In partnership with organizations like USAID, Keurig Green Mountain, and Starbucks, Root Capital has become well known for offering low-interest rates on pre-harvest financing loans for farmers.
Coffee farmers generally receive one payment a year for their entire harvest. This means planning out expenses can be difficult, and, once preparations for the next harvest come around, they often have little money left over to invest in their crop. As such, they often look for loans to be able to apply to their agricultural needs each season. Root Capital sets itself apart from micro-lenders like Kiva because they are loaning amounts upwards of $40,000 each time.
Lending money to smallholder farmers can be risky. If a farmers experiences difficulty meeting volume or quality expectations with their crop, they would not meet sales goals and, ultimately, would not be able to pay back the loan. One way lenders mitigate this risk is by charging high interest rates. Root Capital, on the other hand, chooses to provide low interest rates—offers ongoing training to farmers to help to ensure their ability to repay the loan. They also engage in conversations about best practices for environmental stewardship and long-term sustainability.
I have long appreciated Root Capital's transparency: they openly share both their operation's approach, as well as a commitment to sharing the metrics used to measure what success means.
Counter Culture has been watching their good work for some time and continually tried to identify places of overlap, as well as potential partnerships. Our first entré came this year when we brought Root Capital into a study regarding coffee farmers’ adaptation to climate change that we embarked on with Duke’s Nicholas School of Environmental Management.
Root Capital and Counter Culture have a shared interest in applied research—meaning, we don’t want to do research just for the sake of researching something. We want the research to be of use, to generate an agenda, to mean something concrete on the ground to the people who were initially involved in the research. This type of project is unique in that it brings together a university, a coffee roaster, and an NGO. None of us working alone would be able to understand the issue as comprehensively as we are now able to working together.
Mike Younis, one of the six Duke students involved in the research, had the opportunity to tack on some extra time with Root Capital in their offices in Lima, Peru, as part of the overall project. Here’s what he had to say about the experience:
Both of our business and Root Capital's business are impacted by external factors that can be hard to control. We each have to look for ways to protect ourselves and our supply chains from risks—in this case the vulnerability brought on by climate change. When farmers are impacted by climate change, their overall supply of coffee is less stable, and they are less likely to be able to repay loans or have a consistent supply for buyers. Root Capital and Counter Culture Coffee will benefit from better understanding the impacts of climate change and hopefully be better poised to be a part of the solution.
Moving forward, I believe that collaboration among interested parties from different industries and organizations—all with common goals and interests—will only continue to blossom within the coffee industry. Results from the climate change adaptation study will be shared on our website and elsewhere late-spring 2015.
Hope you’ll keep following along and be in touch with any questions or comments!