The investment aims to significantly ease the availability of finance and access to targeted cooperatives at a 9.9 per cent interest rate ceiling
Heifer Impact Capital (HIC), announced a joint investment of $420,000 with Heifer Labs and Heifer Mexico to improve financial access for smallholder coffee farmers in Mexico through the EthicHub Regenerative Finance (ReFi) platform.
The revolving credit facility will pilot more-efficient dissemination of loan funds to qualifying coffee cooperatives participating in Heifer International’s Beyond Coffee II Project in Chiapas, Mexico. The investment will be facilitated through the EthicHub ReFi platform, a pioneering web-based platform serving smallholder farmers for whom traditional finance solutions have historically been less accessible and available. In Mexico, less than 6 per cent of farmers have access to credit in the traditional finance sector.
Devised as an innovative and more-targeted way to strengthen access and timely availability of capital to smallholder coffee farmers, the investment will address shortcomings hindering access to finance, such as high transaction costs, long lead times to approval and disbursements, fixed collateral requirements and other well-known barriers to credit.
The revolving credit line is designed to provide working capital directly to coffee cooperatives during the harvest season. As only 1.5 per cent of financial products are channelled to the rural sector, smallholders often struggle to access financing, which is often not aligned with farmers’ productive conditions. The credit facility will remain open for other purposes to secure financing and is intended to demonstrate the viability of using this financing instrument to provide more ready and efficient access to capital to pre-selected cooperatives in Chiapas.
“Smallholder farmers are the backbone of the agricultural industry in Latin America, and they face significant challenges in accessing sector-specific and efficient financial instruments,” said Jorge Barrigh, Heifer Impact Capital’s regional director for the Americas. “Our investment with the EthicHub ReFi platform enables us to address very specific challenges that for too long have represented obstacles to an efficient and streamlined capital delivery system all the way to the last mile in rural Latin America.”
The investment aims to significantly ease the availability of finance and access to targeted cooperatives at a 9.9 per cent interest rate ceiling, competitive with the average interest rate in Mexico. In a bid to implement a more integrated solution that addresses shortcomings beyond interest rates, this solution also seeks to simplify and open the black box of costs and processes that often delay timing in approvals and delivery of resources.
