Partners join forces for stronger coffee cooperatives

Vietnamese cooperatives have been going through a profound transformation over the past few years, explains Mark Koppejan, Asia Program Manager at Rabo Foundation. “From traditional, politically driven organizations, they’re trying to convert into modern partnerships of farmers who decide on their course together and share in the profits.”

That metamorphosis requires major investments, but the funds are hard to come by. The price of coffee is volatile, and many farmers suffer from extreme weather due to climate change. That insecurity makes banks hesitant to loan the small farmers’ organizations the money they need.

“And parties outside Vietnam that are willing to make the investments find it challenging to do business directly inside the country”, Koppejan explains. “The regulations are complex and involve a lot of paperwork.”

So how does Rabo Foundation manage to support the Vietnamese cooperatives financially? “That’s thanks to our partnership with Sacombank in Vietnam and the local Agriterra team. They took the step to make a difference for the country’s smallholder coffee farmers together with us.”

Sacombank and Rabo Foundation had worked together on a previous project to apply horticulture techniques in Vietnam. So they came up with a way for Sacombank to loan money to cooperatives, with Rabo Foundation acting as guarantor. The agreement is to reduce the guarantee step-by-step on an annual basis.

Around that same time, the Vietnamese branch of Agriterra, a cooperative specialist with Dutch roots, entered the picture. “That was in 2018”, recalls business consultant Trang Nguyen from Vietnam. “Rabo Foundation was looking for a local partner with expertise in sustainable agriculture, and we were looking for help in making smallholder farmers ‘lendable’. It was pure good luck that we found each other.”

The partners are now working on behalf of three coffee cooperatives – Ea Kiet, Minh Toan Loi and Tan Nong Nguyen – that each represent between 75 and 250 smallholder coffee farmers. Nguyen: “We train and advise the cooperatives in the areas of marketing, management and financial administration. We support them in improving the quality of their coffee and in developing new coffee strains. And together with Sacombank, we help them apply for loans.”

The results are impressive. With the financial and technical assistance, the cooperatives have been able to bring new types of roasted and ground coffee to market. Ea Kiet even set up its own coffee roaster. The cooperative has increased its sales figures and is now operating in the black. Minh Toan Loi built a roaster and a processing facility, and its profits for 2020 were 10% higher than in 2018. Tan Nong Nguyen has even become financially independent.

“Agriterra has also identified how the farmers are affected by climate change”, says Koppejan. “That usually entails longer periods of drought, higher solar intensity and more variable weather. With help from specialists, the consultants are looking for ways to help the farmers adapt, for example by using different growing techniques and planting trees to provide more shade.”

The three organizations are understandably confident about the future now, and Koppejan is beginning to cautiously think about expanding the partnership. “We’re currently reaching around 550 farmers, but we eventually hope to expand that to 5,000, or even 10,000. And we’re thinking of other agricultural sectors, like fruit and vegetables, so we can reach even more farmers.”

Where Rabo Foundation and Sacombank once made separate financial agreements for each cooperative, they’re now considering whether they can agree to single loans for a larger amount. Mark: “That would allow us to finance several cooperatives at the same time. It wouldn’t just save us time and administrative work; it will also help promising cooperatives to take the necessary steps forward even faster. And that’s what we’re all about.”