharp recession, the Partnership continued investing in smallholders not only across Latin America but also in Sub-Saharan Africa and Indonesia, lending over $22.6 million to 143 businesses.

It’s not just about survival anymore, either. As cooperatives grow, they’ve been able to train more farmers in climate-smart practices to improve carbon sequestration and reduce soil erosion. Many are also investing in community-based healthcare, education and infrastructure initiatives.

Photo by Root Capital

“The reason we’re able to work with these riskier enterprises is because we have set up a foundation for them to safely manage loans, and to support their producer members with resources to improve the quality and quantity of coffee yields at the farm level.” Siever said. “Over the next five to 10 years, I envision a growing pipeline of investment-ready agricultural enterprises.”

Smallholder farmers will continue to face challenges–whether another bout of coffee rust, continued economic uncertainty or climate-related issues–but they now have the tools to overcome these challenges, emerging stronger and more resilient than before.

The Partnership for Sustainable Coffee is a collaboration between Keurig Dr Pepper, Root Capital and Feed the Future to foster sustainable livelihoods for 330,000 smallholder coffee farmers and their families through improved access to financial services.

 

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