Thomas Tichar

Quinoa, Dairy, Coffee: Value Chains and Rural Microcredit in Bolivia

Bolivia has grown famous for its 20-year history in microfinance. This growth and success has meant that targeting the urban poor as an audience for loans has gradually become saturated, encouraging both established and growing Bolivian microfinance agencies to focus on rural clients. This is an audience that’s usually seen as a high risk/low return, and thus peripheral, group in many poorer countries.

As part of my research with Sembrar Sartawi (SS), a growing microfinance organization, I travelled to a number of small towns to better understand how they are able to provide loans to a predominantly rural clientele while remaining sustainable as an enterprise. What I noticed is that they take as much time in considering the sustainability of the sector in which their clients work, as how much they trust the clients themselves. The following provides an overview of three value chains – quinoa, dairy and coffee production – and how each defines the ways in which micro-loans are provided. The three towns are in Western Bolivia, a predominantly poor part of the country, with little formal employment to speak of.

Although a small town, Challapata is the epicenter of Bolivia’s quinoa production for both domestic and foreign demand. And given that Bolivia is the largest exporter of quinoa in the world, its feria, or “weekly market,” (a staple of almost every town and city in Bolivia) largely defines global prices for all grades of the grain. The production of quinoa here was the most highly mechanized process I saw during my fieldwork; while the cultivation itself is still dominated by family-maintained plots of land, everything from planting to the complex process of washing and sorting the grain is becoming automated. Sieves, machines for cleaning the grain, and tractors are prevalent in Challapata in part due to loans secured from microfinance agencies. Colleagues from the local SS office explained to me that despite the mantra of high-risk loans to single-crop farmers, they recognize the developed and stable quinoa value chain as good reason to invest in this sector. The cultivation of quinoa thrives on a strong domestic demand, given its history as a staple of the national diet, while its increasing popularity in richer countries as an organically-produced and healthy grain is providing the incentive to both standardize and increase production.

Meanwhile, Patacamaya’s farmers predominantly produce dairy for commercial purposes, which necessitates a relatively developed network to transport, pasteurize and conserve the product. Marafino, a local milk farmer, took me on a tour of the community. Along the way, we drove past fields where alfalfa was grown as feed for cattle, as it helped with the quality and quantity of milk production. He explained that this was why he and other community representatives were working together with SS to develop a proposal for a larger loan than they might otherwise be granted as individual borrowers (they’re seeking to purchase a tractor to help produce more alfalfa). Farmers milk their cows by hand, either in the morning or afternoon, with each community having made agreements with PIL (the largest dairy company in Bolivia) or Delicia to pick up the milk every evening.

Providing loans to a farmer relying on one source of income of course is a high risk, but in this case it is tolerable given two factors. First, is the fact that the farmers’ incomes are spread out over time, given that milk is produced daily rather than once or twice a year (as in the case of crop cycles). Likewise, if one cow becomes sick, this need not excessively affect output – again, unlike in the case of crops. Second, the formal and informal production chains are proving to be robust; in the case of formal networks, PIL and Delicia have developed distinct routes along which they pick up milk daily. Regarding informal networks, the local SS office, in working closely with the community representatives, were confident these groups could work together to develop a viable business plan to procure and repay a loan for a tractor.

The last example is that of Caranavi, a bustling little town surrounded by communities that collectively produce 95 percent of Bolivia’s coffee, all organically. However, unlike quinoa (and dairy), coffee is not popularly consumed in Bolivia, and so is grown primarily for export. According to a specialist at BIB, a French export company that works with local coffee producers, it is this lack of domestic demand – and therefore culture – that is the cause of an ailing production chain. Many farmers who grow coffee (among other products) sell to a cooperative that would then sell on to a more formal buyer. However, a number of farmers complained of the lack of value in selling into these cooperatives, saying they were underpaid for their coffee and received little agricultural training in return for joining – something the farmers considered valuable.

Celccar, an NGO, works to try and improve the technical and financial assistance that coffee cooperatives provide to their members, while BIB supports projects run by its partner cooperatives to improve bean quality. Nevertheless, this lack of coffee tradition and domestic demand seems to be the cause of an industry that is walking but not yet running. Moreover, in contrast to quinoa production, which encompasses practically the entire value chain, Caranavi farmers and buyers go only so far as to process the bean to its “green” stage. Roasting, packaging and branding all takes place outside of the country (with the exception of mostly lower-grade coffee grain that is roasted and sold domestically). Indeed, the local SS office told me they would be less likely to provide a loan to a farmer who only produces coffee than one who has diversified into other crops, so as to lower risk.

None of these three products lack demand, either domestically or internationally. Challapata and Patacamaya however have been able to capitalize on domestic demand to develop strong value chains – albeit to different degrees – while farmers and organizations in and around Caranavi are only just starting to cooperate and capture a small portion of the organic coffee market for themselves. The notion of rural clients and monoculture being too-high a risk, thus does not by definition apply in the context of a robust value chain, a fact that microfinance agencies like SS are eager to support.

The next step is to better understand how to emulate these success stories and apply them to value chains that are still fragile. In doing so micro-loans will be able to help more poor farmers and rural communities, in Bolivia and elsewhere.

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