Cooperatives, quality and climate resilience: insights from Oikocredit Journeys’ Peru trip

Earlier this year, a group of Oikocredit investors travelled to the heart of Peru’s coffee production in the Cajamarca region. As part of Oikocredit Journeys, we met with competent and hardworking coffee farmers and committed cooperatives and saw firsthand the social impact of Oikocredit’s financing on smallholder farmers and their families. Here are some vignettes from our visit.

Cooperatives and certification matter

Being part of a cooperative and obtaining certifications (such as organic, Fairtrade, or Rainforest Alliance) can significantly impact farmers’ lives. Take Kelly Aranda Chuqihuanga, a member of Oikocredit partner Cooperativa Agraria Frontera San Ignacio (COOPAFSI). Together with her husband Hernan, she grows organic and fairtrade coffee and other crops on six hectares of steep slopes in a remote area north of San Ignacio.

With technical assistance from COOPAFSI, Kelly has improved the yield and quality of her coffee crop. Together with the premiums she earns from organic and fairtrade certifications, this translates into a higher income for her family. Their improved standard of living has allowed them to invest in the education of their children – the oldest one just finished university – and to add a toilet and a kitchen to their home.

Quality coffee boosts economic resilience

Carefully grown specialty coffee can ensure stable incomes for farmers, something that Mauro Perez Bustamante, a member of Oikocredit partner Coopac Norandino, understands and exemplifies.

He used loans from the credit and savings cooperative to grow his coffee farm and invest in the education of his four sons. Mauro prefers selling his high-quality coffee to Caravela, a private coffee company, rather than to a coffee cooperative.

Technical assistance from Oikocredit partner Caravela has helped Mauro to grow speciality coffee which always fetches better prices and reduces his dependence on volatile world market prices. “I grow better coffee than most and Caravela pays me a better price,” he says.

Hardy species withstand climate change

Farmers must now grapple with the increasing impact of climate change on their coffee plantations. Wilson Jonny Silva Sanchez, president of the Oikocredit partner cooperative Sol y Café, reports that recent droughts have delayed harvests and resulted in smaller coffee beans, affecting quality and prices.

On his coffee farm, Wilson is now experimenting with more resilient coffee plant varieties. All the farmers our group met now take part in reforestation programmes and plant trees that shade and protect their coffee plants.

Working in coffee: attractiveness and challenges

The labour-intensive nature of coffee farming carries a number of challenges.

Finding younger people willing to work in the coffee sector is increasingly difficult. The younger generation, who often have a better education than their parents, usually seeks alternative career paths and isn’t eager to take over family farms.

Making careers in coffee and other agricultural areas more appealing is essential for the future of sustainable food production. Initiatives like the school created by Oikocredit partner Sol y Café encourage children to familiarise themselves with agricultural activities, such as by overseeing the school’s nursery. “The school is based on our cooperative philosophy. Here we share our culture and passion for agriculture with the children of our producers, employees and the local community,” Managing Director Gerardo Alarcón Cubas says.

Bridging the liquidity gap with access to finance

Oikocredit’s coffee partners face an annual funding gap, impacting their ability to operate and grow. When farmers are ready to sell their coffee, cooperatives and processors must pay them promptly. However, the cooperatives and companies themselves only receive payment two to three months later, after their coffee has been processed and shipped overseas.

Donald Delgado Sanchez, General Manager of coffee cooperative UNICAFEC, emphasises the importance of Oikocredit’s loans: “We’re grateful for the timely loans which allow us to pay our members right away. Without this funding, our members would sell their coffee to other buyers.”

Oikocredit is often not the only financier, adds Lenin Tocto Minga, Commercial Manager at our partner Finca Churupampa. But Oikocredit and other impact investors offer lower interest rates than local banks and offer additional support like capacity building.

During challenging times, Oikocredit stands by its partners, as was evident during our visit to Sol y Café. When the cooperative faced difficulties due to the pandemic local banks didn’t advance a loans but the cooperative persevered and recovered thanks to the continued financing from Oikocredit.

Brewing success for Peru’s coffee sector

We returned home with an insight into the many different elements that go into brewing a cup of coffee. From bean to cup, it was evident that the coffee industry in Peru and elsewhere rely on a web of interconnected factors.

Cooperatives play a crucial role in providing farmers with the resources and support needed to improve their practices and market their products effectively. Essential certifications ensure that the coffee meets high standards of quality and sustainability and improve the impact of coffee farming on nature and humans. A focus on climate resilience addresses environmental challenges, enabling farmers to adapt to changing conditions. Most fundamental of all, reliable financial support is vital in sustaining and growing the industry.

Oikocredit’s coffee journey showed us how each sip of our morning brew reflects the dedication and effort invested at every stage – from the farm to storage, processing, export and roasting – revealing the true story behind each cup.