In this remote corner of Sumatra, Indonesia, thirty-foot long pythons slither across the jungle floors as leopards prowl the canopy above. The Leuser Ecosystem covers an awe-inspiring landscape from the peaks of towering mountains to the depths of peat-rich bog lands.
This ecosystem is the last place on earth where orangutans, rhinos, elephants, and tigers coexist, and it’s a safe haven for countless species of bugs, plants, and bacteria that call nowhere else home. More than that, it’s a critical carbon sink, embodying 1.6 billion tons of carbon—nearly three times the annual emissions of Indonesia.
While much of the ecosystem is legally protected, the scale of the forest makes it difficult to patrol. When illegal logging and other extractive industries encroach on places like the Leuser Ecosystem, they deforest the area—meaning biodiversity is lost and these critical carbon sinks are transformed into significant carbon emissions. What's more, these practices cause flooding and pollute local waterways, threatening both farmers and the ecosystem itself.
The downstream effects directly impact the 80,000 smallholder coffee farmers who tend land in the Leuser’s “buffer zone.” There, on the edges, farmers are fighting to preserve their own livelihoods—alongside the biodiversity of this precious ecosystem.
The buffer zone is a legally defined area where limited, responsible economic activity is encouraged. For farmers, that means sustainable agriculture on small plots of land that uses minimal chemicals. Here, environmental preservation and economic opportunity go hand-in-hand. The farmers act as frontline forest defenders, notifying authorities about encroachment by bad actors; and when these farmers plant shade-grown coffee, they also provide a critical habitat for endangered species that live in and around the ecosystem.
In turn, the farmers rely on the rich soil that comes with proximity to such biodiversity. They also benefit from the ecosystem’s clean water, which the Leuser ecosystem supplies at a rate of over four million gallons each year. The result is some of the most prized coffee in the world, demanding top dollar in cafes abroad.
However, as climate change accelerates, the fate of the Leuser Ecosystem and its farmers hangs in the balance.
While you might pay a high price for a cup of Sumatran coffee, cash-strapped farmers are forced to sell their goods to intermediaries for cheap, receiving just pennies on the dollar.
As incomes decrease, the local ecosystem feels the impact. Forced to boost their yields for survival, farmers turn to chemical fertilizers and pesticides or expand their farmland into the nearby forest. Some may even participate in logging, mining, or poaching to supplement their incomes. Still others, left with no choice, will abandon their farms in search of economic opportunity in urban centers. The COVID-19 pandemic has exacerbated this problem as global demand for coffee from Sumatra has plummeted, leaving some to receive even lower prices than before.
Fortunately, farmers in the buffer zone are increasing their power in the market by banding together to form coffee cooperatives. These cooperatives aggregate farmers’ crops and sell them directly to international buyers, earning their members a premium price.
But to reach their full potential, cooperatives need support. Right-sized financing can allow these businesses to pay farmers on-time for their harvests while financial and agronomic training positions the cooperatives for long-term, sustainable growth. That’s where Root Capital comes in.
In 2014, Root Capital relaunched our lending program in Indonesia by partnering with businesses like the Ketiara Coffee Cooperative in Sumatra. For these enterprises, Root Capital is their only source of financing, providing them with the credit they need to boost farmer incomes and continue to protect the Leuser Ecosystem.
We’re committed to ensuring that each of these enterprises has an impact. Not just today, but into the future. We pair our credit with training on financial management, agronomic support, and digital business intelligence. And the impact of our approach is paying off for local farmers and the Leuser Ecosystem.
Beyond just paying farmers higher prices, most of our clients are certified organic and engage in intensive environmental services like reforestation or training farmers on climate-smart agricultural practices. A recent impact study showed that farmers affiliated with Root Capital-financed cooperatives in Indonesia were 26.5 percentage points more likely to receive agricultural training than non-members. In 2019 alone, we worked with businesses to reach over 13,000 farmers in the region.
The climate threats that these enterprises face are growing. Rainfall is increasingly inconsistent and farmers in the mountains are starting to battle pest infestations made worse by shifting climate conditions. These impacts are all compounded by Indonesia's new status as the epicenter of the COVID-19 pandemic. But our support for these businesses remains resolute.
Throughout and beyond this crisis, Root Capital is committed to helping local farmers build sustainable prosperity. Sustainable for themselves, their families, and our planet.