Starbucks Pledges $30M for Coffee Loans

Starbucks Supports Microfinance Coffee Loans

When Starbucks buyers find that they have trouble sourcing enough coffee for the coffee giant’s needs, they don’t sit back and wait for someone to do something. They step up to the plate to help shore up its coffee bean supply chain by making loans available to the coops and coffee farmers with whom it does business. Starbucks announced last month that it would make up to $30 million available to loan to coffee farmers over the next five years.

This is not the first time that the sprawling coffee chain has stepped into the microfinance business. In 2010, Starbucks made an initial $20 million commitment to assist its coffee producing partners in getting through difficult harvest and weather cycles. The money was disbursed through microfinance nonprofits, such as Root Capital, a Massachusetts non-profit organization that makes small loans to individual farmers and farming coops. According to Starbucks, the initial tranche of money provided financial aid to 62 cooperatives representing some 40,000 farmers in eight countries.

These microloans are vital to many small landholders, coffee farmers and coffee roasteries in devleoping countries. In an industry where farmers often have to wait until well after the harvest season to be paid for their crops, the lack of ready capital can essentially put a family farm out of business. Starbucks vice president for coffee said in a statement that these small loans give farmers “the ability to make strategic investments in their infrastructure, offering the stability they need to manage ongoing complexities so there is a future for them and the industry.”

This is especially important in coffee producing nations closest to home. Central American and Caribbean coffee regions were devasted by an epidemic of la roya — coffee rust — a fungus that may have been worsened by the warming of the climate. Many farmers in those regions lost not only their entire crops, but entire coffee orchards, to the destructive leaf rust over the past few years. Starbucks is not the only company stepping up to help coffee farmers hurt by coffee rust, but their $30 million investment is certainly one of the largest.

According to Root Capital, it makes two types of loans. The first is a small, short-term loan that helps farmers get through a harvest cycle – pay workers, buy supplies and feed their families while they wait to be paid for their crops. The other type of loan is a longer term loan meant to help farmers make infrastructure improvements – upgrading a mill, replanting after a devastating event and working to adapt to the changing climate are all examples of the way these loans may be used.

In fact, Starbucks, like many other smaller coffee chains, is finding that the warming climate makes it more difficult to grow high quality coffee in the traditional areas. Over the past decades, few farmers have put time and money into developing new strains of coffee, opting instead to produce the most reliable and highest producers – which are also notoriously finicky in terms of climate conditions. This has led to very little genetic diversity, and serious vulnerability to climage swings and diseases like roya.

In addition to the microfinance investment, Starbucks also has opened coffee support centers in six major coffee growing regions to share best practices, information and other types of support with farmers in those regions.