This month saw the crucial and complex issue of access to agricultural finance pushed onto the coffee sector’s agenda by a group of key coffee stakeholders.
In many parts of the world and especially in Sub Saharan Africa, the lack of information, limited entrepreneurial and financial skills, low productivity and cash flow challenges faced by African smallholders are exacerbated by a gap between the demand and supply of financial products. This gap is governed by risks with often insufficient mitigation instruments. The 5th African Coffee Sustainability Forum and a one-day workshop on improved access to input finance facilities therefore proved instrumental in collectively addressing these systemic issues.
The action-oriented finance workshop on 10th February brought together a distinct group of experts from farmer associations, traders, micro-finance and financial institutions, input providers, social lenders, sustainability standards, and donors. They examined risk perspectives and mitigation measures on input finance facilities, drawing on international best practices and the findings of a study by the International Coffee Organization (ICO) and the World Bank.
The outcome of the workshop includes a set of concrete action items and generic collaborative models of risk mitigation for short-term input finance. These actions can, in combination with other ongoing measures to improve the productivity and sustainability of smallholder coffee farmers, be applied and scaled in multiple African countries.
One of the workshop’s organizers, Ian Lachmund, Project Director of the Coffee Partnership for Tanzania (managed by DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH) complements these promising results: “the interest already shown by many of the stakeholders present signifies a very strong potential for the various models of input finance developed at the workshop to be rolled out at a country or regional level”.
Ted van der Put, Director at IDH, The Sustainable Trade Initiative and co-initiator of this event as Chair of the Sustainable Coffee Program also concluded: “It became clearer than ever for me that access to input finance can be solved addressing two challenges: how to engage the marketing agent (exporter, trader) and how to share the input finance risk in the value chain between producers, trade, input providers and roasters”.
The 5th African Coffee Sustainability Forum
The outcome of this workshop provided a stimulating base for the 5th African Coffee Sustainability Forum the following day. Through expert panel sessions, interactive presentations and working groups, the forum explored a range of inclusive finance models and the role access to finance can play in increasing productivity and sustainability. With over 160 participants, the sustainability forum offered a unique opportunity for coffee stakeholders to provide their input into addressing these issues and collectively devise solutions that will benefit all members of the coffee supply chain.
An encouraging result was the proposal made to the African Fine Coffees Association’s General Meeting to further explore the topic of financial literacy for farmers. Commitment to this topic was also echoed in the keynote speech of Roland Weening, President Coffee of Mondelēz International, who said: “Coffee farming needs to become more attractive to the next generation. Through our Coffee Made Happy program, we will enable coffee farmers to become coffee entrepreneurs by helping them run profitable, sustainable and respected businesses”.
Apart from the need for financial literacy training, the importance of enabling more smallholder farmers to satisfy their basic needs and build capital was flagged. Hence, with a tailored approach, more entrepreneurial farmers will take advantage of more favorable financial products, thus allowing them to grow their business and increase productivity. According to Mauricio Galindo, Head of Operations at ICO, “the forum was vital to the future of the African coffee sector as it brought all the relevant actors to collectively address the systemic issues of productivity, access to finance and increased public-private collaboration – all of which are critical elements to the sustainability of the coffee industry”.
The final report, speaker presentations and follow up information shall be made available at www.4c-coffeeassociation.org and www.sustainablecoffeeprogram.com. The next African Coffee Sustainability Forum is set to take place in Dar es Salaam, Tanzania in February, 2016. For more information on either of these events or on the topic of access to finance, please contact the Project Manager of the 4C Association, Lars Kahnert or the Senior Program Manager of SCP, Jenny Kwan.
5th African Coffee Sustainability Forum (11/2/2015)
Finance Workshop (10/2/2015)