Ethiop Coffee II

completed

The project consists of a 3-year Risk Sharing Facility (RSF) for a portfolio of up to 300M Ethiopian Birr – ETB (approx. USD 15.2M) working capital loans to coffee farmer cooperatives, originated and serviced by NIB Bank in cooperation with TNS. The loan will enable the farmer cooperatives to buy “cherry” coffee to process into “washed” coffee. Under the RSF, IFC will assume [60-65]% of the credit risk on the portfolio, up to a maximum IFC exposure of ETB 180M (approx. USD 9M). The remainder would be covered by Nib Bank. The proposed Project is essentially a renewal of the existing US$10 million Ethiopian Coffee facility (Project #29228) with the same bank. The renewal of the facility will enable IFC to continue to support the coffee sector in Ethiopia. The first facility benefited 62 cooperatives and facilitated market access for 46, 500 farmers, an increase from 15,100 farmers reached in 2010 when it was launched. Under the initiative, TNS will continue to: (i) work with coffee farmer cooperatives to improve their business management skills; (ii) provide them with training to improve quality of the coffee produced; (iii) facilitate farmers’ access to credit by developing a business plan for each washing station (“wet mill”) and present it to Nib; (iv) facilitate the farmers access to markets by linking them to key buyers; and, (v) provide farmers with agronomy and extension services to improve their yields. TechnoServe (TNS) is a nonprofit organization that develops business solutions to poverty by linking people to information, capital and markets. In 2008, TNS received a four-year, $47 million grant from the Bill & Melinda Gates Foundation to increase the incomes of 182,000 smallholder coffee farmers in East Africa. Coffee production targeted by this project is grown under canopy cover (“shade coffee system”) of diverse native trees species which help maintain ecological functions (e.g. soil conservation, water cycle maintenance, carbon sequestration). The targeted region is situated in semi-forest areas in south and south-western Ethiopia. Most specialty coffee production in Ethiopia only uses organic fertilization and, as such, does not rely on inorganic fertilizers and/or pesticides. In terms of process, the selective picking (only the ripe coffee cherries are harvested) is done by hand, a labor-intensive process. This kind of harvest is used primarily to harvest the finer Arabica beans. Cherry is then transported from the fields to the collection points and subsequently to the wet mills. At the wet mills, machine-assisted wet processing or mechanical demucilaging is used to process the cherries. Processing capacity of the wet mills ranges between 1.0 and 2.4 tons/hour. After overnight fermentation, the resulting coffee beans (“parchment”) are dried in the sun on large raised drying tables for a period of 7-10 days in order to achieve the desired moisture content of 11%. The parchments are then transported to service providers/exporters in Addis Ababa to undergo the dry milling, which encompass hulling to remove the parchment and silver skin. The green beans are then transported by truck to Djibouti for export in jute bags of 60kg.