What do I need to know?

Farmer Pyramid

Different types of farmers typically require different types of R&R support and are easier/harder to serve. Understanding farmer characteristics is important to help determine the most likely financing instrument and capacity to undertake R&R at the farmer level.

Click on the pyramid

Large & Medium Farmers

These are the strongest, most well connected farmers, and therefore also the farmers that are most likely to be suitable for loan-based R&R programs.

Even at this level, loans will likely have to be concessional and coupled with some technical assistance (likely financed via grants) and for the ‘weakest’ farmers in this segment, it might still not be feasible to do loan-based R&R programs (e.g. if the enabling environment is lacking key features).

Commercial farmers in tight value chains ~1.5 million farmers

These are the strongest, most well connected farmers, and therefore also the farmers that are most likely to be suitable for loan-based R&R programs.

Even at this level, loans will likely have to be concessional and coupled with some technical assistance (likely financed via grants) and for the ‘weakest’ farmers in this segment, it might still not be feasible to do loan-based R&R programs (e.g. if the enabling environment is lacking key features).

Commercial farmers in loose value chains

These farmers are less strong, but still with some connection to global value chains and therefore suitable for more grant-based R&R programs.

For the strongest of these farmers there may be opportunities to pilot loan-based financing with highly flexible and tailored repayment schedules and a heavy focus on technical assistance (financed via grants). Conversely, the weakest farmers might require systemic capacity building (e.g. through investments in coops) before, or alongside, investments in more complex R&R programs.

Disconnected Farmers

These farmers are weakly connected to global value chains and therefore require systemic capacity building (e.g. through investments in coops) before, or alongside, investments in more complex R&R programs.

Farmers are unlikely to be able to repay loans and R&R programs must therefore be fully financed via grants.

Farmers further down the pyramid will tend to have lower financial literacy, less collateral, and there will be fewer ways to accurately understand credit risk (e.g. track record of selling to trader), or to mitigate credit risk (e.g. diversification through a cooperative). Transaction costs will be higher as ticket size will tend to be smaller, access to the farmer will be more expensive (e.g.not aggregated through a coop), and due diligence/risk mitigation is harder (see left). As such, grants may be more suitable than loans.

Estimates of number of farmers in each segment comes from Hans R. Neumann Stiftung, Structure of the coffee sector and implications for R&R, 2017, methodology from: Dalberg, Inflection point: Unlocking growth in the era of farmer finance, 2016.

Key Elements of a R&R Program

We’re getting to know how to conduct crop renovation and rehabilitation even better. Successful programs generally contain three elements…

Inputs

To ensure an optimal return on investment, high quality inputs are critical. This includes planting material (for renovation), trees (timber, fruit, etc.), and other inputs such as nutrition, tools, and herbicide.

Finance

It is necessary to accompany R&R with support on determining the best approach at the farm level, knowledge on good agricultural practices, and management of long-term loans.

Knowledge

There are expenses associated with R&R – both to cover upfront costs and often to cover the ‘valley of death’. Financing either through loans or grants can be critical when farmers can not cover costs from savings.

Inputs

To ensure an optimal return on investment, high quality inputs are critical. This includes planting material (for renovation), trees (timber, fruit, etc.), and other inputs such as nutrition, tools, and herbicide.

Inputs

To ensure an optimal return on investment, high quality inputs are critical. This includes planting material (for renovation), trees (timber, fruit, etc.), and other inputs such as nutrition, tools, and herbicide.

Knowledge

There are expenses associated with R&R – both to cover upfront costs and often to cover the ‘valley of death’. Financing either through loans or grants can be critical when farmers can not cover costs from savings.

Timing Considerations

Investments are not only needed at the onset of renovation or rehabilitation. A mix of inputs and knowledge are needed until the coffee trees are producing. Finance covers the costs of the inputs throughout, though the biggest need for finance is upfront.

Explore the timeline below to better understand what is needed, when.

Drag the timeline

Renovation
Rehabilitation

YEAR 0

Year 1

Establishment

Year 5

Maintenance

Technical assistance is a continuous process that is relevant for farmers and R&R supporting organizations

Before: Training

Implement renovation training programs and select approach
Select lead farmers that can function as pilot plots
Perform/train farmers to conduct soil analysis

During: Monitoring

Monitor replanting efforts and make sure that farmers implement good agricultural practices
Implement follow up training programs adjusted to farmers needs (e.g. how to manage nematodes)

After: Evaluation

Conduct evaluation of replanting programs and analyze data on failure and success rates

Before: Training

In cases where loans are dispersed through local coops, stakeholders must educate coops on how to manage long-term loans
Make sure that farmer org./extension service worker is adequately equipped

During: Monitoring

Monitoring should take place to ensure that coops (or other farmer organizations) are operating according to required standards

After: Evaluation

No technical assistance is likely needed

Before: Training

Finance providers without experience in dispersing R&R loans must be trained on how to manage these loans
Advocacy efforts to persuade local FIs to lend to farmers for R&R

During: Monitoring

No technical assistance is likely needed

After: Evaluation

No technical assistance is likely needed

Before: Training

Nurseries often need capacity building and training to become certified and be able to produce high quality seedlings in commercial quantities

During: Monitoring

Some monitoring is likely required to ensure that nurseries are retain quality standards. Genetic testing should be continued (e.g. through the World Coffee Research nursery certification program)

After: Evaluation

No technical assistance is likely needed

Learn more and get involved

There is a lot of work to be done to ensure the long-term supply of coffee from countries where the crop has long shaped the social and economic fabric. Learning to extend the life of their trees and improve yields helps farmers stabilize annual production and in turn, income, while the rest of the world benefits from a steady supply of quality coffee. Continue on to learn more about the immediate attention and action that is required to make this a reality.

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