The banking-backed sustainable-sourcing program aims to reach 300,000 coffee families by 2030.
BY CHRIS RYAN
BARISTA MAGAZINE ONLINE
Photos courtesy of Neumann Kaffee Gruppe
Neumann Kaffee Gruppe (NKG), the Hamburg, Germany-based green coffee service and trading company, announced this month the new NKG BLOOM initiative, which a press release from NKG describes as “a long-term sustainable-sourcing initiative designed to address poverty in coffee communities, financially empower coffee farmers, and ensure a healthy future for coffee.”
The BLOOM initiative aims to accomplish these tasks in coffee-producing communities around the world through a combination of field-based educational efforts, real-time mobile technology, and what NKG says is the industry’s first impact banking–backed initiative for coffee production.
The banks involved in NKG BLOOM are European institutions ABN AMRO, Rabobank, and BNP Paribas, which will share the direct risks on farmer defaults, per the initiative. BLOOM will operate out of the newly created Coffee Smallholder Livelihoods Facility, a Netherlands-based revolving facility that NKG says is further backed by two complementary default guarantees by the U.S. Agency for International Development and IDH the Sustainable Trade Initiative.
“The purpose of the facility is to give NKG companies financing for them to lend to smallholder farmers and farmer groups and to minimize the risk of defaults from farmers and groups by sharing it amongst [the] three banks, as well as USAID, IDH and NKG,” says Catalina Eikenberg, head of the NKG Sustainable Business Unit.
NKG’s goal is for BLOOM to reach at least 300,000 coffee families in 10 major coffee producing countries by 2030. Before launching the initiative, NKG tested it through the pilot project NKG BLOOM Uganda, which delivered key findings that informed the growth of the initiative, Catalina says.
“In Uganda … we learned that it is indeed possible for us to finance even the smallest of smallholders directly through a combination of technology like mobile money, an IT solution specially designed to support operations in the field, and micro-finance methodologies that have been developed in the past by Grameen Bank and ProCredit Bank,” says Catalina. “We also learned that through the provision of services to farmers (especially financial services), it is possible for our export companies to significantly increase the volumes sourced from those farmers. In Uganda we saw farmers going from selling 10% of their coffee to us to 70%, and this encouraged us to pursue NKG BLOOM also in other geographies.”
In 2019, NKG BLOOM will be introduced in Colombia, Honduras, Kenya, and Mexico, and furthered in Uganda, with the establishment and staffing of permanent Farmer Services Units (FSUs) based at respective local NKG companies. NKG is also working with NewForesight, an independent strategic consultancy that focuses on sustainability challenges, as an external partner and validator of NKG BLOOM to ensure the initiative delivers provable structural changes.
For NKG, launching BLOOM is an investment in the future of the smallholder farmers with which the company partners. “NKG BLOOM is not a marketing strategy, it is not a philanthropic endeavor or a feel-good project. It’s about the way we want to do business in the long term. It will cost us a lot of money and effort, but it is simply the right thing to do,” said David M. Neumann, Neumann Gruppe’s Group CEO, in the press release. “Lending to smallholder farmers in some of the poorest places in the world is a risky proposition, but it’s critical to unlocking the potential that these farmers hold for global agriculture and development in their own countries and communities.”