Supporting Coffee Farmers in Uganda

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Supporting Coffee Farmers in Uganda

GABRIELLE ROSENAU: HOW IBERO UGANDA IS INCREASING SMALLHOLDER COFFEE FARMER PRODUCTIVITY.

How one company’s commitment and long term view is making a significant difference to smallholder coffee farmers in Uganda

Getting ready for fertilizer distribution: Photo credit: Ibero Uganda

Coffee is by far the largest export product of Uganda, accounting for 20% of export revenues. Despite favorable agro-climatic conditions for its production and a constant global increase in demand for the product, coffee in Uganda is largely produced by smallholder farmers, very few of whom are able to run their farms to full potential. From transparency in coffee value chain processes to offering collateral- free advances that are repaid with coffee sales, Ibero Uganda (part of Neumann Kaffee Gruppe, the largest coffee trading group in the world), aims to change this situation and ensure farmers increase their productivity and ultimately escape the vicious cycle of poverty in which they are currently trapped.

The Mastercard Foundation Fund for Rural Prosperity interviewed Gabrielle Rosenau, Project Manager of Ibero Uganda, to gain insights on how they tackle the challenges faced by coffee farmers in Uganda, and how support from the Fund is benefiting rural communities.

Q. Tell us a bit about the origins of your Mastercard Foundation Fund for Rural Prosperity project.

G: There was an early realization from our work that thousands of coffee farmers in Uganda do not have reliable access to farm inputs and access to finance. As a result, Ibero Uganda, took the next logical step and decided to do research and find out how to structure a commercially viable Farmer Financing Unit within its export operation in the country.

We developed the idea to a point where we felt it needed implementation support in the very initial period of ramp-up towards financial viability… and so we submitted it to the Mastercard Foundation Fund for Rural Prosperity. We were very pleased when they selected us for support after a very competitive process.

Q: Who is your target audience and how do you intend to help them?

G: Ibero Uganda’s Farmer Financing Unit targets smallholder coffee farmers who own less than 5 hectares of land, or, in general, those smallholder farmers who are hard-working but do not have access to formal financial services. There are hundreds of thousands of smallholder farmers in Uganda we aim to support in the long term.

Our solutions and accompanying supportive ecosystem will enable farmers to access fertilizer, use it properly in synergy with good agricultural practices, and derive higher productivity from their coffee trees. We have set ourselves the ambitious target of a 100% productivity increase from farmers we work with by the end of our 2-year crop nutrition program.

Farmers will also have access to more transparent pricing when selling their coffee via their Depot Committees to Ibero, plus access to a mobile money credit line, both of which ultimately reduce their current dependency on middlemen. This will enable them to ultimately receive a fair price for their coffee that is estimated to be 30% to 60% higher than the price received now.

Q: The path to success is never easy. What are some of the obstacles you have encountered as you get on with your project and how you are trying to overcome them?

G: One crucial learning early on was that you need the right personnel on a project of this nature, to build credibility with farmers and to ensure a good relationship. This can take a long time to get right but has been crucial to our success.

Secondly, we realised we needed to accurately manage a large database of farmers very early on, and to do this well, we needed to invest time and effort into our IT solutions. The solution is never complete, and we are still working on developing and improving our systems as we learn more about what our needs are.

Third, there were limitations to working with farmers. For example, there was often a lack of organization into farmer groups.  Despite challenges, Ibero Uganda has now been able to establish relationships with structured farmer groups, and has been able to distribute fertilizer twice a year. We have also been able to change the mind-set that we are there to give them any form of hand-outs by showing that we want to engage with them through business.

Q: What are some of the learnings that have stood out for you?

G: We noticed that a high number of farmers who now have access to finance use it very carefully. For instance, some use it for school fees, catering for emergencies and investment into their farms. This careful use of the coffee pre-finance facility (the mobile money credit line that we bundle with the fertilizer) is resulting in very high repayment rates which we were not expecting this early into the project implementation period. Most farmers honour their contracts and we can utilize coffee as their collateral in case. The role Ibero Uganda plays is critical in deepening financial services to small holder farmers.

Q: How are farmers benefiting from your project?

G: Well, farmers are getting more income as a result of higher yields. We have noticed farmers engaging with us are embracing the concept and even spreading the word to other farmers that could access fertilizer and finance through Ibero Uganda. This is happening because Ibero Uganda strongly believes in transparency. We try to be very clear in informing farmers of the solutions we offer and there are no hidden costs etc. This makes us competitive in the market and encourages farmers to repay their advances on time.

“Ever since I started using fertilizers from Ibero, my coffee trees have been greener and healthier than ever before. I expect to harvest 30-40 bags of kiboko in the main season (October-January 2018 season) which is more than the 10-15 bags I was harvesting before I started using the fertilizers.” Nkubano Matia, Beneficiary. “I am happy about mobile money cash advance because it is readily available and I can access it any time. I plan to withdraw the money and use it to complete my new house. I have hired mobile speakers at 3000-5000 Uganda shillings at my cost to sensitize and do farmer mobilization around my village (producer organization). I also mobilized other farmers to come to my coffee garden for them to learn good agricultural practices and witness the impact of applying fertilizers to the coffee trees.”

Q: How are women and youth benefiting from your project?

G: An estimated 25% of our portfolio is comprised of women. We also empower the women within our Ibero Uganda project team to go to the field and be involved. We are working to ensure more women and youth are involved in the coffee value chain.

Training on fertilizer application taking place before fertilizer distribution. Photo credit: Ibero Uganda

Q: Tell us a bit about your relationship with the Fund. In what ways has your engagement with the Fund helped you advance the project?

G: Honestly, it would have been difficult to implement the project without support from the MasterCard Foundation Fund for Rural Prosperity, because of the large initial investment to set up our operations.

We are glad we have a partner that is supporting us, and has the interests of farmers at heart. Personally, I have a good relationship with the Fund project managers and wider team. We see this relationship only getting better as we work towards common goals of improving lives.  

Approximately 3,000 small holder coffee farmers in Uganda are already benefiting from the project to date.

Q: What would your advice be to other financial focused businesses seeking to deliver better financial access to rural populations in Africa?

G: My main advice to financial service providers with innovative projects is to be fully committed and not look only for short term quick wins. They need to be aware that making this work will take a lot of time and investment to achieve results.

Q: What are your future plans for the project past 2021?

G: We are forming partnerships with organizations to support us after the scope of our project ends with the Fund. We plan to continue to scale up the project and ultimately improve lives of thousands of coffee farmers in Uganda and beyond. Our main objectives will continue to be to improve livelihoods and increasing incomes of smallholder coffee farmers by building their capabilities to access and use financial and technical services, and to promote systemic change in agricultural finance. Finally, Neumann Kaffee Gruppe is also planning to learn from what we are doing here in Uganda, to set up other Farmer Financing Units in countries where smallholder coffee farmers are in dire need for financing to run their farms at full potential.

Interview conducted by Grace Oduor and Colin Azavedo, Communications, Mastercard Foundation Fund for Rural Prosperity.