The FINANCIAL — IFC, a member of the World Bank Group, will provide long-term loans to help Nicaraguan coffee farmers combat the devastating effects of the coffee rust fungus, which has swept through Central America crippling production and threatening the livelihoods of millions who depend on the coffee industry.
The project is a partnership between IFC, Atlantic (a subsidiary of the coffee trader Ecom), Starbucks, the Inter-American Development Bank, and the Global Agriculture and Food Security Program (GAFSP). Once up and running, IFC plans to expand the program to other countries, according to IFC.
IFC will invest $12 million in the total $30 million loan program, administered by Atlantic, a subsidiary of Ecom operating in Nicaragua. In addition, the Inter-American Development Bank (IDB) will invest $12 million. Atlantic will invest $3 million, as will coffee roaster and retailer Starbucks, which will purchase coffee from Atlantic. The GAFSP Private Sector Window will provide a 25 percent first loss guarantee for IFC and IDB’s investment, which will lower risks and the level of interest rates charged to farmers.
Coffee is Central America’s leading export. In some countries coffee rust, or La Roya, has affected up to 70 percent of plantations. The disease attacks coffee leaves and chokes off nutrition to the coffee cherries that protect the beans. Many small-holder farmers are trying to fight it by replacing aging trees or spraying fertilizer and fungicide. But income losses for farmers in Central America have been compounded by lower global coffee prices due to bumper crops in other regions, and the chronic lack of long-term financing is a constraint.
This project will help approximately 500 farmers, many of whom work less than 12 acres, replant and renovate their farms. It will provide them with new coffee varieties that are resistant to the fungus and technical support to improve their agricultural practices.
“This partnership will help us provide farmers not only with financing to replace old, diseased plants with disease-resistant varieties, but also technical assistance to help them make farming practices more sustainable,” said Edward Esteve, CEO of Coffee and Cocoa at Ecom.
Craig Russell, Executive Vice President, Global Coffee, Starbucks said, “Providing access to financing is part of Starbucks comprehensive approach to supporting farmer livelihoods around the world. This unique loan program helps farmers make strategic investments in their infrastructure, offering the stability they need to manage ongoing complexities so that there is a future for them and the industry.”
Alzbeta Klein, IFC Director for Manufacturing, Agribusiness and Services said, “Small farmers are particularly vulnerable to the effects of La Roya, as they cannot access financing to purchase new plants and provide working capital to offset lost income for the years required for new plants to mature and produce income. In partnership with industry and with donors through the Global Agriculture and Food Security Program, we have developed a creative way to provide long-term financing farmers need.”
Hans Schulz, General Manager of the IDB Structured and Corporate Finance Department and interim Vice President for the Private Sector said, “This is one of the first private-sector climate adaptation projects to be approved by the international financial institutions, in partnership with like-minded industry leaders and donors committed to sustainability. We hope that this project in Nicaragua can be replicated successfully in other countries in Central America.”
GAFSP is a global effort that pools donor resources to fund programs that increase agricultural productivity in countries with the highest rates of poverty and hunger. Its objective is to improve incomes and strengthen food and nutrition security. Through its public sector window, GAFSP helps governments develop national agriculture and food security plans. Its private sector window—managed by IFC and supported by the governments of Canada, Japan, the Netherlands, the United Kingdom, and the United States—provides long- and short-term loans, credit guarantees, and equity to private sector companies to improve productivity growth, deepen farmers’ links to markets, and increase capacity and technical skills.