Improving Access to Pre-Financing for Cooperatives and Coffee Washing StationsDOWNLOAD FILE
May 1, 2016 - Author: David Ortega
Improving Access to Pre-Financing for Cooperatives and Coffee Washing Stations
Feed the Future Africa Great Lakes Region Coffee Support Program
Policy Roundtable, Kigali, Rwanda
Challenge and Findings
1. Coffee Washing Station (CWS) use pre-financing to pay for coffee cherry upfront. Loans are then reimbursed from the proceeds of coffee sales.
2. Private CWS often receive pre-financing from banks because they have collateral.
3. Cooperative CWS often cannot obtain pre-financing because banks believe cooperatives are mismanaged, and that cooperatives will default on their loans.
4. Bank loan cycles often do not match up with the coffee season. As a result, even when CWS do receive financing, it may not be at the right time.
5. Since cooperative CWS often cannot receive the pre-financing necessary to pay farmers upfront, many farmers sell to private CWS, which do not
(1) advocate for farmers’ needs;
(2) elicit trust from farmers;
(3) incentivize farmers to produce high quality coffee;
(4) increase traceability in the sector.
See also FSP Research Paper 27