Coffee Farmer Resilience Initiative in Latin America

Long-term loans for renovation are provided by a blended finance facility to farmer organizations in Latin America

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  • R&R type Loan based renovation
  • Countries Honduras, Nicaragua, Peru
  • Costs USD 7.7 million in loans approved
  • Dates 2014-2016
  • Borrowers Farmers aggregations (e.g. coops)
  • Currency USD
  • Tenor 3-7 years
  • Grace period 1-3 years
  • Interest rate 7-10.5 APR

Project Context

  • In 2011/12, La Roya affected almost 50% of the total coffee growing areas in Latin America, significantly reducing the SHF production.
  • La Roya outbreak revealed decades of underinvestment in the coffee sector. Over 60% of trees in the region had passed the productivity peak and were more exposed to the disease.

Objectives, Activities, and Results

  • Root Capital provided loans to SHF orgs who then distribute to SHFs to support the upfront cost of R&R. Root Capital also provided technical assistance (free to SHF orgs.) and challenge grants (with cost-share from orgs) to build org. capacity to implement R&R programs.
  • USD 7.7M in loans were approved to 8 orgs. in Honduras, Nicaragua, and Peru.1
  • Value creation: increased yields and strengthened SHF capacity.
  • Value capture: farmer groups selling higher volumes of coffee.

Project Context

Management of the three R&R Components



Third parties

Challenges faced

SHFs must have access to upfront and ongoing inputs. SHF orgs. must have the capacity to source and deliver appropriate inputs.


Root Capital only selects SHF orgs. that are able to manage selection and application of adequate farm input. A Root Capital approved agronomist assists SHF orgs. with preparing their input delivery plan for SHFs.



Various (cf. previous slide)

Challenges faced

Understanding risk and bringing togetherfunders with aligned risk appetites; protecting investors


  • Root Capital conducted intensive due diligence. SelectedSHF orgs. must have adequate sources of internal financingto cover at least 20% of the R&R investment. Root Capitalalso assessed credit risk using in-house tools developed over15+ years3.
  • Using a blended finance structure to partially de-risk theinvestment4.



Root Capital.

Challenges faced

Most of the farmer groups lack the ability to manage R&R loans for SHFs.


35 trainers delivered financial advisory services to managers and accounting staff of Root Capital’s potential or existing clients. Training focuses on managerial, organizational, technical capacities, with a focus on orgs’ internal credit and technical assistance service.

(1) TA and challenge grants were extended to an additional 25+ orgs in El Salvador, Guatemala, Honduras, Mexico, Nicaragua, and Peru.

(2) Source: GCP and Technoserve, Economic Viability of Coffee Farming, 2017.

(3) Root Capital assesses the credit risk of borrowers using an internal rating system that weighs various risk categories, including scale and buyer diversification, enterprise strength and growth potential, financial flexibility, and financial strategy. This data is combined with the experience and judgment of loan officers to inform a full assessment of credit risk.

(4) The funding comes from public and private financers with different return expectations. Credit enhancements reduce the investment risk, and grant funding dedicated to capacity building reduces the client risk, ultimately reducing the investment risk. Source: Root Capital, Learning Report: The Coffee Farmer Resilience Initiative, 2016; Dalberg interviews

Lessons Learned

  • Leveraging blended finance structures enables lenders to partially de-risk R&R investments
    Root Capital used a blended finance structure to align the incentives and risk appetites of the different funders. Mechanisms of partial loan guarantees, risk-sharing, reserves for first-loss capital, and technical assistance funds helped to mitigate risks. These types of blended finance structures should be reproduced to scale R&R financing.

  • Invest in capacity building for aggregation points
    Root Capital relies on farmer organizations to deliver and manage loans to SHFs. Many SHF orgs., however, currently lack the capacity to manage large R&R interventions. Strengthening SHF orgs. or other farmer aggregation points, like local microfinance institutions, is needed to scale R

Learn more and get involved

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