The
Heller School for Social Policy and Management
Brandeis University
The Impact of Small and Medium-Sized Enterprise Lending on Economic Security and Migration: A Case Study of Coffee Producer Cooperatives in Guatemala and Chiapas
Submitted by
Emily Aruna Teitsworth
A paper submitted in partial fulfillment of the requirements for the
Master of Arts Degree
In
Sustainable International Development
Table of Contents
Introduction and Learning Objectives.................................................................................1
The Development Problem..................................................................................................3
The Development Question.................................................................................................5
Methods................................................................................................................................6
Literature Review.................................................................................................................9
Evidence and Analysis.........................................................................................................4
Policy Implications............................................................................................................27
Appendices.........................................................................................................................30
Executive Summary
To date, little research has focused on the socio-economic impacts of Small and Medium-Sized Enterprise (SME) lending in developing countries. This paper examines the impacts of Root Capital’s SME lending operations on coffee cooperative clients and their beneficiaries in Guatemala and Chiapas. Root Capital is a non-profit organization that provides financial services to businesses in the developing world that operate in environmentally sensitive areas. This impact assessment focuses on financial impacts at the cooperative level and on economic security and migration at the household level. Using semi-structured interviews with cooperative managers and members as the primary means of data collection, the study addresses both quantitative and qualitative impacts. Almost all cooperative clients were able to improve their financial security by increasing their loans over time and reducing the percentage of members’ coffee sold outside the cooperative. At the household level, impacts observed included improved ability to invest in land and home, increased disposable income, and reduced migration. These results demonstrate the effectiveness of SME lending as a socio-economic development tool. SME lending programs should therefore be considered as an alternative to more traditional microfinance projects, particularly in migrant sending communities and other rural areas.
Learning Objectives
For the second year practicum, my objective was to better understand the development issues confronting rural agricultural communities in Mexico and Central America, and to assess the effectiveness of the financial development interventions taking place in those communities. Because much of my work prior to beginning the internship had centered on migration to the United States, I also hoped to gain experience working on economic development in agricultural communities that send migrant workers to the US.
This paper was
written during a six-month practicum with Root Capital, an
organization whose mission is “to provide affordable financial
services to small and medium-sized businesses operating in
environmentally sensitive areas of the developing world, whose
activities foster environmental conservation and grassroots economic
development.” Root Capital provides loans to socially and
environmentally responsible businesses, and also operates a program
of financial education to improve business skills in many of these
same organizations. In Guatemala and southern Mexico, Root Capital’s
work focuses on organic and Fair Trade coffee-growing cooperatives,
but its local client roster includes businesses as diverse as
beekeepers and handicraft producers. My internship was based in Root
Capital’s Quetzaltenango, Guatemala office between September
1st, 2007 and March 7th, 2008. Between
November 26th and December 12th, 2007 I worked
out of Root Capital’s Chiapas, Mexico office.
My responsibilities for the internship included outcome assessment, support of Porvenir Financiero (PorFin), the organization’s financial education program, and assisting in the production of investment memos. The majority of my time with Root Capital focused on outcome assessment for their small and medium-sized enterprise (SME) lending operations, including designing indicators and interview questions to measure economic and social impacts of the organization’s services, visits to client agricultural cooperatives, and production of reports and marketing materials. PorFin is based in San Cristobal de las Casas, Chiapas, Mexico, and my time in Mexico allowed me to more effectively support their work and the work of Root Capital. Lastly, I assisted in the research and writing of investment memos for prospective clients of the organization. Working on the narrative and background sections of the memos entailed research into the history of each organization, while assisting in the production of financial profiles of individual businesses allowed me to improve my skills in financial analysis.
Agricultural communities in Guatemala and Chiapas face a multitude of significant development problems. Historically, insecure land tenure and persecution of indigenous groups has kept rural areas mired in severe poverty. These areas suffer from a critical lack of social services and basic infrastructure at all levels. As an organization, Root Capital seeks to address the absence of affordable financial services as a mechanism for alleviating aspects of rural poverty. My hope for this internship was that work in these communities would help me to assess the development interventions taking place and learn new context-relevant skills, with the goal of working to more effectively improve the lives of rural farmers in the developing world.
During my practicum with Root Capital, I sought to gain skills in interview design and implementation, community development, and financial analysis. I also wanted to improve my Spanish language abilities and to develop skills in the K’iche’ language, which is the primary language of a large number of Root Capital clients in Guatemala. The majority of my internship-related activities were directly relevant to improving these specific skills. A large portion of my early work with Root Capital focused on developing indicators and interviews with the assistance of senior staff. I was then able to visit multiple client communities and administer the interviews. This unique opportunity helped me develop my understanding of how to construct relevant indicators and effective assessment questions.
I often worked in the communities for up to a week at a time. This provided me with important insights into the challenges facing community development initiatives in agricultural communities. The fact of working in a financial services organization, combined with my work on investment memos, vastly improved my understanding of the calculations that drive financial services provision. During the course of the internship, I spoke only Spanish with other staff and Root Capital clients, and periodically met with a Spanish tutor who assisted me with specific questions. In addition, I studied Ki’che’ with a private instructor for four hours per week for three months, which allowed me to develop a base level of competence in the language. This facilitated my work in communities where few people spoke Spanish, serving as a way to increase our ability to communicate and improve mutual trust.
As an intern with Root Capital, I had the opportunity to assess the impacts of SME loans to coffee producer cooperatives, using documentation review and interview data. I first developed economic, social, and environmental indicators, and then integrated indicator-related questions into the organization’s existing monitoring questionnaires. Next I conducted interviews at eight cooperatives with both employees and members. Analyzing the results and refining questions taught me the importance of simplicity, and impressed on me the difficulty of determining causality in complex real-world situations. This process of developing and conducting interviews was one of the central ways in which my internship with Root Capital enabled me to meet my learning objectives.
My field research yielded data for the Master’s Paper that focused on outcomes relating to migration and social development in communities that have received loans from Root Capital. Data was collected using surveys, semi-structured interviews with individuals, and documentation review. Data focused on social quality of life indicators (e.g. number of children in school, household nutrition) and household migration history, comparing present circumstances to pre-loan conditions. The data gathered during this practicum and the resulting impact assessment will allow my sponsoring organization to assess whether their lending programs are having their intended development effects, and to improve their client services.
The Development Problem
Rural agricultural communities in Guatemala and southern Mexico face serious obstacles to achieving sustainable development. Major issues confronting these communities include insecure land tenure, deforestation and soil degradation, limited access to social services such as education and medical care, poor civil and financial infrastructure, and human rights violations. As of 2000, almost three-quarters of rural Guatemalans were living below the poverty line, compared to only 27% of the urban population (Vakis, 2003, p. 39). In Mexico, although the majority of the population resides in urban areas, rural communities are home to 65% of the country’s extremely poor, and about a third of its moderately poor citizens (World Bank, 2005, pp. 50-1).
During the Guatemalan Civil War, which lasted from roughly 1960-1996, guerilla groups fought for access to land and the right to self-determination by indigenous people. By the end of the conflict, at least 200,000 Guatemalans had been tortured, disappeared, or killed by the army (Commission for Historical Clarification, 1999, p. 1). Although the 1996 Peace Accords produced some important concessions, including demilitarization and anti-discrimination agreements, many benchmarks set by the Accords have not been met, and the situation in rural communities remains dire. In 2002, the literacy rate for all Guatemalans was only 69%; this rate is much lower in rural areas. That same year, the malnutrition rate in children under the age of five was reported to be 49%, significantly worse than in Chad, India, or Cambodia (World Bank, 2007).
The history of the Mexican state of Chiapas is in many ways entwined with that of Guatemala. In fact, Chiapas and the Guatemalan highlands were once part of the Sixth State of the Federal Republic of Central America. Although Chiapas has not suffered the same level of violence as Guatemala, it has experienced armed conflict, and is similar to Guatemala in terms of poverty, population, and agricultural demographics. For example, the Mexican government found that in 2003, over 70% of indigenous Chiapans were suffering from some form of malnutrition (Servicio Internacional Para La Paz, 2007). Additionally, while the Mexican national illiteracy rate is 12.6%, in Chiapas it is 23% in aggregate, and 42% in indigenous communities within the state (Servicio Internacional Para La Paz, 2007).
Coffee-growing communities in Guatemala and Chiapas also suffer from the instability of the price of coffee on the world market, and this compounds the other challenges that they face. Coffee has historically been one of Guatemala’s most important sources of export revenue, and the country is still the world’s fourth largest coffee exporter, exporting 620 million pounds in 1999 (International Coffee Organization, 2007). In 1998, coffee accounted for over $586 million of Guatemala’s export revenue, about double the amount of sugar, the country’s next most important agricultural export. While historically, Mexico has not depended as heavily as Guatemala on coffee exports, the state produces 46% of Mexico’s coffee (Howard and Homer-Dixon, 1996).
Globalization has rendered the world coffee price increasingly volatile over the last 20 years, and has dramatically reshaped the world market. Between 1998 and 2002, coffee exports in Guatemala fell by 25%, and in Mexico by over 39% (International Coffee Organization, 2007). In January 1998, the average price on the international coffee market was $1.30/lb. By 2001, that figure had fallen to $0.49/lb. Although by 2006, the price paid to growers had recovered somewhat, to $0.91/lb in Guatemala, and $0.83/lb in Mexico, both the crash of the coffee price and the changing international trade landscape have had long-term impacts on both country’s agricultural communities (International Coffee Organization, 2007).
The world system of coffee pricing began to unravel with the failure of the International Coffee Agreement in 1992. However, many observers point to Vietnam’s entry into the international coffee market as the tipping point that caused the “coffee crisis.” In 1990, Vietnam was producing approximately 90,000 tons of coffee per year. Around this time, as part of the country’s World Bank supervised economic restructuring, thousands of farmers were encouraged to convert to coffee production. Just 10 years later, in 2000, the total coffee produced by Vietnam had grown to almost 1 million tons. The coffee exported by Vietnam was of extremely poor quality and very cheap, and when it flooded the market it caused a worldwide crash in the price of coffee whose effects are still being felt in the present day (Osorio, 2002, p. 2).
Poverty in rural areas of Mexico and Guatemala worsened as a result of the coffee crisis, because the precipitous drop in coffee prices caused many cooperatives to close or reduce their size, and drove a significant number of small farmers off their land. In 2001 alone, total reduction in labor income in coffee production for Guatemala was estimated at $62 million (Varangis et al, 2003, p. 50). This loss of income had immediate consequences in both Guatemala and Mexico. For example, studies of coffee-growing communities in southern Mexico have shown that drastic drops in household income due to the crisis led to increased out-migration (Lewis, 2005, p. 29). In addition to reduced sales revenue and overall income, cooperatives and independent coffee producers faced a specific financial problem: lack of access to financing and financial services in rural areas did not allow them to borrow the money that would allow them to remain financially solvent during the worst years of the crisis. The absence of access to loans also impeded the cooperatives’ investment in social improvement initiatives that their communities desperately needed. As a result of these financial limitations in a time of crisis, many cooperatives could not meet the needs of their members and either closed or ceased to provide farmers with a viable livelihood.
One of the major consequences of the coffee price crash and subsequent crisis for rural farming communities has been an acceleration of migration to the US. In spite of the atrocities committed in rural areas during Guatemala’s armed conflict, the number of immigrants to the US from Guatemala more than tripled between the signing of the Peace Accords, in 1996, and 2006. Currently, between 6-12,000 Guatemalans migrate to the US each year (Smith, 2006, p.1). Without public services or reliable income from mainstream coffee production, people in rural communities lack the ability to save and invest money and improve their quality of life. Migration to Mexico and the US represents one of the major strategies that households use to cope with the poverty, financial risk, and limited access to social services that affect their home communities. The situation is similar north of the border: migration from Mexico to the US continues to rise, and currently over 30,000 Chiapans immigrate to the US every year. At least 65% of these migrants come from rural indigenous communities (Servicio Internacional Para La Paz, 2007).
The Development Question
The purpose of the paper, “The Impact of Small and Medium-Sized Enterprise Lending on Economic Security and Migration: A Case Study of Coffee Producer Cooperatives in Guatemala and Chiapas,” is to assess the experiences of members of coffee cooperatives that are financial services clients of Root Capital. Its goal is to determine whether these services have produced socio-economic impacts at the cooperative and household level. The inquiry focuses on a few key economic security indicators and on migration-related impacts, based on quantitative and qualitative data collected during semi-structured interviews and documentation review. Migration is a major strategy used by rural communities to mitigate financial risk. It is also a measure of the health of communities: the ability to make a living and enjoy access to basic social services often obviates the need to migrate (e.g. Lindstrom and Lauster, 2001, pp. 1248-9). Programs that impact migration decisions and quality of life can have a range of practical applications for both development practitioners and communities confronting development challenges.
This paper was written for the staff of Root Capital as an internal impact assessment document. It is meant to serve as a practical tool for gauging the socio-economic impacts of financial services provided to cooperative organizations of coffee producers, with the aim of facilitating improvements in Root Capital’s service provision. Elements of the data collected and potential sections of the resulting document will also be employed by the organization for external publicity and marketing purposes, such as providing donors with first-person accounts of the impacts of their donations.
Although this paper was written as an internal document for the use of Root Capital, it is my hope that examining the impacts of SME lending in rural agricultural communities will have practical applications for the larger development community as well. Numerous academic and development industry papers have examined the role of microfinance in rural Latin American development. However, SME lending, aimed at businesses rather than individuals or small groups, has largely been ignored by academic and industry analyses. Furthermore, few studies have addressed potential linkages between alternative financial services and migration. An examination of the potential impacts of SME lending on migration and quality of life could therefore be useful to both existing financial services providers, and to communities and organizations considering the use of alternative business lending. The conclusions of the paper could assist these groups in deciding if SME lending would be an appropriate tool to incorporate into their business model or local service network. The paper may also be useful to researchers and development practitioners working on migration-related issues. SME lending addresses several root causes of economic migration, and assessing its efficacy in improving household economic security and social welfare could provide important practical tools for development initiatives in migration source communities.
Methods
In order to assess the impacts of SME lending on coffee cooperatives and their home communities, three principal methods were used: review of relevant academic and development industry literature, documentation review of materials from Root Capital and participating cooperatives, and interviews with employees and members of the cooperatives. Research for the present study employed a mixture of qualitative and quantitative methods. Qualitative methods were given primacy because of the nature of the information available and Root Capital’s need for narrative results, and because practical constraints on the scope of the study precluded the use of large-scale quantitative methods. These qualitative methods allowed individual respondents’ interpretations of events and personal experiences to occupy a place of primary importance. Quantitative data was also gathered during documentation review and the interviews as a supplement to the qualitative data collected. This quantitative data facilitated the identification of trends and comparison between cooperatives and geographical regions.
Literature Review
The initial step in undertaking this study was to conduct a literature review. This survey of relevant academic and development industry sources focused on three content areas: socio-economic development issues in Guatemala, the economic causes of migration in source communities, and on microfinance and socio-economic impacts. To ensure relevance and accuracy, I limited the sources consulted to articles published since 1990, either in peer-reviewed journals or by major international development organizations or research universities. This review of published studies and articles provided the basis for selecting and developing the other methods used. Conducting a literature review helped focus my inquiry and improved my understanding of the context in which Root Capital operates. Unfortunately, almost no relevant scholarly articles have been published about SME lending in developing countries, and so the literature review focuses mainly on the impacts of traditional microfinance programs. The literature review follows the next section.
Documentation Review
The second
principal method employed during this study was review of
documentation from Root Capital and the participating cooperatives.
Documentation review provided context for interviews and helped
establish both qualitative and quantitative historical trends. The
sources consulted included internal Root Capital investment memos,
quantitative and qualitative data from Root Capital, cooperatives,
and other sources, and surveys conducted by the cooperatives
themselves. Qualitative data reviewed included narrative histories
of each organization, specialty coffee certification information, and
prior individual interviews. Quantitative data consulted included
figures on sales, export volumes, and loan history, and statistics
about education, migration, financial services, and the coffee
industry.
Interviews
This study employed semi-structured interviews with cooperative employees and members as its principal investigative tool. Semi-structured interviews were chosen as the main research method for several reasons. Firstly, this type of interview combines the adaptability of unstructured conversation with the specificity of highly structured interviewing (Bernard, 2000, p. 191). Maintaining a degree of flexibility and attempting to establish a conversational rapport was particularly important to the present context. As a relatively affluent, white North American I was clearly an outsider in the poor, mostly indigenous Guatemalan and Chiapan communities where I conducted interviews. In establishing a level of trust with respondents, I attempted to mitigate confounds such as the ‘deference effect,’ “when people tell you what they think you want to know, not to offend you” (Bernard, 2000, p. 213). Because in many people’s minds, I was associated with the cooperative management, they were sometimes reluctant to explicitly criticize the cooperative or to express negative opinions.
While I sought to establish a level of comfort and informality with interview subjects, I was also interested in obtaining certain specific information. Therefore, I had a list of structured questions that I asked during each interview. These questions focused on socio-economic wellbeing and narrative personal history. Queries ranged from “how many times a week do you eat meat?” to “have you ever had to travel outside the community to work?” Each interview ended with the open-ended question: “is there anything else you would like to share?” This allowed respondents to select information they found important and enabled them to actively participate in shaping the results of the interview.
Data was gathered from eight coffee producer cooperatives, five in Guatemala and three in Chiapas. The Guatemalan cooperatives included ADIPSA, APECAFORM, the Asociación Chajulense, ASUVIM, and Maya Ixil. In Chiapas, the cooperatives were Finca Triunfo Verde, Selva Negra Zoque, and UDEPOM. At each cooperative, the cooperative president or manager was interviewed, along with a sample of cooperative members. These member groups ranged from 3-10 individuals, totaling 23 in Guatemala and 23 in Chiapas. A brief description of each group is available in Appendix 1.
Timeline of Activities
September 3-21, 2007: Selection of Methods; Indicator and Interview Design; Review of Root Capital documentation
September 26-28: Visit to ASUVIM, Santa Clara La Laguna, Guatemala
October 8-9: Visit to the Asociación Chajulense, Chajul, Guatemala
October 10-11: Visit to Maya Ixil, Santa Avelina, Guatemala
October 14-18: Visit to APECAFORM, Pueblo Nuevo, San Marcos, Guatemala
November 5-7: Visit to ADIPSA, San Agustín Acasaguastlán, Guatemala
November 15: Submission of first draft of Methods to Advisor
December 6-7: Visit to Selva Negra Zoque, Tuxtla Gutierrez, Chiapas, Mexico
December 9-10: Visit to Finca Triunfo Verde, Jaltenango, Chiapas, Mexico
December 11-12: Visit to UDEPOM, Motozintla, Chiapas, Mexico
January 8-February 20, 2008: Analysis of data collected during cooperative visits
January 28: Submission of first draft of Evidence to Advisor
March 10: Submission of first draft of Master’s Paper to Advisor
Limitations
There are several limitations to the methodological approach detailed above that deserve to be mentioned, as well as significant constraints on the information available for analysis. Qualitative methods in themselves present certain innate limitations, including their vulnerability to the subjective bias of both researcher and subject. However, the single most significant limitation on this investigation was the lack of a control group. Various organizational and financial factors precluded the use of large-scale survey techniques, and the resulting small, non-random sample restricts the general validity of the research findings. In order to address some of these limitations during interviews and documentation review, I made every effort to establish baselines, and explicitly asked for comparisons of present and past conditions.
Multiple studies have identified causal attribution as a significant confound in evaluation of microfinance programs (e.g. Little, 1997; Hulme, 2000). Because Root Capital works principally with coffee cooperatives that possess organic, Fair Trade, and other specialty certifications, isolating causal factors is particularly challenging. The various socio-economic development activities of multiple organizations working with the coffee cooperatives, as well as the cooperatives themselves, are all responsible in different ways for the presence or absence of social change in each community. This confound was minimized in the present study as much as possible by establishing baselines and obtaining data values over time. However, given the assessment needs of Root Capital and the fact that in many respects financial services occupy a supporting role for the coffee cooperatives, many impacts of Root Capital’s services may be secondary in nature.
The context in which the research for this paper was undertaken also limits the accuracy and generalizability of the results. In this case, language turned out to be one of the most problematic limiting factors, especially in Guatemala. More than 20 languages are spoken in Guatemala, and this diversity represented a challenge during the collection of interview data. Often, interview subjects had little knowledge of Spanish, necessitating the use of translators. However, because of the relatively small numbers of speakers of each indigenous language, and because of general human capital limitations in Guatemala, hiring professional translators was not a feasible option. Therefore, bilingual community members or cooperative employees acted as translators. Their own language abilities and subjective biases may have influenced the results of interviews in ways that are difficult to determine.
In certain respects, these limitations restrict the paper’s ability to provide conclusive evidence regarding both impacts and causality, and readers will have to judge for themselves whether they find the evidence and analysis presented convincing.
Literature Review
In the following subsections I will summarize current scholarship on development issues and coffee in Guatemala and Chiapas, the economic causes of migration in sending communities, and on the socio-economic impacts of microfinance. Although the focus of this study is SME lending rather than individual microfinance loans, the literature reviewed here assesses more traditional microfinance programs. This reflects the dearth of research on SME lending, especially in relation to social impacts. While the socio-economic effects of microfinance and SME lending may be comparable in many respects, SME lending may tend to generate greater impact at the larger community level than strict microfinance, and may have less impact on individuals.
a) Socio-economic development issues and coffee in Mexico and Central America
A World Bank paper addressing poverty in Guatemala outlined the nexus of insecure land tenure, inequality, and lack of access to services that has produced the staggering levels of poverty present in rural areas in Guatemala. It noted that in rural areas, where 75% of the general population was classified as poor, 87% of small landowners were poor (Vakis, 2003, p. 25). Additionally, the author asserted that access to credit in rural areas was key to improving agriculture and reducing poverty in Guatemala. As of 2000, however, up to 40% of rural households wanted credit but did not apply, due to lack of collateral, expensive loan terms, and the belief that the person applying would not qualify (Vakis, 2003, p. 28). In Mexico, lack of credit has been linked to low productivity in the agricultural sector and increased labor force participation in the form of migration (World Bank, 2005, pp. 6-8). These articles demonstrate the critical need for small farmers to access credit and other services that can help lift them out of poverty. The present study of Root Capital’s lending operations will build on this research to assess whether, in practice, access to institutional credit does have a positive effect on farmers’ quality of life.
A recent study provides macroeconomic context to poverty in Central America by assessing the effects of the Dominican Republic–Central America Free Trade Agreement (DR-CAFTA) on smallholder agriculture in Guatemala. The authors found that this multinational treaty had served to worsen the situation of Guatemalan small farmers (Fradejas and Gauster, 2006, p. 49). In fact, while the treaty improved market access and trade conditions for large commercial operations, it did not provide support to small producers, who still faced barriers such as lack of access to financial resources or economic inability to meet new regulations imposed by the treaty (Fradejas and Gauster, 2006, p. 37). Importantly, the authors also traced increases in migration to the initiation of economic reforms such as liberalization of food imports and the institution of price increases for basic goods (Fradejas and Gauster, 2006, p. 29). The North American Free Trade Agreement (NAFTA) has had similar negative consequences for rural communities in Mexico. As part of a debate in the journal Foreign Policy, Cavanagh and Anderson noted that the cheap corn and other US exports that flooded Mexico after the signing of NAFTA were disastrous for Mexican farmers, and increased rural poverty by three percentage points in just four years (Cavanagh, Anderson, Serra, and Espinosa, 2002, p. 58).
A World Bank working paper on the coffee crisis in Central America details the consequences of the coffee crisis for the Guatemalan economy and the coffee industry. The authors reported that between the 1999/2000 and 2000/2001 harvests, Guatemala’s coffee export revenue was reduced by 38% (Varangis, Siegel, Giovannucci and Lewin, 2003, p. 7). This had a profound effect on the 31% of rural residents employed in the coffee industry, resulting in lost wages of $62 million (Varangis, Siegel, Giovannucci and Lewin, 2003, pp. 8-9). The paper also discussed the need for improved risk management and access to credit for farmers, although in the context of individual, rather than institutional loans (Varangis, Siegel, Giovannucci and Lewin, 2003, pp. 32-3).
Various studies have elaborated the consequences of the coffee crisis at the human level as well. An investigation of Mexican, Guatemalan, and Honduran farmers’ responses to the crisis found that beyond its direct impacts on income, the coffee crisis negatively affected quality of life in multiple ways. For example, 96.4% of respondents reported reduced ability to purchase basic goods, and 78.6% reported that they were no longer able to afford school fees for their children (Eakin, Tucker, and Castellanos, 2006, p. 164). Interestingly, according to the study, “very few households in Guatemala reported altering their land use or adopting alternative crops,” in contrast to Mexican and Honduran farmers (Eakin, Tucker, and Castellanos, 2006, p. 165). This may reflect more limited access to development aid and social services in Guatemala. The present study will further investigate income diversification in both Guatemala and Chiapas.
In the last 10 years, studies have begun to look at niche coffee markets, such as that for Fair Trade and organic coffee. One study examining specialty coffee found that Fair Trade certified coffee cooperatives derived benefits from certification that ranged from improved economic security at the community level to higher and more stable incomes and increased investment in education at the individual level (Raynolds, Murray, and Taylor, 2004, pp. 1117-18). Certification is not always a recipe for success, however. Another study looking at the impacts of Fair Trade and organic coffee production also employed a case-study approach to assessing the impacts of certified coffee on producer livelihoods. The study found that in the case of a particular community in Oaxaca, Mexico, producing even certified coffee was not enough to cover production costs or limit economic migration to the US (Lewis, 2005, p. 67). It is important to recognize the contributions that Fair Trade and other specialty coffee programs have made to development in coffee producing communities, as well as their limitations. These studies are particularly relevant because all of the cooperatives participating in the present study of Root Capital grow and sell at least some of their coffee under specialty certification. Comparing the results of the present study to others dealing with specialty coffee will help establish baselines and facilitate identification of SME lending-dependent impacts, especially in terms of migration.
b) The economic causes of migration in sending communities
There are multiple “push factors” that encourage migration out of countries like Guatemala and Mexico to richer countries such as the US. These include social influences such as lack of access to healthcare and education and financial factors such as underdeveloped financial markets. In both Guatemala and Mexico, economic factors like underdeveloped markets, lack of banking services, and low wages are major influences on migration decisions. In turn, migration has been found to have a variety of transformative consequences for sending communities, particularly in the context of economic markets.
The lack of viable markets in many rural Guatemalan and Chiapan communities is a major cause of migration, and one that is in fact often worsened by migration itself. Studies have shown that a major engine driving migration is financial risk; that is, a lack of access to stable financial markets, savings, and loans. As a recent survey of contemporary theories of migration noted, households “control risks to their economic well-being by diversifying the allocation of household resources, such as family labor” (Massey et al, 1993, p. 436). The present study will build on this research by assessing if lowering financial risk at the institutional and household level has any effect on individual migration decisions.
A case study of a region of Costa Rica during the beginning of the coffee crisis identified migration as one of the major strategies that residents used to improve their household income after the crash of the price of coffee (Sick, 1997, p. 269). The author noted that “with few resources to cushion them in times of crisis, most [coffee producers] live on the margin of disaster and must carefully consider their responses to changing economic conditions” (Sick, 1997, p. 259). Migration became a central way that residents protected themselves from economic uncertainty: in 1963, the migration rate to the area was 26.8, but by the 1980s, net migration was negative, and 13% of households in one community surveyed had sent at least one member to work in the US (Sick, 1997, p. 269).
A survey of over 6,000 households in Mexico found that the absence of credit encouraged migration as a way to access investment capital. The authors also observed that residents of communities with wage opportunities one standard deviation above the mean were half as likely to migrate to the US as those residing in areas where wage opportunities were one standard deviation below the mean (Lindstrom and Lauster, 2001, p. 1248). Both the desire to invest and the lack of wage earning jobs strongly encouraged migration. As the authors noted, “favorable employment opportunities in origin communities are associated with significantly lower risks of out-migration to both internal and US destinations” (Lindstrom and Lauster 2001, p. 1249).
A study focusing on microfinance found that in the microenterprise sector, a one standard deviation increase in the migration rate was associated with a 35-40% increase in the level of capital invested in business, although not with increased sales (Woodruff and Zenteno, 2007, p. 510). The authors asserted that the sales results called into question whether cash generated by migration was alleviating capital constraints in home communities. While remittance money from migration provides quick injections of cash into sending communities, this money may not in itself transform deficient economic markets. The present study of Root Capital will investigate whether building institutional capital also influences local economic markets, and what its related impacts may be on migration.
c) The socio-economic impacts of microfinance
Microfinance programs directly address some of the root causes of migration by improving access to savings and credit for business ventures and reducing local financial risks. These enhanced financial opportunities can influence a variety of social and economic factors in migrant sending communities.
A synthesis report on three studies on the impact of independent microfinance institutions (MFIs) operating in India, Peru, and Zimbabwe found strong positive effects on household income and income diversification as a result of participation in microfinance programs (Snodgrass and Sebstad, 2002, p. 37). Access to microfinance also reduced financial risk by “helping to ensure a steady flow of income, diversifying sources of income, and building varied assets” (Snodgrass and Sebstad, 2002, p. 64). Results were less positive for investments in household infrastructure and expenditure on food (2002, p. 38). At the enterprise level, there were solid improvements in revenue and employment, but interestingly, no conclusive impacts on assets (Snodgrass and Sebstad, 2002, p. 44). This study is particularly relevant to the present assessment of Root Capital in that it can serve as point of reference for the household and enterprise level impacts of MFIs in comparison to those of SME lending.
Studies of microfinance specific to Central America have demonstrated clear social and economic impacts. For example, a study of microcredit programs in Nicaragua found that access to financial services directly impacted a variety of economic and social indicators. Eighty-six percent of loan recipients reported that credit services increased their income, and sixty-three were able to hire additional part- or full-time labor because they had taken loans (Ferguson, 2001, Section III. D). At the household level, access to credit engendered a variety of positive changes, from increasing personal assets to helping borrowers pay for their children to attend school (Ferguson, 2001, Section III. E). Similarly, a study of microfinance and child schooling in Guatemala found that “increased access to credit reduces the likelihood that a child will be withdrawn from school to work in the household enterprise” by approximately 30% (Wydick, 1999, p. 862).
Access to institutional finance in the agricultural sector has been shown to measurably improve individual quality of life. An analysis of agricultural credit programs in Central Europe and East Africa asserted that in expanding economies, “agricultural sectors must be able to invest in necessary changes of production structures and capacity in order to reap the gains from increased market access…The increased capacity and profitability in the agricultural sector derived from improved financial institutions can provide direct benefits to rural areas by improving low-income farmers’ welfare” (Chloupkova and Bjønskov, 2002, pp. 15-16). The present study will assess whether larger-scale SME lending has similar effects on farmer welfare.
Research has shown a large unmet need for SME lending in rural areas, particularly in term finance to support infrastructure and capital development. As the World Bank’s Agriculture and Rural Development Department noted in their 2003 report, “[t]he lack of term finance is a particular problem for private investment in rural infrastructure and in other enterprises that can provide diversified, growing incomes and employment in rural areas” (p. 25). This study of Root Capital’s SME lending programs will investigate whether the organization is effectively meeting the need for rural institutional financing and impacting income at the organizational and individual level.
Conclusions
A variety of studies over the past 20 years have explored the relationship of rural poverty to coffee production in Guatemala and Chiapas, the economic deficiencies that lead to migration, and the community and household level impacts of microfinance. Poverty in Guatemala and Chiapas is an overwhelmingly rural phenomenon, and the coffee crisis, coupled with neo-liberal government reforms, has worsened the economic situation of many rural communities. The deteriorating economic situation facing many small farmers has increased migration as a household coping strategy.
Lack of access to financial and social services in rural communities in Guatemala and Mexico has accelerated out-migration over the last 10 years. However, studies have shown that the presence of wage and enterprise opportunities in sending communities can dramatically decrease emigration. Other investigations have demonstrated the impacts of microfinance in such communities, from higher incomes to improved school attendance rates. Although current scholarship elucidates both the complex causes of migration and the relationship of microfinance to some of the causes of migration, there are still gaps in the literature. Further research is needed to assess whether the availability of credit services directly influences migration decisions. Investigating the socio-economic effects of SME loans to businesses such as coffee producer cooperatives will expand the body of research on SME lending and development. The current case study of Root Capital aims to expand the body of literature assessing the efficacy of SME lending as a tool for change while addressing some of the issues currently debated in the field of migration studies; for example, the extent to which economic development initiatives in source communities influence migration decisions at the household level.
Evidence and Analysis
The purpose of this paper is to assess the experiences of coffee cooperatives that are financial service clients of Root Capital. The paper’s goal is to determine whether these services have produced socio-economic impacts at both the cooperative and household level.
This section reviews and analyzes data collected from review of documentation provided by the cooperatives and by Root Capital, and during one-on-one interviews with cooperative management and individual members. The sample of members interviewed ranged from 3-10 individuals, totaling 23 in Guatemala and 23 in Chiapas. Data was gathered from a total of eight coffee producer cooperatives, five in Guatemala and three in Chiapas. The Guatemalan cooperatives included ADIPSA, APECAFORM, the Asociación Chajulense, ASUVIM, and Maya Ixil. In Chiapas, the cooperatives were Finca Triunfo Verde, Selva Negra Zoque, and UDEPOM. Review of evidence and data analysis is divided here into separate sections for cooperatives and their members.
Cooperative Level
Data
At the cooperative level, quantitative data collected included the number of loans taken by the cooperative and successive loan size, the use of each loan, the percentage of the cooperative budget used for social projects, and the percentage of coffee sold to middlemen by members. Data on cooperative revenue was not included in this study because it is so strongly influenced by price fluctuations on the international coffee market and other exogenous factors such as the weather. Responses to quantitative inquiries can be found in Appendix 2, Table 4. Narrative, qualitative data on impacts was collected during interviews with cooperative employees. This data allowed analysis of each group’s relationship with Root Capital, their organizational growth, and effects on members’ income and confidence in the cooperative.
The number of loans received by the cooperatives ranged from one to six, and loan size from $20,000 to $750,000. In just two years, the Asociación Chajulense increased their loan capital by 60%, while Maya Ixil increased their loans by 200% over four years. Over a period of three loans, Finca Triunfo Verde increased their loans by 111%, up to $200,000 in 2008. The only group whose loan size did not increase was ADIPSA, whose loans actually reduced in size from $30,000 to $20,000 over three years. According to their manager, this was due to a low level of need among their producers, and to the fact that only 20 of their 414 members grew coffee. The average increase between first and most recent loan (including ADIPSA) was 212% overall, an average of 234% for cooperatives in Guatemala, and 156% for the two groups in Chiapas that had received more than one loan. The multiple loans taken by almost all borrowers, as well as steady increases in loan size, are indicators not only of improving institutional capacity, but also the ability of Root Capital to form successful long-term relationships with its clients.
One of the most significant challenges facing coffee producer cooperatives is competition from middlemen, independent buyers who purchase coffee directly from farmers. These middlemen generally pay much lower prices than the cooperatives, and do not offer “value-added” benefits, such as workshops and social projects, that the cooperatives provide. However, because they pay upfront and transport the coffee themselves, middlemen can represent an attractive option for farmers who need an immediate infusion of cash to cover basic necessities. Because of critical shortages of working capital, many cooperatives cannot pay their members for their coffee on delivery, and producers often must wait months for full payment. It is during this time period that many farmers sell some of their coffee to middlemen in order to survive. However, the lower prices they receive have negative economic consequences at the household level, and the loss of their coffee can put the cooperative’s sales contracts in jeopardy.
All cooperatives surveyed used their loans almost exclusively for pre-shipment trade credit for producers. This allowed them to pay at least part of the total owed to producers on delivery, or to extend personal credit to producers that allowed them to wait for payment from the cooperative. Seven of eight cooperatives surveyed reported a significant reduction in the amount of coffee sold outside of the cooperative to middlemen between the year of their first loan and the current year. For example, in the space of two harvest seasons, the Asociación Chajulense reported a decrease from 30-40% of coffee being sold to middlemen to nearly zero. The exception to this trend was ASUVIM. The year before ASUVIM became a Root Capital client, the cooperative’s members sold about 25% of their coffee to middlemen. By 2007, that number had risen to 65%. However, according to Carlos Reynoso, the head of Manos Campesinas, ASUVIM’s exporting organization, this was due to very particular market conditions in the Lake Atitlán region of Guatemala. Middlemen in that area had been purchasing coffee at artificially high prices, subsidized by unknown sources. Manos Campesinas had thus far been unsuccessful at competing with them or identifying the source of their additional capital (personal communication, February 15, 2008). Excluding ASUVIM as a local aberration, the average percentage of coffee sold outside of the other cooperatives overall was 35% in the year before the first loan and 15% in 2007. The average percentage of coffee sold to middlemen in Guatemala in the year before the first loan was 29%, and in 2007 this had been reduced to 1.5%. In Chiapas, these averages were 45% and 32%, respectively.
Data was also gathered on the social projects undertaken by cooperatives. The majority of cooperatives surveyed reported reserving a percentage of sales for social investment. However, many only spent the amount mandated by Fair Trade certifying agencies, and often awarded this as a “premium” to their members rather than investing it in community development projects. Even if the cooperatives sold 100% Fair Trade coffee and invested all of their premiums in social projects, it is unlikely that the total would have amounted to more than $15,000 annually, especially factoring in the high cost of certification. The few cooperatives that had a designated social fund beyond these premiums were unable to invest much. The cooperative with the highest allocations in Guatemala, Maya Ixil, spent between 7-8% of sales per year on social programs, most recently on a women’s sewing project and a school computer lab. Selva Negra had increased its social spending 100% in the last two years, and as of 2008 set aside 10% of sales revenue in a social fund. However, this amounts to not much more than the equivalent of Fair Trade premiums had the cooperative been certified. The only cooperative that had no designated social fund was the Asociación Chajulense. In fact, prior to receiving its first loan, this group had de-capitalized almost three-quarters of its assets, due to over-spending on a variety of social initiatives, from women’s projects to eco-tourism. This set of data indicates that these cooperatives had not been able to maintain sufficient profitability or a steady enough supply of working capital to make large-scale social investment feasible.
Qualitative data at the cooperative level focused on the organization’s experiences with Root Capital and their opinions about the credit they had received. In general, cooperative managers felt that Root Capital had impacted their organizations and members in positive ways. According to Miguel To Tzah, marketing manager at the Asociación Chajulense, the loans from Root Capital had been “...a success for the cooperative because before, the producers had to wait up to four months for payment, and this year, the delay was only 20 days” (personal communication, October 9, 2007). Moises Garcia Lopez, a member of ASUVIM’s oversight committee, noted that because Root Capital’s loans had freed up capital for other projects, “[w]e’re increasing the quality and quantity of our coffee. We’ve been able to invest in infrastructure, like the seedling nursery [and] in organic composting...Our cupping laboratory just arrived. And the association now helps with necessities like personal credit” (personal communication, September 26, 2007). Victor Hernandez Sanchez, the president of Selva Negra Zoque, asserted that “[f]or the members, the benefit was that they no longer had to take loans from moneylenders that charge 10-15% [monthly] interest. This benefited them a lot because of the lower interest and because they were able to store their coffee. Before, they sold to the middlemen and earned less. So for the members, we saw good results” (personal communication, December 7, 2007). Hugo Lares, the general manager of Finca Triunfo Verde, summed up the group’s experience thusly: “We’ve had a good relationship with Root Capital. This has allowed us to fulfill our contracts—we haven’t let down our clients, the capital got to us at the opportune moment, and we’ve taken care of the producers with a good price” (personal communication, December 9, 2007).
However, most groups also had suggestions for Root Capital. Andres Perez Martinez, the president of Maya Ixil, echoed the sentiments at many cooperatives when he asserted that Root Capital needed to “work to speed up disbursement of loan funds, because the delays negatively affect the cooperative” (personal communication, October 10, 2007). Although overall he stressed the group’s positive experiences with Root Capital, Lenny Ruiz Alvarado, the production manager for Finca Triunfo Verde, also reported continued financing problems for the group:
The problem for us is financing at this time. When the financing doesn’t arrive on time, the producer comes, and at times there’s no cash to pay him...and the producer wants it right way, because he is starting to harvest his coffee...But there’s no money, and the little we can give is insufficient...Many producers get angry, because they want more, because they have necessities. What happens is, they say, “if there isn’t money, I’ll just go to the ‘coyote.’”...The problem now is that Finca Triunfo Verde doesn’t have enough resources to support its producers when it comes to payment. (personal communication, December 9, 2007)
The social consequences of financial limitations were also apparent in the comments of some cooperative staff members. Multiple respondents lamented the lack of political will to resolve socio-economic problems in their communities. Moises Garcia Lopez, of ASUVIM, expressed frustration at the continued poverty and lack of services in his town, such as the inability to pay teacher salaries and the absence of improved sanitation for many cooperative members (personal communication, September 26, 2007). Although financing from Root Capital alleviated a number of capital constraints for the cooperatives, the social impact of the cooperatives in their communities appears to have been dampened by persistent financial limitations.
Household Level Data
At the household level, quantitative data collection focused on improvements to land and home, frequency of meat consumption, migratory work history, livestock ownership, and income diversification. Quantitative assessment questions were as follows:
“Have you been able to improve your land since becoming a member of the cooperative?”
“Have you been able to improve your home since becoming a member of the cooperative?”
“How many times a week do you eat meat? Is this more, less, or the same as five years ago?”
“Have you ever had to travel outside of the community to work? Do you still? Do you have children who are currently migrating to work?”
“Do you own livestock? When was it purchased?”
“Do you have any other important sources of income apart from coffee?”
Aggregate data for individual quantitative responses, and data specific to Guatemala and Chiapas, is collected in Appendix 2, Tables 1-3.
The majority of respondents reported having been able to improve both their land (89.1%) and home (67.4%) since becoming cooperative members. Improvements cited included transitioning to organic production, terracing land, and converting from wood-frame to concrete housing. Nearly 45% reported eating more meat now than five years ago. Over 40% of respondents had a history of migrating for work, either domestically or internationally, while only one cooperative member still engaged in seasonal migration. Nearly 20% of respondents reported that one of their children was currently engaged in work-related migration. About one-fifth of interviewees owned livestock, but only 9% of respondents had purchased that livestock since becoming cooperative members. Finally, 32.6% of respondents reported important income sources other than coffee.
Data demonstrated significant regional variation between Guatemala and Chiapas. For example, while 100% of respondents in Chiapas reported being able to improve their land, and 91.3% had improved their home, in Guatemala, these numbers were only 78.3% and 43.5%, respectively. In Guatemala, slightly less than half of respondents had a major source of income in addition to coffee, while less than one-fifth of Chiapans reported similar income diversification. Interestingly, 60.9% of Guatemalan respondents reported having migrated in the past, while only 21.7% of Chiapans had a history of migration. However, this trend reversed in the current generation, with only 8.7% of Guatemalans reporting children migrating, compared to 30.4% of those in Chiapas.
Although quantitative data provided important measurable benchmarks, much of the data collected at the individual level was qualitative in nature, and focused on topics such as the impact of credit availability, migration, and personal history. Open-ended questioning in interviews also allowed individuals to express their opinions about both the cooperative and Root Capital. Responses included here are divided into four subsections according to content: Credit, Migration, Education, and External Factors.
Credit
Respondents reported a variety of positive impacts of credit access through loan-enabled pre-shipment producer credit programs. Rolando and Oliva Albizures, members of ADIPSA, asserted that receiving credit helped them cover basic necessities and pay workers to harvest their coffee. As Oliva noted, “At harvest time, if you don’t have [credit], and you apply for credit outside of the cooperative, getting the money takes so long that by the time you receive it, your coffee is over-ripe. In contrast, here the credit program is more organized” (personal communication, November 6, 2007). Eduardo Martinez Robledo, of Finca Triunfo Verde, reported that, “when we borrow money from the moneylenders, they charge 10%, and here with the cooperative, the interest is minimal; the money we save adds to our income” (personal communication, December 10, 2007).
Maria Cancap Rivera, of the Asociación Chajulense, explained that avoiding external moneylenders had left her with more disposable income:
...Three years ago we had to wait, and we had to take loans from moneylenders. Because they charged so much interest, there was barely any profit left over from selling our coffee. Now the only thing that puts us behind a little bit is the transport, and that’s it...Working with coffee has helped me build a house and buy more land. [Receiving payments on time] has already improved the profitability of the harvest and the profitability of our purchases. (personal communication, October 9, 2007)
This additional income not only impacted the members themselves, but other community members as well. For example, Humberto Roblero Roblero, a member of Finca Triunfo Verde, explained that because he has credit access through the cooperative, he had been able to pay his day laborers better: “We invest the money...it’s not like before, when we paid 40-50 pesos per day. Now we pay a good wage to everyone that helps us [harvest our coffee]” (personal communication, December 10, 2007). In this way, increased economic security was transmitted from cooperative members to the larger local community.
Many respondents also noted that receiving credit helped them avoid selling to middlemen. For example, David Hernandez Chavez of Selva Negra Zoque pointed out that “with this money, I was able to store my coffee, because without it we can’t—we have to sell [to the middlemen] because we need soup, we need shoes...But when the cooperative has fronted us the money, we store the coffee and sell it directly to the organization and pay off our debt” (personal communication, December 7, 2007). Because of credit access, coffee producers were able to avoid selling their coffee at lower prices in order to cover the cost of basic necessities, and this allowed them to increase their household income.
In spite of these positive impacts, respondents reported that lack of loan funds and delays in payment from the cooperatives lead to continued financial problems for their families. A number of respondents reported that they had wanted to take loans from the cooperative, but were unable to because of insufficient funds, or because they were not given a large enough loan. Raymundo Veracruz Gonzalez, of Selva Negra Zoque remarked that “[t]he credit I received was just to help process the coffee...It helped me somewhat, but it really was very little” (personal communication, December 7, 2007). Rolando Albizures of ADIPSA explained that, “we have had some problems with the loans, because sometimes you apply for credit and there’s no money. So then we have a cash problem: we need money and there isn’t any. So then sometimes the coffee gets over-ripe, or falls off the plant, and we can’t harvest” (personal communication, November 6, 2007).
Problems with loan timing and delayed payments were often due to the fact that groups of producers within each cooperative lived at a variety of altitudes, and needed money to harvest their coffee at different times. In one community where members of Selva Negra Zoque resided, the harvest began very early, and credit didn’t reach them in time. Constantina Garcia Díaz noted that “...when we didn’t have an obligation to the cooperative, we would sell the coffee as soon as we had harvested. And now, we have to store it, and it’s a big effort for us, because the payment arrives too late, and on top of that we have to pay rent to store the coffee longer (personal communication, December 7, 2007).
Migration
The majority of both quantitative and qualitative data collected depicted a marked reduction in migration rates over time. These impacts were most marked in Guatemala. Most communities that make up APECAFORM are near the Guatemala-Chiapas border, and a large number of residents have historically traveled to Mexico and the United States to look for work. Fernando Perez Chavez reported that, “before, I had to migrate to Chiapas, but not anymore. This is because before, the cooperative only paid us 50% upfront for our coffee, but now with Root Capital, it has been 100% upfront and I haven’t had to travel to work” (personal communication, October 16, 2007). Two years earlier, Otilia Ramirez, a new member of APECAFORM, had sent her 16-year-old son to work in Florida out of desperation. After becoming a cooperative member and improving her income, she said that she was planning on bringing him home (personal communication, October 16, 2007). Many respondents had participated in domestic migration as well. Miguel To Tzah, a member of ASUVIM, reported that:
...before, we left to go work on the big coffee plantations [near the Pacific coast], but thanks to God, not anymore. When I was 10 years old, I left home to work. During my first few years as a member of the cooperative, I still traveled, but when the coffee plants started to bear fruit, I stopped going. Now, the cooperative members don’t migrate, but many of those who aren’t members have had to go the US. (personal communication, September 26, 2007)
In Mexico, the situation was similar. Eliseo Vasquez Hernandez, a Selva Negra Zoque member living in Chiapas, reported that in years past he had “traveled to Villahermosa and Cancún to work, because we had very few resources, and I had to look for work elsewhere...But now I don’t work outside the community, I grow coffee, and some corn and beans, and that’s enough” (personal communication, December 7, 2007).
For many respondents, the benefits of not having to migrate went beyond the purely economic. Santiago Hernandez Gonzalez, another member of Selva Negra Zoque, remembered the suffering of migration: “Thanks to the cooperative I don’t have to travel to work, because it’s not the same life, what I’ve had to live in other cities. You don’t live a happy life...I’ve seen the way one suffers being away...even if you are paid every week, it’s never the same as living in your own home” (personal communication, December 7, 2007). The increased economic security provided by both the cooperative and Root Capital’s financing appears to have served to reduce both domestic and international migration, and ameliorate the distress suffered by producers who had been forced to engage in migration.
Education
At the beginning of the study, quantitative questions about education were included in interviews. However, 100% of respondents reported that all of their children were studying, and very few would admit that their children helped during the coffee harvest, in spite of this being a near-universal practice in coffee-growing communities. Although accurate quantitative data on education was not obtained, some members did share personal stories about educating their families and the impact of the cooperative. Aroldo Lopez Díaz, from ADIPSA, noted that cooperative membership had increased educational opportunities for the next generation: “In middle school I dropped out. But my sons completed high school and then went to a vocational training institute for a year. One of them had a scholarship through ADIPSA...We also used our fund mandated by FLO [the international Fair Trade certifying agency] for education. I used money from the fund for two years to allow my children to stay in school” (personal communication, November 6, 2007). Juan Ordoñez Perez, a Maya Ixil member, shared similar experiences: “I have two sons, one who is 22 and the other 18...One is a teacher, and the other is in high school. [The cooperative] always helps us with school fees, and we are making the most of it (personal communication, October 10, 2007). Sabino Ortega Rodriguez, from Finca Triunfo Verde, noted that the cooperative’s educational benefits extended beyond the classroom, remarking that one of the major benefits of cooperative membership was that “they teach us to conserve the environment, and we pass this knowledge on to our children, so that they continue to protect the environment, because this is their future” (personal communication, December 10, 2007).
In spite of demonstrating some positive impacts, much qualitative data collected illustrated the limited educational opportunities that continue to handicap rural producer communities. ADIPSA’s Felix Cruz Jacobo explained that:
We have one child who is studying in El Progreso [a larger town nearby]. This is what has taken up almost all of our life. The year before last, two kids were still studying, and it was really difficult. This is what has prevented us from getting ahead in life, from living in a decent house, because we are spending so much to educate our children...Because we make our living only from coffee, we have no other resources. (personal communication, November 6, 2007)
In Maya Ixil member communities, where schools are relatively accessible, their quality is still a major concern. Antonio Perez Martinez reported that all of his eight children are studying, but “even though we have a school here, we need others, because although there are teachers, they have too many students, and don’t pay attention to them” (personal communication, October 10, 2007).
External Factors
The influence of
external economic factors on the wellbeing of respondents,
particularly in Guatemala, deserves to be mentioned. In the course
of open-ended questioning, a significant number of respondents
pointed to the increasing price of basic commodities as a factor that
had negatively influenced their ability to make a living and provide
for their families. Over the last several years, the price of the
“basic food basket” in Guatemala has increased
dramatically; in January 2007 alone, it rose 7% (Dardon, B., 2007,
February 8). Angel Lopez Sanchez, a member of Maya Ixil, reported
that “[h]ere in Guatemala, in recent years everything has gone
up. The price of things is really high. Instead of being able to
grow, we’re stuck...We hope the price of coffee will go up, but
if it goes down again, it will be disastrous for us” (personal
communication, October 10, 2007). Natanael Saloj, of ASUVIM,
concurred, noting that “[w]hile salaries remain low, costs have
gone up a lot during the last four years. The government has allowed
the price of basic necessities—bread, sugar, soap—to go
up” (personal communication, September 26, 2007). Thus,
although they received higher, more consistent prices from their
cooperatives, larger macroeconomic forces were contributing to the
continued poverty of cooperative members.
Conclusions
The qualitative and quantitative data collected during this study demonstrated socio-economic development impacts as a result of Root Capital’s SME lending programs at both the cooperative and household level. However, it is important to also address the difference between direct and indirect impacts. Because Root Capital lends to organizations, rather than individuals, its most direct and demonstrable impacts are most deeply felt at the organizational level. Its role at the individual and household level is generally as a supporting organization, providing capital to allow the cooperative organizations to continue to work for their members. However, as both quantitative and qualitative data shows, the ways in which a Root Capital loan is used by a given cooperative can have direct consequences for the income and quality of life of cooperative members. The data demonstrates that Root Capital has had both direct and indirect impacts on cooperatives and their producer members.
At the cooperative level, Root Capital had demonstrable direct impacts in terms of increasing access to capital and reducing the amount of coffee that was sold outside the cooperative. The average first loan was valued at $95,625, while the average most recent loan was over $273,386. Average increases of 212% over a cooperative’s loan history with Root Capital demonstrated both that the cooperatives were able to pay back their loans, and that these loans allowed them to increase the working capital that they had available for producer credit and other necessary administrative functions. This data also serves as an indication of borrower satisfaction with Root Capital, and of the organization’s ability to forge positive relationships with clients over the long-term.
Both cooperative employees and members attributed reductions in the amount of coffee sold to cooperatives directly to the loans they received from Root Capital. Excluding ASUVIM for reasons mentioned above, an average reduction of 50% in the amount of coffee sold to middlemen had impacts at both the cooperative level and at the level of individual members. It increased the amount of coffee available for export by the cooperatives, allowed them to fulfill their contracts, and improved their overall income. Because the cooperatives purchased coffee at higher, more stable prices than the middlemen, it also had a significant direct impact on the income of individual producers.
In large part, these impacts were due to the fact that over 85% of capital lent to the cooperatives surveyed was used for pre-shipment trade credit for producers. This means that by increasing their working capital, the cooperatives were able to either extend credit to producers or pay them for their coffee on delivery, rather than forcing them to go to usurious local lenders for money or wait up to several months for their payments. This built the confidence of members, lead to improved coffee sales yields, and increased their revenue. It also directly raised the income of producers by ensuring more stable, higher prices and more prompt payment, and by reduced expenditure on loan interest.
In spite of these positive cooperative level impacts, the data collected also demonstrated the need for greater access to financing. Many cooperatives indicated that they were unable to meet the payment and credit needs of all of their producers. Likewise, producers often expressed frustration at the limited credit available from their cooperatives and continued delays in receiving payment for their coffee. To some extent, this attests to the limited size of the SME lending industry in Guatemala and Chiapas, and to the unmet needs that organizations such as Root Capital can address going forward. There was also evidence from both cooperatives and producers, however, that some payments were significantly delayed, suggesting the need for more prompt loan disbursement as well as increased overall funding from Root Capital.
The restricted ability of most cooperatives to consistently invest in social projects further demonstrated their persistent financial limitations. Several cooperatives had been increasing their social investments over time, in line with the requirements of their Fair Trade and organic certifying agencies. However, no cooperative invested more than 10% of its sales income in social projects, and six of the eight cooperatives did not spend a fixed percentage of their yearly income on social projects. While the exception rather than the rule, the Asociación Chajulense was suffering from a financial crisis at the time of research, having de-capitalized 73% of its equity in three years through over-investment in social initiatives (internal Root Capital investment memo, October 1, 2007). The inconsistency and limitations of the social funding available from cooperatives restricted the transfer of benefits from cooperatives to their members, and limited the investments in social development that cooperatives could make on behalf of their members.
At the household level, data demonstrated a variety of significant positive impacts, notably in the areas of disposable income, personal property improvements, and migration. The ability of nearly 90% of respondents to improve their land and 67% to improve their homes represents an important impact for several reasons. Land was often improved by increasing soil quality and production, and through the transition to organic production. This had direct impacts on household income, as well as health and ecosystem benefits resulting from reduced use of harmful chemicals. In general, producers indicated that they only invested in their homes if they had already improved their productive land. As such, the ability to make improvements to housing is an indicator of greater access to disposable income than the capacity to upgrade land. Dwelling improvements, such as converting from a dirt floor to concrete, or installing electricity, also translate to better quality of life for producers and their families, as well as to improved personal security and reduced health risks associated with cramped and unclean living conditions. It is worth noting here, however, there was significant regional variation between Guatemala and Chiapas, with Guatemalans 22% less likely to have improved their land, and 48% less likely to have improved their homes. This is mostly likely an indicator of the relative wealth of Mexico compared with Guatemala, rather than a result that can be linked directly to the organizations’ relationship to Root Capital.
Data collected on meat consumption displayed an interesting pattern based on country of residence. While the Guatemalans had a slight advantage (less than 10% more) in the percentage of people that reported eating more meat compared to five years ago, the Chiapans surveyed ate meat much more frequently than the Guatemalans. Frequency of meat consumption has long been used as an indicator of economic security, disposable income, and increased per capita calorie intake (e.g., Leterme and Muñoz, 2002; Grigg, 1999; Xiao and Taylor, 1995). On the one hand, the fact that over 40% of respondents had increased their meat consumption over time is a solid indicator of improved access to disposable income. It also implies a more varied and nutritious diet, something that is of critical importance in areas that have historically suffered from high rates of malnutrition. On the other hand, the fact that the Chiapans surveyed ate about twice as much meat overall as the Guatemalans is yet another indicator of the more severe poverty that continues to afflict Guatemala.
Migration-related data displayed both strong global trends and important geographical variations. Cooperative membership and the availability of credit through Root Capital demonstrably played a role in reducing migration rates. Migration rates for cooperative members were lowered from over 40% in the years prior to joining the cooperative to nearly zero, and rates of migration in respondents’ children were reduced by more than half over the previous generation. It is not possible to attribute the entire reduction in out-migration to Root Capital’s financial interventions. However, a number of producers directly credited increased access to credit through the cooperative with allowing them to remain in the community rather than having to seek better wage opportunities elsewhere.
The question of whether migration is “good” or “bad” overall for sending communities is beyond the scope of the present paper. While it is true that in many cases, migration increases income and improves quality life, at least at the level of individual households, it is also clear that economic migration from Guatemala and Mexico has occurred in response to specific negative economic conditions, without succeeding in measurably reducing poverty or deprivation in most communities. Furthermore, migration has been shown to have a variety of negative effects in sending communities in terms of community disintegration and lost labor (e.g., Taylor, J.E., et al, 1996, p. 408; Cohen, J. H., 2002). According to data collected during this study, furthermore, coffee farmers stopped migrating when economic conditions in their home communities improved sufficiently for them to support their families, and they repeatedly stressed their preference to remain in their communities. The reduction in out-migration observed during this study therefore has positive implications for the social and economic health of both individual households and larger communal groups.
The overall reduction in migration in the adult generation masks significant geographical variation in migration patterns between Guatemala and Chiapas. In the Guatemalan cooperatives surveyed, 61% of respondents reported a history of migration, while only 9% had children migrating. In Chiapas, on the other hand, about 22% had migrated in the past, and 30% had children migrating. The data gathered in Guatemala stands in contrast to studies showing that emigration from Guatemala is on the rise. Between 1981-84, during the worst years of the armed conflict, only 85,000 people left Guatemala; from 2000-05, that number totaled over 1.3 million (Smith, J., 2006). The number of Mexican-born US residents has exploded in a similar fashion, going from two million in 1990 to 5.3 million in 2002 (Passel, J., 2004). From the data collected, it is difficult to say why the Guatemalans surveyed displayed cross-generational reductions in migration counter to national trends, while producers from Chiapas did not. It is possible that in Guatemala, the combination of improved socio-economic opportunities and the end of the armed conflict was enough to keep more cooperative member’s children at home, while in Mexico, the historical predominance of economic migration and more acute consciousness of relative deprivation compared to the US continued to push the current generation north.
Some respondents reported positive impacts on their ability to educate their children, but this was not widespread. Overall, data on education was difficult to obtain and inconclusive. Similarly, there were no strong positive trends observed in livestock acquisition or income diversification. Only 21% of respondents owned livestock at all, and only 9% had purchased their livestock since becoming cooperative members. This indicates a lack of sufficient disposable income that might permit investment in the more expensive, large animals that could serve as important secondary sources of household revenue.
Although almost half of Guatemalan respondents reported major income sources other than coffee, only about 17% of Chiapans reported the same. The most common other sources of income cited were corn, beans, and other vegetables that were grown to sell in local markets. A few of the cooperatives, notably Selva Negra Zoque, had introduced projects such as mushroom cultivation or hog farming. However, in most cases, income sources other than coffee generally comprised only a small portion of total household income, and were not part of any organized income diversification program.
In part, the lack of viable alternative sources of income may indicate a lack of work by the cooperatives to support alternative household revenue streams. Although some cooperatives had begun to introduce income diversification projects, for the security of both the cooperatives and their members, this is an area that deserves greater focus. The absence of strong impacts in these areas could also be an indication of several external influences. For one, the serious land shortage in Guatemala, and to a lesser extent, Chiapas, has often precluded the purchase of livestock even when a farmer has sufficient disposable income. Other external factors, such as the rising prices of basic goods or lack of government assistance, could also serve to limit impacts in these areas.
Although there were important impacts reported over time at both the cooperative and household level, issues of causal attribution and statistical significance should not go unmentioned. As noted previously, the small sample size of survey respondents limits the ability to assess statistical significance and to generalize the findings. In addition, factors other than the financial interventions of Root Capital almost certainly played a role in generating positive social impacts. For example, all cooperatives surveyed have been involved with both Fair Trade and organic coffee certification programs to some degree over time. The Fair Trade certification program mandates a certain amount of social investment on the part of cooperatives each year. Similarly, transitions to organic agricultural practices, if not the financial ability to make those transitions, are in large part due to the involvement of organic certification agencies. In spite of their important contributions, however, these agencies cannot account for all of the documented impacts at either the cooperative or household level, since most cooperatives had an established history with them prior to becoming Root Capital clients. And, while other factors no doubt played a role in the development of these coffee cooperatives, there is still consequential evidence that Root Capital’s services had impacts on both the cooperative groups and their members.
Finally, one significant confound that arose during interviews in Guatemala was that of translation. I often had to rely on a cooperative employee to translate the interview because some cooperative members spoke only their native Mayan language, and because of the lack of professional translators in most Mayan languages. In general, this seemed to present few problems. However, in the course of a few interviews, the translator’s bias towards Root Capital became apparent. During a interview with Pablo Raymundo, a Maya Ixil member who spoke only the Ixil language, I asked if there anything else he want to share. The translator, who was a Maya Ixil employee spoke for several minutes, and I heard the word in Spanish for financing several times. Pablo Raymundo’s response was then translated as: “receiving on-time payment is very important for us to be able to pay laborers to cut our coffee. The coffee is how we make our living. Thanks to God you came here” (personal communication, October 9, 2007). Because of the ability of translators to influence some of the interviews from Guatemalan cooperatives, not all first-person testaments to positive impacts can be taken as direct source quotations.
Although some impacts observed may have been due to a variety of external factors, a number of significant improvements at both the cooperative and household level could be traced directly to the influence of Root Capital. At the cooperative level, these included increased access to working capital and reductions in the percentage of coffee sold outside the cooperatives. At the household level, Root Capital’s impacts included reduced migration, increased disposable income, and marked improvements to quality of life. This case study of Root Capital’s lending programs in Guatemala and Chiapas indicates that SME lending can contribute to socio-economic development and local capacity building in rural communities.
Policy Recommendations
As this study demonstrates, SME lending can have positive socio-economic impacts in rural agricultural communities. These results can be of use to Root Capital in several ways. Their primary utility is as a tool for gauging the socio-economic impacts that coffee cooperatives and their members have experienced over time as a result of their work with Root Capital. This will enable the organization to assess where its financial services are having the desired effects, as well as to identify areas for improvement.
At the level of the cooperatives studied, Root Capital’s services appear to be having measurable positive effects in terms of organizational growth, marked reductions in the percentage of coffee sold outside the cooperative, and the development of successful long-term relationships with borrowers. These impressive results speak to the relevance of Root Capital’s development model to agricultural communities in Mexico and Central America. They also indicate that the organization’s positive impacts extend beyond the provision of financing to strengthen the cooperatives in other capacities as well.
However, in spite of increased access to working capital, most cooperatives seemed unable to make consistent, sizeable investments in community social projects. Although most were mandated to reserve a certain portion of their sales for social initiatives by their Fair Trade certifying agencies, this did not amount to a major investment in social projects, and in many cases became part of the price paid directly to the producers, rather than being invested directly in community development. In terms of Root Capital policy, there is little that can be done in the short term to remedy this. However, as these organizations improve their financial management and gain access to more funding, more money will be directed towards helping to fill the large social service gap left by government agencies.
Finally, some cooperative managers and a significant number of producer members expressed frustration at the timing of loan fund disbursement from Root Capital to the groups. Because every cooperative has a different harvest season, individually-tailored, prompt loan delivery is critical to avoiding loss of coffee to middlemen and ensuring that members do not continue to wait weeks or months for full payment. Based on the data collected, this is an area where improved service provision would have an immediate effect on the cooperatives’ ability to meet the needs of their members.
In terms of impacts at the household level, the data demonstrates that Root Capital has had both direct and indirect effects on migration and several socio-economic indicators. The reduction in migration, as well as increased meat consumption, and improved ability to invest in land and housing, are strong indicators that Root Capital’s approach to SME lending not only affects their institutional clients, but those clients’ member households as well. In this sense it is an endorsement of the efficacy of Root Capital’s current policy framework.
However, it is important to recognize the limitations of the observed effects of Root Capital’s SME lending programs. All households surveyed were still poor, and many could be classified as extremely poor. In all communities that participated in this survey, access to education, healthcare, infrastructure, and functional economic markets was still seriously limited. As such, investment in partner organizations and further local capacity building should be a focus of Root Capital’s future work if more significant impacts are to be achieved.
The primary goal of this paper was to serve as an internal impact assessment document for Root Capital. However, it is my hope that it can also be of use to the coffee cooperatives that were studied, as well as the larger development community. At the level of exogenous development organizations, those most likely to find this study useful are microfinance institutions (MFIs) and development programs that specifically target migrant sending communities. In terms of location, results of this study are most applicable to programs based in Mexico and Central America, although their relevance is not strictly confined to this region.
The strongest policy recommendations that emerge from this study for the coffee cooperatives themselves are to further strengthen their financial management capacity and to invest more in community development initiatives. As Root Capital’s cooperative financial education program, PorFin, enters its second year, it will be an ideal vehicle to improve financial capacity and the efficient use of funds by the groups. As the groups grow and become more self-sufficient over time, development of projects that specifically target education, income diversification, and internal credit should be considered. Cooperative organizations already provide a sense of social cohesion and a locus for action, and are therefore uniquely positioned to actualize local visions for change.
The present study demonstrates that SME lending operations can have socio-economic impacts comparable to those of traditional MFIs. However, comparison of the results of this study with studies of microfinance uncovers key areas of divergent impacts. Not surprisingly, SME lending appears to have greater impacts at the enterprise level than does microfinance. Interestingly, however, while some studies of MFIs have found
that they do not have conclusive impacts on food expenditure or personal infrastructure investment (e.g., D.R. Snodgrass and J. Sebstad, 2002, p. 38), the present study indicates that SME lending can have strong impacts in these areas. On the other hand, MFIs may have more impact on income diversification at the household level than do SME lending programs (D.R. Snodgrass and J. Sebstad, 2002, p. 64).
Development and finance organizations interested in expanding beyond individual micro-lending should evaluate these results to determine if SME lending would be a more effective tool to achieve sustainable development objectives than loans to individuals or small groups. SME lending can effectively build financial capacity in ways distinct from those of most MFIs. However, much more research must be done to fully assess the relative merits of microfinance and SME lending. Areas deserving further investigation include linkages across individual and business lending programs, and use of remittances for productive SME investment.
The migration-reduction effects of SME lending found by this study have policy implications for both microfinance institutions and migration-related development initiatives. MFIs working in migrant sending communities should consider SME lending as an alternative method to reduce out-migration by strengthening local institutions and markets. Other development projects working in areas where emigration is high could benefit from networking with SME lending programs to help achieve social development goals and to develop alternatives to economic migration. SME lending addresses several root causes of economic migration, and assessing its efficacy in improving household economic security and social welfare could provide important practical tools for development initiatives in migration source communities.
Beyond its policy implications for development organizations, it is my hope that the present study can contribute to expanding the literature available on SME lending. The work on SME lending in the developing world is very limited in comparison with studies of microfinance in similar areas. What is needed now is a larger-scale study that can compare organizations and communities that have participated in SME lending programs to a rigorously selected control. A study that allows more quantitative comparison between SME lending and microfinance will benefit the development community not only by expanding the available literature but also by facilitating expansion of relevant financial development projects in rural communities.
Appendix 1: The Cooperatives
ADIPSA
Located in Guatemala’s central desert region, ADIPSA, or the Asociación de Desarrollo Integral Progresista de San Agustín Acasaguastlán, is an organization involved in a variety of social service projects, from food security to water infrastructure. Only 20 of its 414 members are coffee producers, but these producers are 50% Fair Trade and 50% organic certified. Founded in 1994, the organization is headquartered in the town of San Agustín Acasaguastlán, and has annual sales of approximately $86,000. ADIPSA has been a Root Capital client since 2005.
APECAFORM
APECAFORM, or the Asociación de Pequeños Caficultores Orgánicos Maya-Mames, is a group of 300 indigenous Mam farmers, located in the San Marcos region of Guatemala, along the border with Chiapas. The group was founded in 1992, and became a member of the second level organization Manos Campesinas in 1998. Its annual sales, of which 100% are certified organic and Fair Trade, total around $300,000. APECAFORM has been a Root Capital client since 2000.
La Asociación
Chajulense
What is now the Asociación Chajulense
was started in the early 1980s. However, the group was constantly
targeted by the army during the worst years of the armed conflict,
and did not fully form until 1992. Located in the Ixil Triangle, in
north-central Guatemala, the group’s 1,674 members, most of who
are of the Ixil Maya ethnic group, suffered horribly during the
conflict. The group now totals about $2.6 million in sales each
year, of mostly Fair Trade and organic coffee. The Asociación
Chajulense has been a Root Capital client since 2006.
ASUVIM
ASUVIM, the Asociación Unidos para Vivir Mejor, is headquartered in Santa Clara La Laguna, near Lake Atitlán. The group’s 95 members first came together in 2000, and were integrated into the second level organization Manos Campesinas in 2005. It currently receives its loan funds from Root Capital as a percentage of loans made to Manos Campesinas. The group has annual revenues of some $240,000, much of which comes from organic and Fair Trade coffee, but is currently suffering declining sales due to extreme competition from coyotes in the Lake Atitlán area. ASUVIM has been a Root Capital client since 2005.
Maya Ixil
Located near the Asociación Chajulense in the Ixil Triangle, Maya Ixil sells over $300,000 of 100% organic Fair Trade coffee each year. Since its founding in 1998, the group has grown to 148 members. These coffee producers, who are mostly Ixil Maya, reside throughout the Ixil Triangle, although the group is headquartered in the town of Santa Avelina. Maya Ixil has been a Root Capital client since 2005.
Finca Triunfo Verde
Finca Triunfo Verde was founded in 2000 in the town of Jaltenango, Chiapas. The group’s 150 members are spread across 9 communities in the buffer zone of the El Triunfo Biosphere Reserve. The group is Fair Trade certified and is in the process of transition to 100% organic production. Total sales for the group are around $540,000 annually. Finca Triunfo Verde has been a Root Capital client since 2005.
Selva Negra Zoque
Founded in 2001, Selva Negra Zoque is located in the Black Forest region of northern Chiapas. The group’s 194 members total about $133,000 in annual sales, which are 100% organic. They are not Fair Trade certified. Selva Negra Zoque has been a Root Capital client since 2007.
UDEPOM
The
Unión de Ejidos Profesor Otilio Montaño,
or UDEPOM, is headquartered in the town of Motozintla, Chiapas, near
the border with Guatemala. The cooperative was founded in 1992, and
has grown to include 640 members spread across 30 communities.
Annual sales for the group, which are 100% Fair Trade certified and
about 60% organic certified, total over $3.1 million. UDEPOM
has been been a Root Capital client since 2004.
Appendix 2: Quantitative Data Tables
Guatemala-Household Level
|
|
Positive Responses |
Total |
Percentage (%) |
|
Land Improved |
18 |
23 |
78.3 |
|
Home Improved |
10 |
23 |
43.5 |
|
Meat Consumption Increased |
11 |
23 |
47.8 |
|
History of Migration |
14 |
23 |
60.9 |
|
Current Seasonal Migration |
0 |
23 |
0.0 |
|
Children Migrating |
2 |
23 |
8.7 |
|
Own Livestock-total |
6 |
23 |
26.1 |
|
Purchased Livestock-last five years |
2 |
23 |
8.7 |
|
Other Income Sources |
11 |
23 |
47.8 |
Table 1
Chiapas-Household Level
|
|
Positive Responses |
Total |
Percentage |
|
Land Improved |
23 |
23 |
100.0 |
|
Home Improved |
21 |
23 |
91.3 |
|
Meat Consumption Increased |
9 |
23 |
39.1 |
|
History of Migration |
5 |
23 |
21.7 |
|
Current Seasonal Migration |
1 |
23 |
4.4 |
|
Children Migrating |
7 |
23 |
30.4 |
|
Own Livestock-total |
4 |
23 |
17.4 |
|
Purchased Livestock-last five years |
2 |
23 |
8.7 |
|
Other Income Sources |
4 |
23 |
17.4 |
Table 2
All Cooperatives-Household Level
|
|
Positive Responses |
Total |
Percentage |
|
Land Improved |
41 |
46 |
89.1 |
|
Home Improved |
31 |
46 |
67.4 |
|
Meat Consumption Increased |
20 |
46 |
43.5 |
|
History of Migration |
19 |
46 |
41.3 |
|
Current Seasonal Migration |
1 |
46 |
2.2 |
|
Children Migrating |
9 |
46 |
19.6 |
|
Own Livestock-total |
10 |
46 |
21.7 |
|
Purchased Livestock-last five years |
4 |
46 |
8.7 |
|
Other Income Sources |
15 |
46 |
32.6 |
Table 3
|
Cooperative |
Number of Loans |
Use of Loan(s) |
Year and Size of first loan |
Year and Size of most recent loan |
% of coffee sold outside cooperative, prior to first year with RC |
% of coffee sold outside cooperative, this year |
% of sales designated for social projects |
|
ADIPSA |
3 |
Pre-shipment trade credit for producers |
2005-$30,000 |
2007-$20,000 |
25% |
0% |
$0.05/lb of coffee two years ago. This year, $0.10/lb (Fair Trade premium) |
|
APECAFORM |
6 (4 as part of second-level organization Manos Campesinas) |
Pre-shipment trade credit for producers |
2000-approx. $35,000 (35% of loan to Manos Campesinas) |
2007-$355,000 |
25% |
3-7% |
$0.05/lb of coffee two years ago. This year, $0.10/lb (Fair Trade premium) |
|
Asociación Chajulense |
2 |
Pre-shipment trade credit to cover post-harvest financing needs (producer credit, storage costs) |
2006-$250,000
|
2007-$400,000 |
30-40% |
0% |
Four years ago, 10%; because of current financial crisis, 0% |
|
ASUVIM |
3 as part of second-level organization Manos Campesinas |
Pre-shipment trade credit for producers |
2005-$30,000 |
2007- approx. $38,700 (9% of loan to Manos Campesinas)
|
25% |
65% |
$0.05/lb of coffee two years ago. This year, $0.10/lb (Fair Trade premium), plus average annual investment of $600 in education |
|
Maya Ixil |
3 |
Pre-shipment trade credit for producers |
2005-$50,000
|
2008-$150,000 |
30% |
1% |
7-8% |
|
Finca Triunfo Verde |
3 |
Pre-shipment trade credit for producers
|
2005-$95,000
|
2008-$200,000 |
45% |
30% |
No specific designated fund, but last year spent 1% |
|
Selva Negra Zoque |
1 |
Pre-shipment trade credit for producers and coverage of operating costs |
2007-$25,000
|
N/A |
80% |
60% |
Four years ago 5%; this year 10% |
|
UDEPOM |
4 |
Pre-shipment trade credit for producers |
2004-$250,000 |
2008-$750,000 |
10% |
7% |
$0.05/lb of coffee two years ago. This year, $0.10/lb (Fair Trade premium) |
Table 4
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