Chocolate at Risk? : Why a stable cocoa supply for the world’s chocolate business necessitates a commitment to sustainable financing | Citrus North
Farmers in Cote d’Ivoire who work on a smaller scale generate forty percent of the world’s supply of cocoa and are the backbone of a business that is worth millions of dollars. In spite of the fact that they are responsible for up to 15 percent of Ivory Coast’s gross domestic product, the great majority of those people are still impoverished as a direct result of declining productivity.
Cocoa production rates in Côte d’Ivoire are among the lowest in the world, mostly as a result of the age of trees, the degradation of soils, and the development of disease. The cocoa farmers are switching their focus to other crops with more potential for revenue, such as rubber plants since they do not have access to any long-term financing options.
It is vital to make investments in sustainable cocoa cultivation in order to provide a reliable supply of cocoa for the global chocolate industry and to improve the living conditions of farmers in Cote d’Ivoire. Both of these goals will help improve the world’s chocolate supply chain. During the course of the last year, I have made two trips across the whole of Cote d’Ivoire in order to investigate potential avenues for assisting cocoa farmers in gaining access to long-term finance in order to assist in the revitalization of their farms. An assessment of long-term loans related to improvements in the farm that I carried out in partnership with the Sustainable Finance Initiative revealed that such loans are doable and can be repaid with profits from the improved output that occurs as a result of these investments.
It’s encouraging to see that investors concerned about social responsibility also recognize this as a potential investment opportunity. I have had conversations with a wide range of “social finance” lenders as well as establishments that provide “development financing” in both Europe and the United States. The US who are wanting to raise finance to support cocoa farmers in their quest to rehabilitate their plantations is being assisted by others in the U.S. who are also looking to raise capital.
Some social lenders, such as Alterfin and responsibility, have made investments in the cocoa industry by lending money to export cooperatives like Ecookim. These Citrus North Loans have helped the cooperatives grow their businesses. In 2012, a local microfinance institution known as Advans Cote d’Ivoire started providing farmers of cocoa with short-term loans for crop protection and fertilizer as part of the Cocoa Livelihood Program run by the World Cocoa Foundation. It is anticipated that the institution will provide assistance to approximately 7,000 cocoa farmers in 2013.
Cote d’Ivoire does not have access to a financial mechanism that would allow it to channel the kind of large investment necessary to secure the industry’s long-term revival, thus it cannot guarantee that this will happen. The lack of intermediaries in the financial sector in addition to the presence of structural obstacles have made it difficult for investors who are prepared to put in money, as well as for smallholder farmers, to get financing at acceptable rates.
In general, there is a need to provide options and products for the financial services industry that are adapted to satisfy the specific requirements of smallholders in terms of their financial circumstances. The Rainforest Association’s Sustainable Finance Initiative has this as one of its primary objectives for achieving success.
As was mentioned earlier blog post in a recent blog post by Rainforest Alliance President Tensie Whelan, there is an enormous desire for sustainable funding and a massive opportunity for lenders to boost their bottom line while helping thousands of farmers in small-scale farming who are working toward sustainable development. In order to close the funding gap for sustainable development, one of the most important things that need to be done is the creation of new and innovative financial products, in addition to the provision of adequate training, which will cater to the needs of investors as well as the requirements of farmers.