The Inter-American Development Bank’s Social Entrepreneurship Program will provide $461,000 in financing to an association of poor indigenous farmers in southwestern Guatemala for a project to increase their coffee crop’s output and quality and their capacity to export to markets fetching premium prices.
The project will benefit more than 1,100 members of the rural organizations that form Manos Campesinas, an association of coffee growers in the departments of Quetzaltenango, San Marcos and Solola who farm small plots in areas with appropriate climate, soil and altitude conditions for high-quality coffee.
The IDB’s Social Entrepreneurship Program, which supports projects that combine sound business practices with a strong social commitment, will provide Manos Campesinas a $300,000 loan and a $161,000 technical assistance grant.
EcoLogic Finance, a Cambridge, Mass.-based non-profit financial services firm with offices in Guatemala City, will provide a $370,000 loan to Manos Campesinas. EcoLogic specializes in working with smallholder farmers in Latin America and has strong contacts with fair trade organizations, social investors and specialty coffee companies in industrialized nations.
The loans supplied by the IDB and EcoLogic will finance pre-shipment credit for Manos Campesinas members. These credits will help farmers bridge the six- to eight-month periods between the time they deliver their crop to the association’s warehouses and the time U.S. and European coffee importers pay for their purchases.
“If cooperatives have no cash, they can’t make any down payments to their members,” said EcoLogic’s president, William Fulbright Foote. “Farmers then have to turn to middlemen, losing up to half of their potential profits”.
IDB project team leader Maria Teresa Villanueva added: “With a portion of the interest paid by the coffee growers for pre-shipment financing, EcoLogic will establish a capitalization fund that will allow Manos Campesinas to offer loans to its own members.”
The IDB’s technical assistance grant, plus $69,000 in contributions from Manos Campesinas, will help finance training to raise and maintain the quality of their coffee as well as to increase the output of certified fair trade and organic coffee.
New bulking centers will be built to improve coffee storage conditions and information and internal controls systems will be developed to strengthen the business and financial management of Manos Campesinas and its member organizations.
The project is expected to increase considerably the incomes of Manos Campesinas members, most of who are poor indigenous farmers who tend family plots averaging less than one hectare.
The IDB also supports various rural development programs in Central America that assist farmers in diversifying crops, improving their farming methods and starting alternative economic activities.