Posted November 27, 2012 by JoAnne Berkenkamp
The money in your mug. The nickel in your nip. The cashflow in your cup. What’s the connection and what does it have to do with you?
After oil, coffee is the world’s most traded commodity. Globally, over 25 million farmers grow coffee to support themselves and their families. Many of these growers are very small, with a typical Fair Trade coffee farmer growing on less than eight acres of land.
At the beginning of each growing season, farmers need to come up with the cash needed to run their farm as the coffee grows, to harvest it and get it to market. Like farmers around the world, they have to finance these costs, as well as cover living expenses year round, even though they only harvest and get paid once a year.
Small-scale farmers have long struggled to access traditional financing. Lacking conventional collateral and access to fairly-priced loans they often have to borrow money from middle-men at exorbitant interest rates that cut into their profits and their ability to meet their families’ most basic needs. Around the world, the annual demand for sustainable trade financing for farmers is estimated at $3 billion. The financing that is actually available to small growers is more like $300 million.
That’s where you come in.
Peace Coffee (which is owned by IATP) and a group of like-minded coffee roasters in the U.S. and Canada are exploring a new way for you to put your money where your mug is. In conjunction with the Grow Ahead Foundation, they are participating in a new model for social trade finance that connects coffee drinkers and others with the farmers who grow their coffee.
Here’s how it works: Individuals and organizations will make short-term loans of $25 or more to farmer cooperativesthat supply Cooperative Coffees, the entity through which Peace Coffee buys its beans. The funds will be lent to growers early in the year to help “pre-finance” the costs they incur over the growing season.
One of the first farmer cooperatives to participate in this unique funding model is APECAFORM, a 400-member co-op in Guatemala. Money is currently being collected to pre-finance coffee that will be harvested in Fall 2013. Once the coffee has been sold and shipped to North America, the farmer association will repay the loans.
Those of us who make a loan can get our funds back at the end of the growing season (e.g., Fall 2013), use the funds to make another loan or turn it into a permanent donation. The loans made to the Grow Ahead fund will be secured through a $200,000 loan guarantee fund provided by the DOEN Foundation in the Netherlands where the Grow Ahead Foundation got its start. You can learn more about the details of the funding mechanism in the video below.
IATP has already made one of the first loans into the Grow Ahead crowd-funding program and we hope that you will join us. So put your money where your mug is! Learn more at www.growahead.org.