RAOS: Training for a More Resilient Future in Honduras
In the face of adversity, this coffee cooperative is using credit and training from Root Capital to help its farmers thrive.
It all started with 19 farmers and one contract. In 1997, following a long harvest season, farmers in the highlands of Honduras banded together to export just over 5,000 pounds of coffee to a group of buyers in Germany. That small contract sparked something within these men and women—who went on to form the RAOS coffee cooperative. Over the next 20 years, with support from Root Capital, their small business would grow to 300 farming families exporting 4.5 million pounds of coffee annually.
Along the way, the employees and members of RAOS have overcome challenges: from management capacity to climate crises. Root Capital’s unique credit-plus-capacity model has given RAOS the tools it needs to successfully transition from a small, growing business into a resilient engine of impact in its community.
The leadership of RAOS spent their first decade focused on day-to-day operations. Busy keeping the lights on and the coffee moving out of the door, they were able to sign only a few contracts and access scant funds. In 2007, Root Capital provided them with a modest loan of $75,000—which allowed RAOS to increase purchases from farmers and grow their exports. But without proper documentation and adequate internal controls, the organization couldn’t access additional financing.
For many small and growing agricultural enterprises, the story ends here. In remote, rural areas, educational opportunities are limited. Staff can’t access the training they need to strengthen business operations and build larger lines of credit. As Root Capital reached our 10th year, we decided to tackle this critical challenge. In 2012, with the generous support of Green Mountain Coffee Roasters (now Keurig Dr Pepper) we launched RootLink—an early iteration of what has become our advisory services program.
Expanding Access to Financial Education
We chose RAOS as one of our first RootLink clients. The biggest priority was to redesign their internal credit system, through which farmers can borrow money in advance of the harvest. When done right, these credit systems are a huge boon to farmers, allowing them to make necessary investments in farm renovation and fertilization while having cash on hand to feed their families during the “lean months.” When done wrong, however, internal credit systems can trap farmers in a vicious cycle of debt while weakening the cooperative’s own finances.
Over a period of two years, our team of advisors helped RAOS remake its internal credit system from the ground up. With our support, RAOS developed manuals and consistent evaluation tools to determine the right amount of credit for each farmer-member. In addition, we helped the cooperative hire and train an employee dedicated to internal credit and risk management.
"It's a great support for the producers in the rural areas who can't easily access loans elsewhere,” says RAOS accountant Yolanda Argentina Romero Lacio.
Beyond just the benefits to farmers, the newly designed system strengthened the cooperative’s overall financial health — allowing Root Capital to make larger loans that would help the business grow.
Then la roya came to Honduras.
Resilience Through Agronomic Training
La roya, or coffee leaf rust, steamrolled Latin America’s coffee industry in 2013, hitting Central American countries particularly hard. The disease targets coffee trees, coating the leaves with a biological rust that hinders crop yields until it eventually suffocates the tree — killing the farmer’s source of income.
The roya crisis required a bold and dramatic response. So in 2013, Root Capital teamed up with Keurig Green Mountain (now Keurig Dr Pepper) and other partners to form the Coffee Farmer Resilience Initiative.
“Through our direct relationships with suppliers like RAOS, Keurig Dr Pepper recognized the needs facing farmers and the organizations that support them during this crisis,” says Colleen Popkin, Senior Manager, Sustainability, Keurig Dr Pepper. “As a twenty-year partner of Root Capital, we knew their expertise would be critical to help farmers recover from roya and build stronger, more resilient and, ultimately, more successful businesses.”
Businesses like RAOS needed emergency advisory services, including agronomic training, to weather this storm. With our support, RAOS created a full-time position for an agronomist to provide timely, tailored farm visits to combat the spread of the disease. At the same time, despite the crisis, we continued to work with the cooperative on long-term financial planning. Together, these efforts enabled RAOS to not just survive, but continue to grow at a time when farmers needed their support more than ever. Thanks to this capacity building, RAOS progressively grew its line of credit while other organizations were slowing down—or shuttering altogether.
A Long-Term Partnership
Today, our work with RAOS is far from over. With record-low coffee prices and the quickening pace of climate change, sustainable coffee enterprises serve crucial roles in helping farmers build a resilient future. In early 2018, alongside USAID and Keurig Dr Pepper, we formed the Partnership for Sustainable Coffee: a public-private initiative to improve the lives and livelihoods of 90,000 smallholder coffee farmers across the globe. Under this partnership, our advisory services team is continuing to improve financial management capacity at RAOS. The cooperative is now able to obtain favorable loans from commercial banks — a key indicator of a more sustainable business. At the same time, we are helping RAOS support its farmers in learning how to adapt to climate change through agronomic and data-focused advisory services. And through it all, RAOS continues to supply significant volumes of green coffee to Keurig Dr Pepper, meeting the high expectations of one of the world’s largest coffee buyers.
“Root Capital has strengthened our cooperative on professional and personal levels,” says RAOS Vice President, Melba Sosa. “We look back and say, ‘Wow, we’re not the same business as we were before.’”
The road from 5,000 pounds to 4.5 million was anything but simple, and the path to the future will certainly carry new obstacles. But thanks to Root Capital and the continued support of our partners, RAOS is prepared for the future. For the farming families who benefit from the cooperative’s services and market connections, that future looks bright.
Photos © Sean Hawkey and Root Capital