A letter from WCCN’s Executive Director

Twenty years ago at the end of the Contra War in Nicaragua, WCCN’s board and staff brainstormed potential avenues for an economic development project. Before we were approached by The Nicaraguan Council of Protestant Churches (CEPAD) with the idea of working on microfinance, some of these possibilities were financing the production of commodities and goods produced by the organized poor in Nicaragua -- primarily coffee and ceramics. Finding a long-term sustainable business model was complicated at that point but, during the last 10 years, successful business models have been developed for this type of lending.

However, WCCN did not completely remove itself from supporting grassroots businesses. In fact, during the last eight years we have been supporting multiservice cooperatives in the Fair Trade coffee business such as Cooperative April 20th and CECOCAFEN at a lower scale. Although we indeed provided credit to those co-ops, our financial products with a microfinance lens and approach did not take into full consideration the distinct nature of agribusiness enterprises. By customizing the financing structure when supporting agribusiness partners, we may scale our support for these organizations.

This kind of financing has various names. In academia, it is called value chain financing, whereas other social funds call it Fair Trade financing. We prefer to call it “grassroots business financing,” which better reflects the organizations we are interested in supporting. In fact, the only players in an agribusiness value chain that we are interested in financing are grassroots enterprises of the organized poor. Typically, these organized enterprises have the legal structure of cooperatives, but sometimes they maintain other structures, such as private nonprofit associations. These organizations are grassroots businesses whose members are typically small and poor producers who organized to commercialize their main agricultural products. Often, they organized under a Fair Trade initiative to improve their income and the well-being of their families and communities.

As a result WCCN has started a pilot project to provide financing in Nicaragua and Honduras for purposes other than microfinance: to help grassroots businesses better serve their members, primarily small-scale producers. Loan proceeds would be used by the grassroots business to finance the purchase of the harvest from their small-scale producers. WCCN will focus primarily on Fair Trade coffee since the market is well developed, the main producers are grassroots businesses, and other “ethical” players are involved, including import and roaster companies such as Equal Exchange, Cooperative Coffees, Sustainable Harvest, etc. Our supporters can help by purchasing these products in the marketplace.

This edition of Grassroots Connections focuses mainly on this grassroots business lending, and Jeanne Duffy, our fundraising and marketing director, has taken the lead by writing most of the pieces. For the first time, this issue includes a profile of one of our investors and long-term supporters, Jim Topple. We hope you share our excitement about this new lending product. We approach the 20th anniversary of our loan fund next year with more tools to support the poor in Latin America and help them bring hope to their homes and communities.

Sincerely,

Carlos Arenas
WCCN Executive Director