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Jesse Last, Lending & Strategy Associate at Root Capital, tells us how their financing model can help build closer value chain business relationships with longer-term outlooks... Figure 1. Rural Missing Middle Spotlight >> Root Capital – rural finance Root Capital is a nonprofit social investment fund that provides capital and financial training to small and growing businesses in rural areas of Africa and Latin America. We work to bridge the gap between microfinance and corporate banking for farmer and artisan associations and private enterprises that source from small-scale producers. By extending capital, delivering financial training and strengthening market connections, Root Capital reaches remote populations that traditional banks have long overlooked – the so-called “Rural Missing Middle” (see Figure 1.). Our principal loan product is short-term trade credit, for which we use forward purchase contracts as the loan guarantee (Figure 2.) Root Capital will finance up to 60% of the value of the purchase order, with a credit term of between 4 and 12 months. Loan sizes ranges from $25,000 to $2 million and our trade credit loans are used by producer associations and private enterprises to cover working capital needs associated with fulfilling purchase orders in dollars, pounds and Euros. We also offer longer term loans for investment in equipment and infrastructure and to expand production. Figure 2. Root Capital Factoring Model Founding: 1999 Root Capital Overview Mission: To pioneer finance for grassroots businesses that build sustainable livelihoods and transform rural communities in poor, environmentally vulnerable places. Disbursements: $200 million Clients: 282 Loans: 777 Repayment: 99% Headquarters: Cambridge, MA Associated Offices: Nairobi, Kenya; San Jose, Costa Rica, Lima, Perú; Managua, Nicaragua; Quetzaltenango, Guatemala; Chiapas, México Countries of Operation: 30 (15 in Africa including Mali, Burkina Faso, Uganda and Tanzania; 15 in Latin America including Peru, Colombia, and Nicaragua) Root Capital Investment Officer Richard Tugume with a Ugandan cotton grower Since our founding in 1999, Root Capital has applied this model in several industries, including coffee, cocoa, fresh produce, and cotton. We have disbursed more than $200 million via 777 loans to 282 clients, and we have a 99 percent repayment rate. One of the key characteristics of Root Capital’s model is the involvement of our clients’ buyers. We have developed close relationships with a number of leading corporations that source globally, including Starbucks, Green Mountain Coffee Roasters, General Mills and The Body Shop. Through partnership with Root Capital, these companies may benefit from more reliable supply chains, increased producer volumes, and the removal of producer financing from the company’s balance sheet. As Root Capital expands lending to organic cotton growers, we look forward to developing similarly strong relationships with leading players in the cotton value chain. For more information about Root Capital, please contact Jesse Last at finance@rootcapital.org.
Feature >>> Tracenet – A traceability system for India’s organic production Regional focus >>> India By Prabha Nagarajan, Regional Director India, Textile Exchange The increased awareness in the export markets and a growing need for traceability and accountability of products, saw APEDA, the agency set up by the Ministry of Commerce to Christina promote Boecker, and regulate Sekem the export of agricultural and processed foods from India launch successful traceability programs for grapes ( Grapenet) and pomegranates ( Anarnet ) in the mid 2000s. This has now been followed by TRACENET, a pan India, web based system to enable regulation, compliance and monitoring of all organic production. The system was launched in May 2010 and became mandatory in June 2010. Prior to this APEDA (the Agricultural and Processed Food Products Export Development Authority) conducted more than 29 training programs for stakeholders all over India. Trials have also been conducted and feedback sought before the formal launch. All the accredited certifiers have been co opted by APEDA to register all the operators who are engaged in organic agricultural production. These operators are assigned a unique 12 digit Registration number, and issued a Registration Certificate, after obtaining all the details such as name, address, area, scope of activity and number of farmers etc. It is well worth remembering that India has been the first country to introduce the concept of group farming, and that several farmers in one group get managed by one Internal Control System (ICS). It thus becomes the responsibility of the ICS to ensure data entry of all the farmers in the group for Tracenet. If this is not possible then the Certifying body would take on this responsibility. The ICS manager inspects individual famers and forwards the reports to the Certification Body for verification and issuing of Scope Certificate. All Scope certificates and Transaction Certificates carry barcodes with unique ID for the exporters and for the Consignment. Key advantages of Tracenet are: A user friendly software that can be used 24/7. Reduction in duplication of data capture. Instant reference to previous steps in supply chain is enabled. Built-in checks and balances that ensure compliance. Documents can be issued only by going through the software. Enables APEDA to trace details of a consignment right down to the plot level. Photo courtesy: bioRe, India Quite simply traceability would mean the ability to track back or trace the history of a product through recorded means, from farm to final product. APEDA lists the key principles of traceability as follows: Identify products, production batches or logistic units. Record all successive links in the supply chain between production batches and logistic units. Record traceabilty data throughout the supply chain. Provide the downstream partner with all the information required to ensure product traceability. Providing for the above, the features of Tracenet ensure that all key stakeholders from farmers, groups, ICS Certification Bodies and APEDA are well integrated. APEDA has also held review meetings in various locations in India with stakeholders to identify and iron out teething issues. The Tracenet thus offers system based traceability, and is expected to ensure a superior control of the production and certification system. The big challenge of dealing with a complex supply chain can be better dealt with. Indeed Tracenet can be seen as a bold and strategic initiative to put India firmly on the map for agricultural exports, especially organic produce such as cotton. Overpage: Find out how Tracenet works. “Quite simply traceability would mean the ability to track back or trace the history of a product through recorded means, from farm to final product.”
Page 1 and 2: In this issue >>> - Uganda’s orga
Page 3: Feature >>> Nice to meet you! My na
Page 7 and 8: Regional focus >>> Latin America Ab
Page 9 and 10: Spotlight >> Tanzania - from raw co

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