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Expanding Opportunity for Smallholder Farmers


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by Danny Stokley, director of business development, Global Partnerships

By supporting COOPEFACSA with a working capital loan, GP aims to support their plans to add new members and expand their non-financial services offerings.

Global Partnerships (GP) recently disbursed a working-capital loan to a new partner, COOPEFACSA (Cooperativa de Ahorro y Crédito Fondo Campesino de San Antonio), a savings and credit cooperative offering financial services to rural populations in the Autonomous Region of the South Atlantic (RAAS) in Nicaragua. This region remains underdeveloped compared to the rest of Nicaragua, with limited infrastructure, lower literacy rates and a higher percentage of the population living in poverty1. COOPEFACSA is member-owned and deeply integrated within the region. Committed to professional development for both employees and members, COOPEFACSA is one of the only sources of financial services and adult training and education available to the cooperative's 2,800 members. This cooperative is an excellent example of how people living in a remote region can be empowered to expand their own opportunities—the belief at the heart of GP's work in rural livelihoods.

One way that COOPEFACSA supports members is by combining flexible credit, technical assistance and market access in order to help producers begin cultivating cacao. This particular crop requires significant investment in saplings, labor and inputs, and trees only begin producing after two to three years. However, once farmers begin harvesting cacao, they report significantly higher income than from other agricultural uses of their land.

How COOPEFACSA works with outgrowers to create impact
"Outgrowers" are a type of social enterprise GP has recently added to our portfolio. Typically privately-owned companies (agricultural processors or exporters), outgrowers purchase crops from individual farmers or farmer cooperatives. Many also offer training and purchase guarantees that can significantly reduce the economic risks farmers take to run their businesses.

With a lengthy turnaround between a farmer's initial investment and the first harvest, cacao production comes with a number of risk factors that can be particularly worrisome for smallholder farmers. COOPEFACSA's partnership with an outgrower limits their members' exposure to that risk. COOPEFACSA works with INGEMANN, an outgrower that provides technical assistance to farmers, allowing them to produce higher value crops, and guarantees purchase of what they produce. COOPEFACSA provides the loan that allows members to purchase saplings and inputs, and negotiates minimum prices with INGEMANN on behalf of their members. As part of GP's due diligence process, I had the opportunity to visit COOPEFACSA in January, and learned a bit about how this partnership with an outgrower reduces COOPEFACSA members' risk, making an investment in cacao production attractive.

  • The first major hurdle smallholder farmers face with cacao is that it can take up to three years from the time saplings are planted until the first harvest. This is a substantial investment that yields no return for several years. COOPEFACSA assists members by offering credit tailored to cacao production, with a grace period of three years. Frank, the cooperative member pictured with his family above, shared that this loan was crucial, as he wouldn't have been able to put his own money into such a long-term investment.
  • The next obstacle is a lack of local knowledge of how to plan, maintain and harvest cacao. To overcome this, INGEMANN offers interested COOPEFACSA members a certification course in growing cacao. INGEMANN technicians also visit each member every week to provide onsite technical assistance while farmers cultivate their first plot of trees.
  • Perhaps the most worrisome risk for farmers is uncertainty about the ability to sell a new crop after such a significant investment of time and resources. INGEMANN also addresses this concern by guaranteeing to buy 100% of farmer production at a contractual minimum price based on predefined quality standards. While the minimum is set, the final price may be higher, depending on world cacao prices when the farmer is ready to sell.

This partnership allows smallholder farmers to transition to growing a higher value crop with minimal risk, and connects smallholder farmers in an underserved area of Nicaragua with an exporter that supplies gourmet chocolate producers abroad. While the evidence is anecdotal at this stage, COOPEFACSA members confirmed that they were happy with the services received through INGEMANN after several years, and were earning more income than before. Cacao trees also produce fruit year-round, unlike many crops available to smallholder farmers, resulting in a much more consistent source of income over time. As many of the largest chocolate producers globally are warning of an upcoming chocolate shortage, cacao will likely continue to be a lucrative crop for smallholder farmers in certain parts of Latin America2, and relationships between farmers and outgrowers will be essential in cultivating that opportunity.

Why we invest in local partners
COOPEFACSA's employees and owners are all from the region, their current Credit Manager began her career with the cooperative on the janitorial staff, and most of their board members are smallholder farmers themselves. Nearly every employee, from credit officers on up through management, utilizes the organization's financial services offerings. This integration is one reason COOPEFACSA has such a thorough understanding of the products and services most appropriate to, and those that will be most appreciated by, their members. From offering members small savings accounts and a place to receive remittances, to the technical assistance and market access offered through partnerships with outgrowers, all of their activities are driven by local needs. With strong ties to the surrounding community, local partners like these know what their clients need better than anyone else. GP is proud to partner with them and increase the life-changing impact they bring to their clients.

1http://www.fadcanic.org.ni/?q=node/17
2http://www.bloomberg.com/news/articles/2015-01-07/chocolate-shortage-spurs-revival-of-cocoa-in-amazon-commodities

Blog Tags: Central America   COOPEFACSA   cooperatives   farmers   INGEMANN   Latin America   Nicaragua   rural livelihoods   

Smallholder farmer Frank Alvarado and his family with some of their young cacao trees.
COOPEFACSA member Frank Alvarado and his family on their cacao plantation just outside of Nueva Guinea, Nicaragua. Frank is a cattle farmer, but low prices in 2011 inspired him to invest in converting a portion of his land to grow cacao. When asked about risk, Frank shared that the agreement with INGEMANN was very clear from the beginning, which made the transition easy. An INGEMANN technical advisor comes to his property weekly to assist in production, collect the harvest and handle all of the cacao transport and processing. Photo © Global Partnerships.

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  1. Nancy stokley

    Muy interesante.

    posted 3 years ago
  2. Hilsser Obando

    Muchas gracias por el artículo. Estamos contentos de trabajar con GP.

    posted 3 years ago