It’s that time of year again — the time we all make New Year’s resolutions that are destined to be broken. So here are three from the coffeelands:
- Generate more results-based evidence.
- Help the coffee sector navigate uncharted waters.
- Borrow a page from the microfinance playbook.
Only we plan on keeping these.
- Generate more results-based evidence.
At the top of our list of research priorities for 2014: enlist industry leaders and research institutes in a comparative cupping of two leading Colombian coffee varieties, Castillo and Caturra.
We will select 50 farms participating in our Borderlands Coffee Project that are growing both Castillo and Caturra. During the 2014 harvest, we will collect, prepare and ship samples of both cultivars from every farm — 100 in all — to a panel of leading U.S. coffee companies for blind cupping. And we will work with industry actors and research institutes to exhaustively analyze and ultimately publish the results.
This approach to farm and sample selection will control for variability in cup quality based on differences in terroir, husbandry, harvest practices and post-harvest processing on the farm, enabling us to attribute differences to genetics with a high degree of confidence.
If there is an independent field-based study of Castillo and Caturra cup quality this well-designed or this rigorous, I haven’t seen it.
We believe this research will generate the kind of results-based evidence that farmers need to make good decisions on the farm, buyers need to make good decisions on sourcing, and coffee institutes and governments need to make good decisions on policy. The issue seems particularly salient in the wake coffee leaf rust epidemics in Colombia and Central America, where farmers are deciding whether to renovate their coffee fields with traditional high-quality cultivars or rust-resistant hybrids whose quality has been called into question by specialty roasters.
The members of the Advisory Council for our Borderlands project — Atlas, Counter Culture, Green Mountain, Intelligentsia, Stumptown and Sustainable Harvest — have all signed on to the initiative. We are currently in discussions with other roasters to expand participation in the process, and with research institutes to improve on its design.
We will publish the results here later this year.
- Help the coffee sector navigate uncharted waters.
Back in November I suggested that the coffee industry needs a new generation of explorers to travel to the frontiers of coffee—the areas marked on maps by dragons and skulls and crossbones—to identify new sources of risk in coffee chains. CRS has been poking around over the past six months on the margins of the coffee trade, and we have uncovered what appears to be a significant source of risk that is not on the industry’s radar. We will work discreetly to help industry actors address it.
- Borrow a page from the microfinance playbook.
Microfinance, with its dual promises to generate financial profit and social impact, has always had a blended value proposition. But over time, microfinance institutions (MFIs) began to systematically privilege financial indicators over social ones in measuring their performance, due in good measure to donors and investors who insisted that microfinance be financially self-sustaining and not dependent on external subsidies. Today, MFIs are generally regulated like banks and other traditional financial institutions. Most have become sustainable, and many have become fabulously profitable. But this stability has been achieved at a price. MFIs moved up the food chain, serving clients who were less poor, less vulernable, less risky and more profitable. They traded social impact for financial profitability.
Over the past few years, CRS has been part of an innovative effort to help MFIs renew their social commitments, reengineer their organizations and products for social impact, and rebalance their value propositions. Social performance management refers to a set of tools that helps MFI managers set social impact goals, monitor their progress against key social performance indicators and ultimately drive increased social impact through their business models. MFIs are finding ways to increase their social impact without jeopardizing their economic sustainability. What does this have to do with coffee?
Many coffee cooperatives — even the ones born out of social change processes — have become thriving grassroots enterprises, exporting hundreds (even thousands) of containers of coffee, managing massive credit lines from multiple lenders, and delivering a growing range of commercial services to their members. Like MFIs, coops have focused first on building better businesses because their donors and their trading partners require it. But coops with booming businesses that respond effectively to the needs of the marketplace doesn’t necessarily respond effectively to the needs of their members, many of whom are still poor, hungry and vulnerable. A social performance management approach within farmer organizations could help coops achieve a better balance between the commercial value and social impact they generate for their members. If coops can increase the social benefits they generate for their members without undermining their commercial performance, everyone wins.
We will work with friends and allies in the coffee sector in 2014 to explore the possibilities for applying a social performance management approach in the coffeelands.
(And of course, we will continue to work will our allies in the marketplace to help the growers we accompany in coffee projects from Colombia to the DRC to expand access to high-value specialty coffee markets.)
7 Comments
Michael,
I’m really excited to see your last point about microfinance, specifically the impact you hope interventions in this area can generate:
“If coops can increase the social benefits they generate for their members without undermining their commercial performance, everyone wins.”
Love this point! One of the oft repeated arguments we get stateside when talking about fair trade coffee cooperatives specifically is that the economic impact simply isn’t enough to make fair trade worth it. Our counterpoint is that the social benefits of being organized and of receiving fair trade social premiums for the community do make it ultimately “worth it.” Having an analogy to this situation with coops and MFIs that is backed up by data would be most interesting to analyze.
This is one resolution I hope we can keep!
Courtney
Thank you, Courtney.
You are not the only one who has responded favorably to the idea of social performance management for coffee coops. I have heard back from lots of folks in the field and in the marketplace alike who want to be part of this discussion moving forward.
Stay tuned.
Michael
Michael,
Happy New Year, thanks for such bold goals for 2014!
We’d be happy to sign up and evaluate the Caturra/Castillo samples, let me know how we can assist you in any way. Our Colombian trading partners (The Fondo Paez coop) have been struggling with this decision and I know they would benefit from the results of this expirement. Other variables in this equation I’d love to see explored for sustainable small scale producers – how viable an option is Castillo for organic farms? does it remain as resistant to rust with organic methods? is there an additional quality impact with organic farms and Castillo?
Have you heard of much specific research/expirementation with Castillo, or other responses to roya, and organic producers? Coop Coffees is hosting a farmer exchange in Honduras next week with our trading partners from throughout Latin America, focusing on best organic practices in response to roya.
Information sharing has never been so critical, eh?
TJ:
Thanks for the note and Happy New Year right back atcha.
Thanks, too, for the offer of support for the Colombian varietal cupping and the validation of the whole project. Since I published this post I have heard from a few roasters who are interested. We are currently in discussions with research institutes about the format and seeking funds to expand participation beyond the roasters and importers who are directly involved with our Borderlands project. We should have more details soon. Meantime, I will put Kickapoo on the stand-by list.
As for your concern about Castillo and organics, it is a familiar refrain. The general opinon I have heard on this issue in Colombia is that Castillo is “hungrier” than traditional varieties and even the Colombia series of hybrids that preceded it. It is not a scientific opinion, but it is widely held by the growers and agronomists I have talked with in Nariño. I am sure Cenicafé has done studies on this, but I haven’t seen them. This issue is not on our research agenda at this point.
Will be sure to let you know whether/how you can help, and to share the results of the study far and wide so your friends at Fondo Paez and others can make more informed decisions about the tradeoffs they may be facing in the selection of coffee varieties.
Michael
Hi Michael,
I just spent 6 months in Nicaragua evaluating a cooperative initiative that attempted to address the needs of members (or families of members, or sometimes just neighbors of members) in part through offering micro finance services. I agree that MFIs need to be more client-led in their services, and I can see the link you are making between MFIs and cooperatives.
One thing that I came across in my research, however, is a greater distrust of MFIs than of cooperatives. I and a team of researchers interviewed almost all of the recipients and participants in the cooperative initiative, and there was overall enormous faith in the cooperative. When you consider things like the No Pago movement in Nicaragua (and there are many other examples), I am not sure I would say the same faith exists in MFIs.
I am a huge cooperative fan, and I agree increasing social benefits without undermining commercial performance is important. But I also think, at least in the communities where I interviewed, we need to make sure cooperatives are committed to increasing social benefits even when almost every one of their members supports them and thinks they’re great anyway. Perhaps I just worked with a really fantastic cooperative, or perhaps no one was willing to badmouth anyone in front of me, or perhaps cooperativism is so strong in Nicaragua there doesn’t seem to be much mistrust. I am curious if you have experienced different things with different cooperatives, if you have experienced a sense of distrust among members?
Nora:
I meant to limit my MFI-coop comparison to social impact, and more specifically how leaders of those two categories of organizations manage for social performance. Thanks for your comment and for taking the coop-MFI analysis a step further.
I think your findings are very interesting and I would like to understand better why coops are so trusted and MFIs are so mistrusted–is it something particular to the local context in Nicaragua? In my experience, the degree to which coops are embraced depends largely on the quality of their management and performance–are commercial managers finding markets and good prices for coffee? Are processes transparent and democratic? Are they delivering other services–access to credit, agronomic advisory services, etc.? Are coops investing in things beyond coffee that drive social impact? Certainly Nicaragua has some pioneering cooperatives with very strong relationships with their members based on many years of strong performance around some of these issues. And, like every other country, there have been cases of mismanagement and lack of leadership that have led farmers to lose their faith in their coops. I have less direct experience with MFIs.
I guess what I am really curious about is whether your core finding–that farmers love their coops, their MFIs not so much–robust across country borders? If so, it may strengthen that cooperatives are better positioned to be a platform for on-lending to individual members. Root Capital has entered this space deliberately and with very encouraging early results.
As part of our CAFE Livelihoods project, we worked together with Root Capital for three years in Nicaragua to help coops create and capitalize internal credit funds that would allow coops to provide finance to members for diverse farm-level reinvestments–mostly farm rehabilitation. Root Capital’s main business is filling the missing middle in credit markets for the trade finance needs of rural enterprises. Those credits are vitally important to make the coffee trade work, but they don’t drive capital to the farm level where reinvestments are sorely needed, not just in farm rehabilitation, but in post-harvest infrastructure as well as non-coffee investments that smooth diets and incomes by making food and cash available when they are most needed. Root Capital has taken this initiative to scale through Root Link, systematically building, strengthening and capitalizing internal credit funds–essentially making coops specialized providers of microfinance for farm-level investments the coop sees as critical to its commercial–and social–mission.
The Root Link approach is still relatively new, and there are regulatory questions in some countries about how much of this on-lending coops are allowed to do. But if early returns are indicative and regulatory fixes can be found, the approach seems to hold enormous promise for individual lending and social impact within coops.
That leaves the question…what to do where there is no coop?
Michael
Hi Michael,
I haven’t done this type of research across borders, so I can’t answer that. Nicaragua does have strong cooperativismo, so perhaps that has something to do with it. But in general, the sense I got was the lending scared people regardless of where the money came from. Cooperatives did not. The other thing to note about the initiative I worked on in Nicaragua was that it did not only offer credit, and it was only for women, and those women did not have to be cooperative members to join. Often they were wives of members, and therefore would not have had any access personally to any cooperative programming or credit. That’s something an endeavor to finance coop members from outside the cooperative would miss.
Without the cooperative, I see a lack of robust partnerships like the one you are mentioning, but also export being owned privately–often by guys from the North–with few rules on how well farmers are treated. And with the cooperative, there are holes still. Hiring wage labor is something all cooperatives do to process their coffee in beneficios, and something many cooperative farmers do when they have a lot of land. But hiring wage labor betrays the true sense of a cooperative to begin with. I would love to do a study to look at all these missing links. How about the families of coop members who help grow coffee versus families of non-coop members. How about comparing hired wage laborers who work for private estates versus those who pick coffee on cooperatives? How about the workers in coop beneficios or those in private beneficios? I think there you’d start to see some missing information that might answer that question: what do things look like when there is no coop?
Nora