Access to Finance

On a warm, breezy day in the sleepy Congolese city of Bukavu, I find myself on the back of a boda-boda motorcycle taxi, puttering down the unpaved city streets on my way to the National Office of Coffee. Down every alleyway I catch glimpses of the morning sun glimmering off of the calm waters of Lake Kivu. It’s the first day of “Saveur du Kivu,” a celebration of the reemergence of specialty coffee in the Democratic Republic of Congo (DRC) and the country’s premier coffee event. I’m here representing Root Capital, which happens to be the largest coffee lender in the region.

Root Capital was founded in 1999 with a commitment to raising incomes for farmers working in the most vulnerable regions of the world. But instead of working with farmers directly, we chose to focus on the agricultural businesses that create economic opportunities for hundreds, or even thousands, of farmers at a time.

Members of APROCASSI, a coffee cooperative in Peru, line up to apply for credit from the cooperative's internal credit fund. When asked about the effect that a rural business’ internal credit fund has on farmers, Root Capital advisor Fany Murillo answers with a single word: “epic.”

Hills rise into the sky in the coffeelands of the Democratic Republic of Congo (DRC).  Looking out the window as my taxi jostles along a bumpy dirt road that winds from Goli to Ndrele town through the hills of the northeastern Democratic Republic of Congo (DRC), I’m struck by the peaceful scenery that surrounds us. Grassy hills spotted with groves of trees and small gardens of banana, maize, and coffee trees rise gently into the horizon, stretching for miles on either side of the road. However, this region’s apparent tranquility belies a violent past — and scars that a few scrappy businesses are fighting against all odds to heal. 

Root Capital, like many impact investors, operates in the gray area between traditional philanthropy and mainstream commercial markets. As a mission-focused lender, the organization serves the financial needs of small- and medium-sized enterprises—a Fair trade coffee cooperative in Uganda or an association of women quinoa producers in Bolivia, for example.

Two years ago almost to the day, 60 Colombian musicians came together and released a song called “Un Paso Hacia la Paz” (“A Step Toward Peace”). Amid joggling maracas, an impassioned choir of pop stars, indigenous singers, and Vallenato musicians sing, “Así es como canta Colombia por la paz” (“This is how Colombia sings for peace”), urging for an end to the country’s 50-year armed conflict. Fast-forward to today, and the peace Colombia sings for is finally within reach.

After a decade of growth, a coffee cooperative shows why reliable access to finance is critical for success. Global coffee consumption is on the rise. According to the International Coffee Organization, demand will increase by 25 percent over the next five years. As The Wall Street Journal recently pointed out, this offers tremendous opportunities for smallholder coffee producers in Uganda, Africa’s biggest coffee exporter. It’s here where, in my role as a portfolio manager for Root Capital, I witness how the cultivation and sale of coffee can transform rural communities. Since 2005, Root Capital has lent over $200 million to small and medium-sized enterprises throughout Africa, including more than $80 million to clients in East Africa’s coffee industry. And I have seen how access to finance is a crucial ingredient in the sector’s growth.

A look at the challenges and decisions that agricultural entrepreneurs experience over the course of a year.  PART I: HARVEST

This year, the world will consume more coffee than ever before. And industry projections point to growing demand in the years ahead, especially in emerging markets. Take China, for example. During its annual investor meeting last month, Starbucks highlighted that it’s opening the equivalent of one new store in China every day. The problem, however, is that this rising global demand for coffee cannot be met with a dwindling supply.

Kenia Ubeda, general manager of UCCEI, a Root Capital client in Matagalpa, Nicaragua Kenia Ubeda never thought she’d be running a coffee business. “I was an agronomist and a coffee farmer,” she says with a smile on her face. “I didn’t know the first thing about commercializing coffee.” But the community leaders who tapped Kenia to found and run UCCEI, a farmer cooperative in the coffee-fueled town of Matagalpa, Nicaragua, knew she had what it took. And in 2009, Kenia rose to the challenge and became UCCEI’s general manager, overseeing a business currently sourcing from over 900 smallholder farmers in the region.