Coffee from the Democratic Republic of Congo: these high-quality and award-winning beans have been colorfully described as having “a very easy-to-like personality and unthreatening complexity.” But aside from the country’s coffee, so much in the DRC is, in fact, threatening — and at the same time complex.
Political instability and bloodshed have plagued the DRC for decades, especially in the country’s eastern region, leaving farmers scant economic opportunity. Until recently, many Congolese coffee farmers had no choice but to regularly make the perilous journey across Lake Kivu to Rwanda, putting it all on the line to barter their beans for food and other critical supplies. Thousands of people drowned along the way.
Today, that’s all changing thanks to businesses like Furaha, a farmer cooperative that connects 1,600 Congolese coffee producers with a safe and reliable market to sell their harvest. When we first met the leaders of Furaha, no other impact investors would lend to them, much less commercial banks. Root Capital stepped in with a loan of $130,000 in 2013, and we have accompanied them in their growth and success ever since.
As Richard Tugume, our portfolio manager for East Africa, recently said about Furaha and our other clients in the DRC, “All that these businesses need is an opportunity to prove themselves, to show the world they can compete.” Root Capital is proud to help unlock that opportunity. In fact, serving the needs of these agricultural businesses — underdog enterprises with outsized potential — is precisely why we exist.
But originating smaller loans, even to the highest-impact businesses, is not profitable for Root Capital; the cost of lending to them is greater than the interest generated on the loan. To cover the cost that we incur by supporting the growth and competitiveness of businesses like Furaha, Root Capital relies on funding from our donors, as well as on interest revenue earned from larger loans to other businesses in our portfolio.
How do we allocate this invaluable philanthropic support while working with more than 270 different businesses each year? To help answer this question, we pored over our data and developed a series of tools to help us carefully calibrate our approach to building a portfolio with the greatest possible impact for our expected financial return. This work is the topic of a recent article by Mike McCreless, Root Capital’s senior director of strategy and impact, and by sharing our thinking, we hope this model can serve as a catalyst for other impact investors to adopt similar tools and approaches. To current and future donors alike, we hope it conveys one thing loud and clear: every dollar you give is allocated to the highest-impact loans in our portfolio — loans like those we’ve made to Furaha each season since 2013.
At Root Capital, we are fierce believers that when agricultural businesses like Furaha grow, they become engines of impact: family incomes rise, food security improves, women get their share, ecosystems thrive, and young people have the opportunity to lead. Collectively, Furaha and the other 270-plus businesses we worked with this year paid farmers close to $1 billion for their harvests.
Every $1 you donate to Root Capital leads to $25 in income for a farmer and their family. If everyone reading this note pledged just $10, we could unlock $125,000 in income for farmers around the world. Will you join us?
As we prepare to close the 2016 chapter of our story, we wish you a joyous New Year full of peace and prosperity, and we offer our enormous thanks for all you do to make our work possible. Before signing off, I’ll leave you with a few more words from Richard Tugume, which epitomize our work in the DRC and beyond:
In the end, supporting clients like Furaha makes me feel part of something way bigger than myself. The farmers are so full of hope and potential despite all the madness around them; and I’m passionate about opening the door for them to the opportunities arena. That’s what drives me.
Indeed, Richard. Indeed.
Warmest wishes this holiday season,
Founder & CEO, Root Capital