Of the 2.6 billion people who live on less than two dollars a day, 75% are in rural areas. They are forced into short term survival tactics like illegal logging and slash and burn agriculture which trigger environmental destruction and actually worsen poverty .
Root Capital is trying to solve the problem of rural poverty by investing in small businesses that can grow to have big impact, especially for family farmers with only few acres of land.
Those small and growing businesses are too big for the five hundred dollar loan to the street vendor, and they're still too small to attract commercial investors.
So we founded Root Capital to help fill that missing middle and enable real businesses and real communities to thrive. You go to a coffee farm, you pick the ripe berries, after that you carry it to your home.
You start de-pulping using water to help you make the work easier.
And Edwasen Mushi, like ninety percent of Tanzanian coffee growers, owns about an acre of land. He faces the same challenges as other small role farmers around the world.
They like access to basic public services, water and electricity, medicine, education.
That work is very tiring my dear, very tiring. But what to do?,
You had to do it. Even though Mushi and other villagers formed an association to help market their coffee, they could only get very low prices because of the coffee's uneven quality.
The individual farmers were lacking proper equipment for the processing, lacking clean water to do the washing of the coffee.
The older methods also were affecting the environment because farmers couldn't take care of their waste disposal which is the pulp, and this is very acidic.
So, some of the Tanzanian farmers devised a new strategy.
The idea was to try and rejuvenate the coffee industry in Tanzania by focusing specifically on the qulity market.
This is a much different structure than what we saw yesterday.
Yeah.
But to produce that kind of coffee, the farmers needed new equipment, and to buy it, they needed a loan that neither micro finance institutions nor banks would give them.
That's where Root Capital came in.
And how many farmers are working with this machine here?
Here, we have about 57 farmers.
Most small farmers don't have traditional collateral. So, Root Capital looked for a guarantee from Starbucks, one of its largest partners, to purchase the coffee produced with the new the machines.
We want to be a reliable buyer of your coffee, because you are becoming a reliable supplier of this coffee.
So, we made a loan in 2006 of $225,000 for them to invest in 22 of these coffee washing stations.
The farmers no longer are de-pulping and processing at the individual level. They are coming together as a community and working at the central pulplery.
They're able to increase the quality. They're creating employment around the coffee washing station, increasing income by up to fifty percent, and the same time decreasing the polluted water by upwards of eighty percent from before.
Before the use of these washing stations we were buying almost nothing from the small scale farmers.
From one container in 2004, now we have thirty fold increase in our purchases.
To ensure that the farmers have the skills and tools needed to manage their loans and grow their businesses, root capital provides financial education and training.
I put it very clearly to them that credit is only a good servant if its master has the tools to be able to control it.
And that without these tools, which is the financial training, the servant ends up becoming the master. Shiwahaide nearly gave up coffee farming a few years ago.
But, thanks to the new pulping machine , she has been able to buy 4 cows, and able to make 80 chicken.
One, two, three.
The farmers ability to sell their product at premium prices enables them to make investments They bought mats and school supplies, materials so the children could learn to speak English.
You know, the hopes and the dreams of those children, in many respects depends on the success of their parent's business.
When you step back and think about investing in the coffee-washing stations , it's a no brainer in terms of the huge return that you get. Within four years communities can pay down the loan. And you have an enormous impact on the larger community and their ability to take that additional income and invest in things like education.
There is a very big difference, very big difference. It is very profitable to have for loan for working capital.
We also work in wild harvested products. Handcrafts, eco-tourism and fisheries, and are just getting into ...certified timber.
We've provided over 120 million dollars in credit to over two hundred rural businesses, representing three hundred and fifty thousand small holder producers in 30 countries, and we have a 99% repayment rate.
Root Capital alone won't be able to sort out the problem of known access to borrowing.
So who else will join the Root Capital to take up this challenge?
We believe the potential and the demand is unlimited. We need to reach millions of people, and if we do, we're going to have a real effect on solving the problem of global poverty.
