Latin America | Smallholder farmers

Caravela connects Latin American coffee farmers


Rabo Rural Fund’s goal is to help organizations eventually make the step towards commercial lenders. That is often a difficult transition, but Caravela in Colombia managed to make the step, allowing the coffee exporter to continue to grow to reach its maximum potential.

Coffee farmer in Latin America

Caravela exports high-quality coffee beans from Latin America. Unlike other coffee exporters, Caravela buys the beans directly from smallholder coffee producers. Director Alejandro Cadena: “That offers benefits to all of the parties, the most important of which is that we can pay farmers the maximum price for their product. We build a long-term relationship with them, so we can also work on increasing their yields and the quality of their coffee. And finally, we don’t have to invest a lot of time and energy into finding suppliers every year.” In 2018, Caravela bought coffee from around 4,000 smallholder farmers in eight Latin American countries and reached 160 local communities.

Partnership

Caravela had received a loan from Rabo Foundation in 2005, but the company almost went bankrupt in 2010. Alejandro: “Most of the previous year’s harvest was lost due to bad weather. Fortunately, Rabo Foundation understood the situation and re-financed us. They also helped us find other investors to reinforce Caravela financially.”

These efforts were a success: the company grew and in 2014 it was able to meet its growing needs for financing by transferring to Rabo Rural Fund. “Like Rabo Foundation, Rabo Rural Fund believed in our model; how we buy high-quality coffee from smallholder farmers. Rabo Rural Fund not only offered us financing, they also opened the door to other social lenders and a commercial bank in Colombia. Having a strong brand like Rabobank standing behind you sends a highly positive message to the market.”

Own two feet

According to Alejandro, the threat of bankruptcy in 2010 made Caravela determined to eventually stand on its own two feet. “Those kinds of experiences make you stronger. It became clear to us that we could only help smallholder farmers if we were a financially stable and independent organization. So we worked hard to achieve that over the past few years – together with Rabo Rural Fund. We’re extremely proud to have received a credit facility from Rabobank Trade & Commodity Finance in 2018.”

Valuable

Caravela’s strong growth soon brought the organization to the maximum financing limit offered by Rabo Rural Fund. As Alejandro explains, the new financing by Trade & Commodity Finance (TCF) will enable the company to continue to grow without limits. “It was a complicated transition. TCF has a different perspective on our figures than a social lender would. But since we’ve been working towards this point for so long, and have already had experience with another commercial bank, the transition went smoothly. The great thing about TCF is that they understand us very well, thanks to their broad experience in the field of agribusiness. That’s extremely valuable to us.”

Consequences of climate change

Caravela now has access to enough funding to be able to grow. “We don’t have any more limitations in that area.” But what other challenges does Alejandro foresee? “Aside from the ever-volatile global coffee market, the main challenge is climate change. We’ve noticed that the costs of production are rising faster than inflation, while coffee prices are falling. We try to adapt to that by providing smallholder farmers with as much information as possible about the best ways to deal with climate change. The advantage of our model is that we have direct contact with the producers. That makes it easier to provide them with the information.”

A real partnership

Alejandro emphasizes that Caravela would never have come so far without the support and assistance of Rabo Foundation and then Rabo Rural Fund. “It’s a real partnership, not just a financing relationship. Rabo Rural Fund took the trouble of learning all they could about our company and our model, so they were able to help us more. No other organization has done that before. Their trust helped us move forward.”


When Caravela outgrew the support of Rabo Foundation they could rely on Rabo Rural Fund. An impact lender founded in 2011 by Rabo Foundation to strenghten organizations that have outgrown our financial support but are still too small or risky to obtain commercial bank loans.