Prime Partners: EcoLogic Finance

Executive Director: William F. Foote
www.ecologicfinance.org
Grade: B+
Winner's Statement

That $4.25 you laid out this morning for a venti latte? The farmers who harvested the beans won't see much of it. Many cash-strapped growers sell their crops at fire-sale prices, unable to negotiate market rates. Lacking steady income, they give up, fathers and sons leave to try their luck in urban areas, and communities crack.

All that was true even before coffee prices collapsed in 2001—which is when EcoLogic Finance stepped in. EcoLogic, which has offered credit and financial education in developing countries since 1999, started talking with coffee growers and importers. Soon enough, says William F. Foote, EcoLogic's founder, "we found ourselves in the office of the COO of Green Mountain Coffee Roasters. He said, 'Look, you're doing exactly what we need.'"

EcoLogic agreed to offer affordable loans to cooperatives that sold to importers supplying Green Mountain, using contracts with those importers as collateral. By supporting the co-ops until their harvests, the arrangement allowed growers to negotiate higher prices. Green Mountain provided EcoLogic with grants, including one for $220,000 over four years.

What's in it for Green Mountain? Financing the co-ops itself would muddy the relationship between buyer and seller, it says. EcoLogic brings independence and expertise to that function, and it helps clear paths to new sources of supply. "So many people are out there trying to find the right coffee," says Mike Dupee, Green Mountain's vice president of corporate social responsibility. "There's a very strategic need to cultivate new suppliers."

Josefat Hernández, who manages La Union Regional de Huatusco, a co-op, has noticed the changes in Veracruz, Mexico, since EcoLogic began lending. "More young people are staying in the community," he says through a translator. "They're returning to working on the fields." Higher bean prices have allowed his co-op to offer scholarships to members' children and launch a preventative health program.

For EcoLogic, the arrangement with Green Mountain has led to partnerships with other coffee companies, including Starbucks, which recently invested $6 million in the nonprofit. Foote envisions similar deals to empower communities producing cashews, cocoa, and bananas. "You have to know what might be lurking on the opposite end of that long global supply chain," Foote says. "This is not what some groovy NGO came up with, but what the marketplace is demanding."

Data Point

Total lent by EcoLogic to coffee growers in 17 countries: $37 million

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2 Comments

  • Elmo Saurus

    A few years ago I saw a Frontline documentary about finance in general, but it had a section that focused on the near impossibility of running a successful coffee growing co-op in many 3rd world countries, only because of their lack of access to record keeping and credit. Providing that service was a business idea I had, but obviously it's being done, which is good no matter who's doing it. So for the moment I'll stick to investing with J.P. Turner, but should global commodities markets ever return to chaos because of simple reasons like that, I have a longer term plan to help restore balance.

  • Dianne Reyes

    We have changed our name from Ecologic Finance to Root Capital, and our website’s URL has changed to http://www.rootcapital.org.

    Root Capital

    Root Capital is a nonprofit social investment fund that is pioneering finance for grassroots businesses in rural areas of developing countries. Root Capital provides capital, market connections, and financial education to artisan and farmer associations that build sustainable livelihoods and transform rural economies in poor, environmentally vulnerable places.