Think about the cup of coffee you drank this morning. If you don’t drink coffee, think about the millions of cups of coffee that get consumed each morning. Do you know where those coffee beans were grown?
Usually countries like Colombia, Ethiopia or Indonesia come to mind. But not many people realize that Uganda is the world’s 8th largest producer of coffee. The coffee industry is a main part of the Ugandan economy and employs a large portion of the population.
Coffee drinkers don’t usually get to witness the other end of the supply chain, where the coffee is grown. In Uganda, most smallholder coffee farmers do not have access to the equipment to process and add value to their raw coffee beans. They are forced to sell unprocessed coffee to middlemen at less than 5% of its retail value. Without access to financing that would enable them to afford processing equipment, over 10 million smallholder coffee farmers can get stuck in a cycle of poverty.
To address this issue, the National Union of Coffee Agribusinesses and Farm Enterprises (NUCAFE) was founded in 1995. As a coffee farmer’s organization, it introduced a “farmer ownership model” that lets farmers maintain ownership of their coffee throughout the supply chain.
NUCAFE owns processing facilities for cleaning, drying, grading, roasting, grinding and packaging services. Member coffee farmers pay a small service fee to use NUCAFE’s equipment, add value to their coffee and sell manufactured product at a higher price than the unprocessed raw material. NUCAFE also helps its members market their product to potential buyers.
NUCAFE also shares best practices for planting, irrigation and crop maintenance. It advocates for sustainable farming while increasing the standard of coffee farmers and their families. Today, over 200 associations and cooperatives work with NUCAFE, connecting the organization with more than 1.5 million individual smallholder coffee farmers.
NUCAFE is a great example of Kiva’s direct-to-social enterprise (DSE) loan program. While most Kiva loans are a few hundred dollars and are distributed by a Field Partner, Kiva’s DSE program provides loans directly to small for-profit organizations that contribute to social impact around the world. Often, these organizations are too large for microfinance, but too small for traditional finance. That’s why Kiva steps in - to catalyze the change they are making with flexible finance. Social enterprises have the potential to strengthen their communities and reduce poverty by expanding formal employment, scaling innovative social solutions and driving sustainable economic growth on a larger scale.
Before NUCAFE came across Kiva, it had been borrowing at interest rates as high as 12%, forcing them to use profit margins to pay back its costs of financing. Now that it partners with Kiva, the majority of profit margins can go directly back to the farmers.
In 2017, NUCAFE received its first Kiva loan of $50,000 and repaid it successfully within 8 months. The loan enabled NUCAFE to advance coffee profits to over 550 smallholder coffee farmers while their coffee is being processed and sold.
In Bunjakko, an island in Lake Victoria, coffee farmers used to sell their unprocessed coffee for 8 cents per kilogram. Thanks to NUCAFE’s processing resources, the community now sells its coffee at $1.76 per kilogram - an income increase of 2,200%!
NUCAFE is currently fundraising for its second Kiva loan to help member associations better manage their cash flows and continue to process coffee. This loan will advance profits to over 1,000 coffee farmers.
As NUCAFE expands its impact, it works toward completely sustainable solutions. The organization is currently installing an industrial solar plant in order to market eco-friendly coffees in specialty markets that offer higher prices for farmers. It is also introducing solar-powered irrigation pumps to boost member coffee production.
“We plan to franchise the Farmer Ownership Model and introduce it in other value chains and other countries,” says Moses Abuce, NUCAFE’s finance manager. This model revolutionizes the supply chain by driving value toward the source of the product and paying fair prices to smallholder farmers.
If you’re passionate about fair compensation for farmers in global supply chains, click here to support NUCAFE’s efforts.