As you may remember, the TechnoServe Coffee Initiative is funding exclusively by the Gates Foundation who foots the bill for technical assistance and business training but not for any material items or infrastructure for the farmers and their cooperatives. The Gates Foundation is split into three functional groups covering Global Health, Poverty & Development, and Education & Information so the Coffee Initiative falls under Agricultural Development in the Poverty & Development category. Within Poverty & Development, the foundation also addresses homelessness, financial services for the poor, and water, hygiene, and sanitation. A broader issue covering each of these topics is Food Security, which has become a buzz concept across the developed and developing world, and the Gates Foundation is spending a lot of resources trying to understand it and address it.
On the financing side, we have been hearing whispers that the Gates Foundation is interested in setting up an agri-business financing program to bridge the gap between small-holder farmers and their ability to access capital. The foundation has quite a bit of money to put in the ground so this is potentially another way to do it while addressing a major systemic problem in the developing world. As things stand now financing in Africa would potentially come from two sources:
- Large national or international aid organizations (UN, USAID, GTZ (German Development Agency), AFD (French Development Agency), World Bank, etc.) that typically fund entire programs (but don't implement them) or fund large infrastructure projects like roads, buildings, big factories, etc (big checks).
- Local commercial banks that issue loans seemingly at random with steep guarantee requirements (50-100% cash infusion into the bank) and charge anywhere from 15-20% interest. These banks also don't make much on say 20 $15,000 four-year loans even if they are charging high interest rates in an often times risk free situation (with the guarantee) so these small loan sizes are not very interesting for them. All in all, small-holder farmers (and their cooperatives) with little or no credit history or bad credit history and no assets requiring small-ish loans for infrastructure investments in volatile commodities in often corrupt systems have a very difficult time accessing credit all.
Neither of these sources are applicable to small-holder farmers and their cooperatives since they cannot be accessed reliably in a timely manner (as I am reminded everyday). A program that addresses these issues is desperately needed to provide consistent financing to farmers and would revolutionize agriculture financing in the developing world.
Well, the Wall Street Journal published an Opinion piece today by Tim Geithner and Bill Gates to announce a financing vehicle funding by the Gates Foundation and a handful of developed countries to address these financing challenges (
WSJ: A New Initiative to Feed the World). While the article is very high level and there isn't much else out about it right now, this is potentially very exciting for what I am doing and could make a huge difference in the developing world.
On a related note, the coffee cherry in Rwanda is ripening and the coffee washing stations that were financed are installed and up and running. Volumes collected by TNS-supported washing stations have been astronomically high and the system is working with a few kinks here in there (too much rain right now is ripening the coffee too fast to give it time to dry appropriately). Anyway, the picture below is from one of our coffee washing stations near Kibuye on Lake Kivu in Western Rwanda (that is the promised land CONGO in the distance).
