Loan and grant based renovation in Colombia

A strong government commitment and well-organized coffee institutions in Colombia enabled a successful national renovation program

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  • R&R type Loan / grant-based renovation
  • Country Colombia
  • Costs Approx. USD 600 million
  • Dates 2008-2014
  • Borrowers SHF with land between 02-1.5 ha
  • Currency COP
  • Tenor 7 years
  • Grace period 2 years (interest paid by the FoNC1)
  • Interest rate Av. 10%
  • Guarantee2 100% guarantee
  • Grant Grant covering 40% of the principal

Project Context

  • In 1998, the government implemented the Competitiveness Program (CP), with the objective of maintaining competitiveness in densely cultivated coffee growing areas.
  • Between 2008 and 2009, coffee production in Colombia decreased by 32% due to ageing trees and disease.

Objectives, Activities, and Results

  • In 2007/08, the National Federacion of Coffee Producers (FNC) and the Government of Colombia implemented the PSFtoenable access to credit for SHFs for coffee renovation.
  • Objective: renovate 300,000 hectares in 5 years under the PSF and the Competitiveness programs.
  • Between 2008 and 2014, the PSF provided 216,312 loans to SHFs, enabling the renovation of 184,000 hectares.
  • Value creation: increased yields of least productive SHFs and improved livelihoods.
  • Value capture: FNC increases coffee exports, and FondoNacional del Café (FoNC)3 increase revenue.

Project Context

Management of the three R&R Components


FNC is in charge of providing seedlings to farmers.

Challenges faced
Planting unverified seedlings may lead to high mortality rates of the trees.

FNC provides a full R&R package to SHFs, including planting material (certified seeds and seedlings) and agronomic advice on how to plant them.


The program was funded by public sources and local financial institutions4.

Challenges faced
Farmers face a negative cash flow period after replanting (‘valley of death’).

Farmers received loans with grant component funded by the government (ICR5) that allowed them to bridge the ‘valley of death’ and to overcome prolonged periods of lower revenues. As a result of this successful financial design, only 7-8% of the loans are in arrears.


The FNC provided agronomic and business advice to farmers, mostly government-funded6.

Challenges faced
The large numbers of farmers targeted are geographically spread and belong to loose value chains.

The FNC implemented a decentralized model to provide TA. It relied on 15 extension divisions at department level and on 97 sectorial offices and a total of 1011 extension officers at district level, who delivered over 6 million of groups or individual interventions between 2010 and 2014.

(1) The FoNC is financed through a tax of USD 0.6 / lb coffee exported.
(2) Guarantees are provided by the National Guarantee Fund (managed by FINAGRO) and the National Coffee Guarantee Fund (managed by the FNC).
(3) In 2012, the Fondo Nacional del Café (FoNC) stopped covering loan interest.
(4) Funders include the Colombian Ministry of Agriculture, Finagro, Banco Agrario, Banco de Bogotá, Banco Divivienda, the National Coffee Fund (FoNC) and Cundinamarca and Cauca Governors.
(5) Incentivo a la Capitalización Rural. Between 2010 and 2014, the government disbursed USD 359 million in grantfunding.
(6) The Colombian Government spent USD 97 million for extension services between 2010 and 2014. Source: FNC, Sostenibilidad en Accion, 2013; Risk and Finance in the Coffee Sector, The World Bank, February 2015, Rabo Bank and ISH, Rehabilitation & Renovation of crop trees in cocoa, coffee, palm oil, 2015.

Lessons Learned

  • Long-term political commitment and coordination is crucial to the success of large scale renovation programs
    The PSF program required a long-term commitment and level of coordination between the government, coffee institutions and financial institutions. This model could hardly be replicated in countries with a less organized coffee sector.

  • An important presence in the field is required
    Each extension officer had a maximum of 550 farmers under his supervision, allowing for groups or individual interventions, especially at early stages of the program, and thus increasing adoption of best practices and survival rates of plants.

  • The grace period and the loan component are critical to increase farmer willingness and ability to undertake renovation
    As farmers were provided grants funded by the government, they were willing to undertake renovation of their land and mostly able to reimburse their loans after the grace period (60% of the loan to pay back

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.