From Bank to Bean: Strengthening Access to Finance in Rwanda’s Coffee Sector
In Rwanda, coffee is a primary export product, with nearly 22,000 metric tons of coffee exported each year from nearly 300 coffee washing stations (CWS) and more than 400,000 coffee farmers.
In Rwanda, coffee is a primary export product, with nearly 22,000 metric tons of coffee exported each year from nearly 300 coffee washing stations (CWS) and more than 400,000 coffee farmers. It is estimated that, annually, CWS need at least USD 36 million in credit to keep up with production demands.
Challenges Faced by Coffee Farmers in Rwanda
In an effort to address credit challenges, the need to increase CWS operating capital at the start of each season has been identified to ensure smooth operations and support to smallholder farmers. Access to credit improves coffee quality through increased investments in inputs and maintenance at the farm level and investments in infrastructure at the wet mill level, creating a positive feedback cycle.
Sustainable Finance for Rwandan Coffee
Earlier this year, the Rwanda Ikawa Nziza Cyane (INC) project hosted a pivotal roundtable conversation in Kigali, Rwanda, focused on access to finance for the coffee sector. The project involved key stakeholders, including CWS owners, representatives from Rwanda’s banking industry, and micro-finance enterprises. This dialogue explored the challenges and opportunities related to financing within the coffee value chain.
The roundtable featured presentations from eight banking representatives who shared their financial products tailored for the agriculture sector, particularly coffee. Over the past five years, lending agencies have made strides in enhancing their accessibility to farmers, with several banks now employing qualified staff with agribusiness experience to create a “shared language” and understanding of sector needs. This development helps bridge the gap between farmers and banks.
During the discussions, it became evident that banks are setting ambitious goals for agricultural lending. Some banks are setting goals such as reaching $150 million in agriculture lending in the next five years and hitting 30% of overall lending allocated to agriculture by 2030. These goals are underscoring the sector’s increasing importance. Institutions like Root Capital, One Acre Fund, and BK Techouse are also contributing by offering advisory services and fostering public-private partnerships alongside the Rwandan government.
Access to Finance in Rwanda’s Coffee Sector
Following the presentations, a panel discussion led by the Rwanda INC project manager featured insights from coffee washing station managers. The conversation highlighted the critical role that access to finance plays in ensuring business sustainability, sector growth, and support for farmers.
However, significant challenges persist. CWS managers outlined issues such as high interest rates, burdensome loan paperwork, and stringent collateral requirements that most farmers cannot meet. Recommendations from the panel included:
- Increased Field Presence: Banks should enhance their reach to CWS and farmers to foster better relationships.
- Product Awareness: Improving awareness of available financial products is essential for CWS and farmers.
- Collateral Alternatives: Developing alternative collateral options could alleviate the burden on smallholder farmers who lack traditional assets.
Recommendations for a Robust Financing Framework
To build a more robust financing framework for Rwanda’s coffee sector, several key recommendations emerged from the discussions:
- Strong Partnership: Foster close collaboration between CWS and banks to ensure mutual understanding of needs and processes.
- Holistic Loan Assessment: Banks should consider broader factors like drying conditions and climate change when evaluating loan requirements beyond just the harvesting season.
- Regional Adaptation: Payment terms and loan amounts should be flexible to accommodate regional differences.
- Efficient Disbursement: Involve CWS management in the seasonal loan process to ensure timely disbursement and alignment with business needs.
- Financial Flexibility: Banks should be prepared to adjust loan amounts based on market fluctuations, including exchange rate changes.
- Consolidated Banking: Ideally, a single bank should provide comprehensive financing for all CWS activities, from top management to casual workers.
The roundtable conversation in Kigali marked a significant step toward improving access to finance for Rwanda’s coffee sector. By prioritizing collaboration and understanding between banks and CWS, we can create a more sustainable and equitable financing landscape. Proactive engagement between farmers, CWS, and banks will ensure the delivery of high-quality and quantity coffee to ensure Rwandan coffee continues to be a preferred origin for international specialty coffee.
The Future of Sustainable Finance for Rwandan Coffee
The journey to enhancing access to finance is ongoing, but with continued dialogue and commitment, we can empower coffee sector actors to thrive. Let us work together to ensure that every coffee washing station has the financial support it needs to grow and succeed.
The Rwanda Ikawa Nziza Cyane (INC) project is a four-year European Union, JDE-Peets, and Government of Rwanda-funded coffee project aiming to improve the incomes of coffee farming households in Rwanda. The project supports efficient operations across 50 cooperative and privately owned coffee washing stations using digital tools for farm-level agronomic support to boost smallholder productivity and strengthen supply chains.
