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Starbucks More Than Doubles Size of Coffee-Farmer Loan Program

by Craig Giammona

Starbucks Corp. is more than doubling the size of a loan program for farmers that it started seven years ago to help maintain its supply of ethically sourced coffee.

The company will commit an additional $30 million in its Global Farmer Fund program, which debuted in 2008 and has provided $20 million of loans to more than 40,000 farmers in eight countries. The new infusion of cash will be invested by 2020, Seattle-based Starbucks said in a statement Monday.

“Local commercial banks would never take the risk of these kinds of loans,” said Craig Russell, executive vice president of Global Coffee for Starbucks. “As a responsible roaster, we wanted to be invested in making sure these farmers have excellent trees.”

The loans so far have mostly been short-term, helping farmers bridge the gaps between crops by providing capital for necessities like shovels and fertilizer. Starbucks now wants to fund loans as long as seven years so farmers can invest in infrastructure and deal with challenges generated by climate change, Russell said.

While many of the farmers who receive the loans are Starbucks suppliers, that’s not a requirement to participate in the program. The first $20 million invested by Starbucks was distributed by Root Capital and the Fairtrade Access Fund. The farmers typically pay about 10 percent interest on the loans, while Root Capital returns an average of 1 percent to 3 percent to investors like Starbucks, according to Liam Brody, Root’s senior vice president.

Root, founded about 15 years ago, has distributed about $1 billion in loans to farmers in various industries, with a focus on coffee, cashews and cocoa, Brody said. Without these types of loans, coffee farmers wouldn’t have access to affordable capital to invest in their businesses, he said.

“Many of them would be paying loan sharks 50 or 75 percent,” he said. “We’re offering something that’s competitive to the market rate.”

--Adapted from http://www.bloomberg.com/--

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