Credit, Coffee and Conservation

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Credit, Coffee and Conservation

• Using affordable financing and Business
  Development Services to create an economic
  incentive for biodiversity conservation

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What is Conservation Coffee
Conservation coffee is coffee that is cultivated,
processed and marketed in a manner that promotes
biodiversity conservation Best Practices for
Conservation Coffee Field Diversification of
shade canopy, reduction of agrochemicals Farm
Protection of forest fragments, restoration of
degraded land Community Creation of community
reserves, halt logging Protected Area Report
violations, community guards, fire
control Appropriate to the region, economically
viable and positive impact
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Chiapas Coffee Project

• El Triunfo Biosphere Reserve
• 119,177 ha of forest that provides habitat for
  the Quetzal, Puma, Horned Guan
• Coffee fields a major component of buffer zone

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Chiapas Coffee Project

• Average farm size is 7.4 acres
• Manage to harvest 445 lbs per acre
• Former coffee pickers on large farms
• Young men migrating to the US

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Conservation Coffee Project

• tree to cup approach
• Agricultural Extension
• Farm Planning and Evaluation
• Business planning and credit applications
• Trade assistance and market development
• Credit a part of an integrated approach

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Credit Needs

• Traditional sources Moneylenders and Subsidized
  government programs
• Pre-harvest financing allows farmers to repair
  processing equipment, purchase materials, food,
  and pay wages of coffee pickers
• Post-harvest financing allows coops to pay
  local price to farmers upon delivery of their
  coffee. Pay for processing of parchment coffee,
  transport, and export costs

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Eterno-Verde Credit Fund

• Three year credit mechanism
• CEF (CI credit fund, IFC/GEF SME loan)
• Ecologic Enterprise Fund
• Starbucks guarantee for 70 of loans
• Borrowed by coops on behalf of farmers
• Loans made against coffee contracts
• Loans repaid to lenders by coffee buyer
• Required 4-6 savings by cooperatives

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Services Farm Planning Evaluation

• 100 of farmers AND fields visited twice a year
• New members receive diagnostic of farm
• Evaluation visit (April July) to review last
  year, develop new targets
• Wet mill evaluation (Jan-Feb) to review status of
  processing infrastructure and social issues
• Provides
• (1) coffee availability and credit needs
• (2) membership lists
• (3) documentation for certification

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Services Business Planning Credit

• Cooperatives formulate a business plan
• Board of Directors and Technical staff
• Capacity assessment
• Five training Modules (2 days)
• Five individual sessions with each coop
• Credit applications reviewed by lenders
• Provides
• Business plan that reflects coops objectives
• Credit Applications that reflect real needs

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Services Cost Recovery

• Fees for service
• Simple fee per lb. of green coffee
• Paid by cooperative after harvest
• Fee included as a cooperative cost
• Easy to implement if from payments
• Resistance by TA staff
• Need to know capacity to pay
• Need to know value of services

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Results Farmer Participation

• Credit allowed more farmers to benefit
• 2001
• 314 farmers and 867 ha of coffee
• 2002
• 692 farmers and 2076 ha of coffee
• 2003
• 1018 farmers and 3152 ha of coffee

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Results Loans and Savings

• 2001
• Pre-harvest US 145,000
• Post-harvest US 262,000
• 2002
• Pre-harvest US 28,474
• Post-harvest US 221,456
• 2003
• Pre-harvest US 24,500
• Post-harvest US 265,775
• Total Savings US 75,000

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Results Coffee Exports

• 2001
• 798,609 pounds of green coffee
• 2002
• 1,673,276 pounds of green coffee
• 2003
• 2,183,400 pounds of green coffee

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Eterno Verde Lessons Learned

• Farm Planning
• Farmers more aware of risks and responsibilities
• Debt allocated to specific farmers
• Identified who paid, who benefited
• Information key to meeting sales and credit
  targets
• Business Planning
• B of D participation increases their authority
• Process identified fraud and mismanagement
• Connected credit applications to real needs

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Eterno Verde Lessons Learned

• Cost Recovery
• Stimulated thinking about other costs
• Connected costs to services provided
• Set a standard for service quality
• Needed to look at farmer capacity to pay
• Need to look at cost of services
• Credit
• Secure financing allowed cooperative to grow
• Savings requirements did simulated savings
• Credit need to be part of an integrated package

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Lessons Learned

• Irregular, Gov. subsidized credit distorts market
• Business plans reviewed only used once a year
• Not used to make decisions
• Still lack a long-term enterprise vision
• Must start fee for service from day one!!!
• NGO Culture vs. Service Provider

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Verde Ventures

• US5 Million for Eco-Enterprises
• Ecotourism
• Wild harvest Products
• Agroforestry US 2.5 for Coffee
• Debt Equity Financing
• Loan Size - US100,000 to US500,000
• Clear contribution to biodiversity conservation

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Special Thanks

• CGAP
• USAID/PVC Matching Grants Program
• IFC/GEF SME program
• Critical Ecosystem Partnership Fund
• Starbucks Coffee Company
• USAID/ENDAP program