Optimism

Helping farmers bank on a robust future for coffee

by Vicki Hyman

The highlands of the Sierra Madre in Chiapas are known for producing some of the best coffee in the country — which means, farmers here say with pride, some of the best in the world. The life of a coffee farmer in southern Mexico has not changed much over the decades: the seeds are planted in the rich volcanic soil, green coffee plants flower and turn red as they ripen, and all are painstakingly picked by hand.

 

The hilly terrain of these small plots — a typical farm is only a hectare or two — means mechanization is not often possible. And given that the coffee “cherries” ripen at different rates, even rudimentary mechanization may not be desirable. But there is one powerful tool that can help these smallholder farmers, who are increasingly squeezed by middlemen eating up their profits, become more financially secure as they sustain the coffee supply chain’s future: digital payments.

 

There are 235 million people around the world who make their money selling agricultural products but remain outside the formal financial system. That can mean hours-long trips to the nearest city to cash their checks and no secure place to store and manage their money. 

“We are always rushing, we don’t have time,” says Mario Alberto, a smallholder farmer in Chiapas, near the border of Guatemala. “Sometimes when we visit banking branches, those are saturated, and the bank just gives us 6,000 pesos (approximately $256). So this is a difficult situation for us because when we sell the coffee, we need the money to cover all expenses related to the coffee product.” 

A robust partnership is brewing in these coffee communities to digitize the coffee supply chain, giving farmers a safer, more convenient — and crucial —  direct way to get paid by the world’s largest coffee merchant Neumann Kaffee Gruppe (NKG) in Chiapas and Veracruz.

Through the Café Paga-NKG BLOOM collaboration between NKG’s local subsidiary, Exportadora de Café California in Mexico, Mastercard, banking partners Banco Azteca and Citibanamex, and Fundación Capital, farmers are issued a debit card and receive training so they can collect payments electronically, manage their money and save it — reducing earnings lost to intermediaries and increasing transparency between the farmers and their buyers while keeping their money secure. The initiative has since expanded to Colombia. 

“The situation now in Mexico is very complex, and there are some places where you cannot keep your money at home because it could be very dangerous,” says Luis, another Chiapas farmer who opened his first bank account through the initiative. “It is good for me because now I don’t have to keep my money at home, and I have the opportunity to save money in a safe way.”

 

But that’s only one part of the transformation of this cash-based ecosystem. Mastercard is working with payment facilitator Qiubo to help the small businesses that supply the farming community with household basics like soap or toothpaste accept electronic payments. Through its workshops supported by the Mastercard Center for Inclusive Growth, Fundación Capital can combat myths about digital payments and build confidence in formal financial institutions that have not adequately served their needs in the past. 

“It was difficult to break the paradigm around the belief that it’s not safe to keep their money in the bank,” says Guillermo, a field officer with Exportadora de Café California, the NKG subsidiary in Mexico. “It was a cultural shock for them, but gradually they have been accepting and using the banking accounts.”

 

These local shopkeepers are also being digitally enabled through a smartphone to become ATMs for the community, and in that way farmers can cash out closer to home without having to go to the main town in the region. For the shopkeepers, this means that they don´t have to travel to banks in the nearest city once or twice a week – the paper bills literally strapped to their bodies under their clothes to reduce the risk of being robbed while trying to deposit their revenue.

By creating a digital means through which NKG can directly pay farmers in a safe, fast and affordable way, NKG can then open credit lines for farmers so that they can access needed cash even months before the cherries become ripe for picking. That enables families to better deal with the often called “hunger months” when the coffee harvest isn´t there yet. 

“Through our sustainable sourcing strategy NKG BLOOM, we are providing farmers with critical services, including financing, training and market access, which they need to run their farms at full potential and maximize their incomes from coffee,” says Catalina Eikenberg, Head of Sustainable Business at NKG. “Without the possibility for digital payments, this would be operationally impossible. With digital payments, it cultivates a pathway to full financial inclusion and a road to resilience.”