Risk and Finance in the Coffee Sector

Millions of coffee farmers and coffee
trading enterprises lack sufficient credit. This is partly
due to myriad challenges and considerable costs that formal
lending institutions face serving rural, often isolated
markets. A better understanding of coffee sector risks is
needed to respond with strategies, training, and tools that
can help farmers and enterprises, mitigate their exposure to
risk, and strengthen their resilience against inevitable
shocks. This report explores the role that producer
associations, governments, non-profit organizations, the
private sector, and other intermediaries can play in making
risk management and financing tools more accessible and more
workable for smallholder coffee growers. It examines the
global coffee sector and outlines: (1) major risks and
constraints facing the sector; (2) potential opportunities
for improving the management of certain risks; and (3)
programs launched in various regions aimed at improving
access to finance. Through the use of detailed case studies
taken from a number of coffee-producing countries, this
report seeks to demonstrate: how risks can arise that
adversely impact on the coffee sector and those working
within the sector; how risks can be better managed so that
the sector is able to improve its resilience; how financing
constraints can be overcome through a variety of innovative
approaches; and how there are potential opportunities to
both improve risk and access to finance in a coordinated
manner. This report highlights the need for collaboration
among all stakeholders within the coffee sector, both
nationally and globally. The final two cases demonstrate a
virtuous circle of improved risk management that generates
improved access to finance, which itself facilitates further
improvements in risk management. To this end, this report
considers the global coffee supply chain and the actors
operating within it, and demonstrates, through the use of
selected case studies, how collaborative efforts by actors
and stakeholders can improve risk management and access to
finance. It shows how risks can be mitigated and or
transferred between supply chain actors, and how coping can
be facilitated through cooperative arrangements for when
risks arise.