Description

The goal of this campaign is to provide early financing to a Cooperative that brings together 3.200 families that produce certified, organic, specialty coffee in the Northern Highlands of Peru at 1,000+ meters above sea level.

These families (93% of which are smallholder farmers, holding a land of less than 5 hectares) are aggregated into a social purpose entity – a Cooperative – whose goal is to provide the farmers with Environmental, Social and Governance (ESG) services in order to improve their productivity and respond to their social needs. These services include training, health, family, and wellbeing support, as well as help with fair-trade and organic certifications.

The growth of organic coffee production in these regions has boomed over the last 20 years, spearheading Peru as a major producer of organic coffee (at about 90,000 ha of certified organic land, Peru is the world’s second-largest exporter of organic coffee), a business that generates 1.5 million jobs involving approximately 223,000 families.

Such phenomenal growth of organic products emerged from unintended circumstances – given the fact that products contained low levels of chemical fertilizers and pesticides due to their unaffordability – customers saw these products with enhanced interest.

To accommodate the increasing demand and due to the farmers’ inefficient production methods - a consequence of their lack of capital - the growth in these regions has been mainly achieved from opening up new areas to commercial agriculture causing Amazonian deforestation – making such growth unsustainable and with a high environmental cost.

The funds raised through this campaign will be used as Transactional Working Capital to provide liquidity to the Cooperative. Transactional Working Capital is a short-term debt financing asset that allows the producer/aggregator/seller to receive early payments and the buyers to delay their payments.

In commercial sales, standard market practice for payments is between 30 to 90 days from the time when the seller issues its invoice – such payment terms usually strain the cash availability of the seller, while allowing the buyer to hold on to their cash for longer. Often times, the seller’s working capital gap is resolved by accessing traditional bank financing, which usually requires to be over-collateralized over hard assets (i.e. factories, buildings, machineries). However, due to the elevated requirements demanded by banks as guarantees for the loans, impossible to meet for smallholders, such bank loans seldom resolve any working capital gap.

Transactional Working Capital fills this gap without the need for collateral. That, in turns, obtains the following results for both the smallholders and the aggregator:

• Premium Prices - The producers receive a premium price that reflects the value of the coffee, resolving the cash pressure and eliminating the need to provide discounts to the buyer, in return for early payment.
• Higher profit margin that can be reinvested: the higher profit margin can then be allocated not only to pure subsistence but to invest in capacity building of technical agricultural skills & technologies, improving production standards and yield investments in organic, fair trade and quality certifications.

WCA maintains a Trade Credit Insurance Policy with a global insurance company providing worldwide trade credit insurance, surety, and collections services, with a strategic presence in 50 countries. The Project repayment will be guaranteed under such Trade Credit Insurance Policy, which effectively protects GoParity lenders from default in a credit related (e.g. insolvency, bankruptcy). The policy covers against losses from Insolvency, Protracted Default and Political Risk and covers up to 90% of the value of the underlying commercial transaction financed by WCA. As the latter provides up to 85% financing to any underlying commercial transaction, the policy in essence covers more than WCA’s entire financing.

The Impact

The Project's

• Promoting an inclusive value chain: aggregating 3.200 coffee producers who will have an active part on the Cooperative’s work;
• Improving working and financial conditions for small producers: 93% of the 3.200 families covered by the project own less than 5 hectares of land;
• Facilitating the Cooperative’s social mission: by ensuring early payments at a premium to the Cooperative, the latter can then reinvest the money in training, education, social support to the farmers and their families, health support and help with organic and fair trade certifications;
• Reducing rural poverty: the smallholders will receive a higher profit margin for higher value-added products (when compared to traditional “commodity coffee”) which can be allocated not only to pure subsistence. They will also have access to larger national and international markets;
• Promoting the growth of organic products: all the coffee produced is organic and certified, containing low levels of chemical fertilizers and pesticides;
• Contributing to the environmental protection of the Selva Region, in the Peruvian Northern Highlands: in order to meet increasing demand and due to the farmers’ inefficient production methods (a consequence of the lack of capital), the growth in the Selva Region has been mainly achieved so far through Amazonian deforestation - a growth that is not sustainable and is coming at a high environmental cost.

The Company's 

• Enabling agricultural efficiency and reducing rural poverty: market access has been identified as one of the most relevant factors influencing the performance of small-scale producers in developing countries and, hence, one of the enablers of agricultural efficiency, a vital opportunity to reduce rural poverty. WCA provides smallholder access to markets via value chains;
• Promoting gender equality: WCA is a female-owned and -led company. In addition, the company applies a gender-lens to its investments and seeks to finance businesses that have the appropriate governance and responsible management standards to allow women to grow successfully in their work environment.

Impact Indicators

1.600

people impacted

Contribution to the Sustainable
Development Goals

Sustainable Development Goals

Financial viability

The loan obtained through Goparity investors will be repaid from coffee sales as follows:

1. The loan amount is significantly lower than the total financed by the WCA, creating a financial cushion.
2. Repayment comes from buyers in Western markets with a history of successful payments to the Cooperative over several years.
3. Loan repayment is protected by trade credit insurance.

Download Key Investment Information Sheet

The Promoter

About WCA (Working Capital Associates) LLP

WCA is the only female-owned and led company providing direct financing to value chains of agriculture products from Sub Saharan Africa (SSA) and Latin America (Latam).

WCA follows a themed responsible investment approach which “allows investors to address ESG issues by investing in specific solutions to them, such as renewable energy, waste, and water management, sustainable forestry and agriculture, health products and inclusive finance” (PRI).

The company follows two key themes:

The company also applies gender-lens to its investments, seeking to finance a significant level of female-led businesses that follow sustainable and responsibly managed standards.

WCA’s goal is to grow value chains by providing access to finance to SMEs, in the framework of three keys SDGs:

• SDG 2 - End hunger, achieve food security, and promote sustainable agriculture.
• SDG 12 - Ensure sustainable consumption and production patterns.
• SDG 8 - Promote inclusive and sustainable economic growth, employment, and decent work for all

The company also applies a “No Harm” Impact Goal, when reviewing its investment opportunities and applying a negative screening to harmful/controversial products and industries.

The team is composed of ten professionals, with senior executive team members having 10+ years of experience in Emerging Markets and/or Trade Finance, and a collective experience in financing over USD1 billion in short-term debt and Emerging Markets transactions.

The team

Federica Sambiase

Founding Partner and CEO

Federica Sambiase is a senior Banking & Finance professional with 20+ years of experience in originating, advising and structuring corporate finance solutions for global clients.

Andrew Darling

Chief Structuring and Product Officer

Andrew Darling is a veteran Trade Finance specialist with over 40 years experience of providing funding to Corporates across a broad spectrum of products.

Jorge Cerna Coronado

Latam Origination and Relationship Management

Jorge Cerna is an investment banking & finance professional with 10+ years experience in origination, structuring and relationship management of local and regional clients in Latin America.

Gathuo Njoroge

SS Africa Origination and Relationship Management

Gathuo Njoroge is a finance and technology expert with over 10 years experience in product development, research, origination and operations of SME and corporates finance solutions across East African and US markets.

Ekaterina Kobzareva

Investments Manager

Ekaterina Kobzareva is experienced and highly qualified Investment professional with 6+ years in financial analysis, due diligence and deal structuring (both Buy side and Sell side) across a number of different industries.

Sara Piedrabuena

Designer and Latinamerican Coverage

Business Model

Updates

2021-03-09

Project Update

The promoter has confirmed that the funds have been lent to the cooperative and that the first tranche has been returned and repaid to investors.