Change Accelerator: Session 4

Impact Hub Berkeley’sFrom the Ground Up” is a four part, year-long program that brings together multi-stakeholder organizations working in sustainable food and agriculture to collaborate on joint initiatives. The Change Accelerator combines dynamic innovation salons, public-facing education programs, and community building events to drive systemic change in the following areas: (1) Collaborative Trade, (2) Living Oceans, (3) Soil Health/Carbon Farming (4) Local Food Systems.

Collaborative Trade is fundamentally about people, and providing opportunities for each person to help create systems that work better for everyone involved. These conversations surface a diversity of perspectives so we get a better sense of the system we want to change and what is possible together.


Session 4: Criteria for Relationship


The topic for the third and fourth salon sessions focused on “The Risky of Business of Logistics and Supporting Finance.”   Session 4 gathered an intimate group of leaders from the social finance and cacao trading to share their voice and co-design ways to build better relationships necessary to improve financial and logistical flow to underserved communities and businesses. (See participant list below).  Particularly, the conversation focused on the criteria that supports vetting and due diligence process for lending and trade relationships.  The 3.5 hour session included introductions and a PPT overview and a topic-led discussion.  


Session 4 Participants


Kathleen Bennett, Kiva

Kathryn Cavallin, Ecom Trading

Laura Kowler, Solidaridad

Pam Schreier, Ecom Trading


Session 4 Summary

The session was initially focused around the following set questions. Due to the intimate size of the group, we did not do a formal co-creative topic development for this session and instead let the conversation organically evolve.

– What is important to measuring impact?

– How can verification be supportive?

– What criteria is essential to developing better trade relationships?

– How do we create a culture to make it easier for farmers to report challenges or ask for support?


Below is a summary of learning, followed by an detailed account of the topics discussed.


Measuring impact is costly and challenging for smaller businesses


Small and start-up chocolate makers often don’t have the finances to invest in measuring impact, farmer training or direct activities beyond certification. Therefore there is a lack of a collective voice or way to justify the positive effects and higher price of quality cacao to consumers and the industry at large.  


Defining “success” can be custom fit


“No one size fits all” is a recurring theme because every sourcing situation is different depending on the context and people involved.  There is a desire to create impact metrics that are flexible when we’re working with educational institutions, microfinance institutions, coffee cooperatives and cacao cooperatives in particular, that meets the needs of the stakeholders involved.


What if each stakeholder could define what success looks like and the process to achieve those aims? Kiva, a non-profit crowd-funded lending institution, takes an innovative and flexible approach to evaluating lending partners. They create a process for the partners to define their own goals and measures of success.


Due diligence can be a process of facilitation rather than simply an audit


“I think fundamentally, when we say due diligence all we’re trying to figure out is what does this organization want to do and are they good at it? For example, Kiva looks at the process of how field partners decide who to lend to and what other support they need (financing, information or skill needs) to be successful.


Creating systems for call and response


There is a desire to create a culture that makes it easier for farmers or other stakeholders to report challenges and ask for support.  Responding to questions rather than sending unsolicited information generally creates better engagement, buy-in and learning.


Trusted relationships can lead to lower costs and increased trade


Kiva notes the benefits of vetting partners and building those relationships to expand their lender pool. “If they’re my partner, I trust them and know that they’re already doing a good job which  significantly lowers our transaction costs down the line.”


Ecom agrees that “part of the success of marketing and sales is in personal relationships.“


Trust requires a system of mutual accountability


Communications between buyer and farmer is challenged by “lack of insurance claim” or two parties agreeing to a certain level of commitment around quality and expectations for example. If something goes wrong, how does the farmer get paid?  There is currently no process, certification or system that “facilitates a dialogue between buyer and producer” other than going down and visiting the cooperative on a yearly basis and creating a relationship with them.”


Transparency on profit margin is key to creating trust


Providing information on profit margin up front and in a really easily digestible way and in a consistent way across cooperatives is key to measuring impact and if the lives of producers are truly better off.


Demand constrained. Consumers ultimately hold the power.


Speciality beans are growing significantly but the barrier is still lack of demand. There are beans available at the high quality standard and for a suitable price, but it’s more just finding buyers to meet that cost at scale. Larger buyers are shifting preferences and demanding higher quality cacao.  To support this growth, farmers need a collective sense of qualifications or specifications from buyers.


Screenshot 2016-05-30 20.31.17

Topic-led discussion

Yellow Seed engages community directly in the decision-making process. We believe individual voices coming together accelerates learning and allows the Collaborative Trade  movement to grow. We documented the conversation here, highlighting stories and experience shared, so you can join the collective learning process throughout the series.


I had the privilege to chat with Kate Bennet, the Portfolio Manager for Kiva, a non-profit lending institution, who provides crowd-funded loans to people around the world lacking access to traditional banking for 20 minutes or so before other participants called-in.  Our conversation started naturally along the topic themes.  They provide loans by partnering with microfinance organizations (“field partners”) who administer the loans in-country with farmers and farmer associations.  Kate’s job at Kiva is to “to evaluate potential partners and bring in new partners, and then work with current partners in the field, and do ongoing risk and financial monitoring.”


Kate spoke of the current process of onboarding a new potential field partner, Cooperativa Norandino, a large cooperative of organic fair trade coffee producers and organizations in Northwest Peru, who process, market and export coffee, cacao, cane sugar and other products.   


“The way it works is that the loans are financed through donors on our website and then facilitated (in the field) by our business partners”, explained Kate. “Norandino is pretty advanced for a cooperative that’s traditionally been servicing only small farmers.” Legally coffee cooperatives can’t lend to their members and so the field partner is actually the Norandino Credit Union which was founded by the co-op members 2005. “The credit union would be our formal partner. They have the legal ability to lend in Peru.”


Kate explains how the credit union provides financing to smallholder farmers for new infrastructure, emergency health loans, land titling loans, (agricultural) inputs, start of the harvest, and even organic conversion.  Additionally, Norandino provides loans to Farmers Associations who need capital upfront to purchase the farmers’ seasonal crop. “So, Norandino is not only providing financing for the smallholder farmers, but then it finances the farmer associations to purchase their crop.” Those loan terms are 4 or 5 months because the second they sell on the market, they can pay be repaid.


Kate continued, “The question for us is  ‘what loans to farmers we will be funding?’ We are pretty open and Norandino can tell us what the need is. She speaks more to the due diligence process,  “Right now, we are asking, when Norandino provides a $50k to a $150K loan to a cooperative or farmer association, is that a loan that I put on Kiva? If that’s the case, how do we do a credit analysis of a farmer association?  How do we do an analysis of whether or not we support them purchasing a coffee sale upfront from farmers or if we support purchase of a larger piece of machinery or processing infrastructure?”  

Kate added this interesting bit of information, “oddly enough when Norandino initially came to us, they didn’t even propose funding their coffee farmer loans. They proposed us funding small business loans to the wives of coffee farmers.


I reflected, “That’s interesting. What came up in session 3 is that Maya from Uncommon Cacao realized that repayment rates were higher if loans were to women or underwritten by women.”


“One of the big challenges for us is doing a credit evaluation for a farmer.” ~ Kate


“One of the big challenges for us, with Norandino or almost any other partner, is doing a credit evaluation for a farmer,” Kate explained. That’s already challenging for so many different reasons for our partners. They’ve got no credit history, their income is in flux throughout the year.”


I cheer, “This challenge and this puzzle is exactly the inspiration for this session particularly.  It’s really around what will help lower the risk for for finances, what is the information criteria?  What do you need to know to decide that a loan is not risky, and what other types of financial capital is available (i.e. philanthropic)?   Currently, Yellow Seed is focused on understanding how to create profiles to help reduce the risk for buyers but also funders and donors who could be working together to create positive impact for the producer at origin.  A lot of our first prototype is based on the idea that if we can build trust and relationships, there’s a lot of value that will unlock; information, finance, product.


“These sessions have affirmed a need for an overall architecture that helps to build relationships with people within the supply chain.” ~ Nancy


I explain, “What’s come up during these discussions is that there are information solutions that could benefit supporting traders like Ecom while also supporting players like RSF and Kiva, by reducing the vetting process and creating a process for trust and also by linking to a market (e.g. aggregating orders) to guarantee flow of capital coming in within a certain time period.”

Continuing along this theme, Kate explained further Kiva’s vetting process for loans and field partners.


“Kiva is sort of a funny one because we partner with the organization that typically is lending to the farmer, or lending to the associations rather than lending directly.  Part of our jobs is to look at what the evaluation process of the Field Partner.  For us it’s a combination of not only what is that risk profile, and all the things that we need to know associated with either financial or institutional risk, but also for Kiva it’s about the need.  Do they need Kiva’s funding and why? Do they need risk tolerant capital.


Kate mocks up an example on the whiteboard, “When you go to, you’re going to see “Kate” (She draws a hypothetical farmer) and my profile, and that I’m asking for $100.  [The public] can go to and,  along with  anybody else in the world,  lend in increments of $25.  Four lenders, each contribute $25 to fully fund my loan of $100. Kiva takes that lump sum and sends the  money to the field partners, let’s say Maya Mountain (Uncommon Cacao).” The field partner disperses the loan, gets paid back, and then Kiva returns the $25 to each lender.


The Kiva capital goes to Maya Mountain or other Field Partner as a 0% interest loan.  Kate explains that it is a bit more complicated in ag in that the loan could be dispersed from the field partners in the form of fertilizer, technical assistance, or cash. The field partners may add a 10% to 20% premium, which helps support operating expenses of building their organization and pay for capital projects or other services.


“Part of the analysis is looking at how field partner’s decide [who is provided loans] and what are the criteria they use to decide to lend to an association.” ~Kate, Kiva


Kate’s explained further, “It doesn’t end there.  We look at our field partner (e.g. Uncommon Cacao) with whom we are doing all of our risk and institutional and financial analysis.  Part of that analysis is looking at how do these field partner’s decide [who is provided loans]. What are the criteria they use to decide to lend to an association.  What do they need to know?


“We do the upfront due diligence on how they do an evaluation, for whether it’s an individual or if it’s a small medium enterprise, or small growing business, and after that point, we expect the organization to be able to go through that due diligent process the same and the right way, and we monitor that regularly.  


“What I’m doing right now for Cooperativa Norandino, is looking at all of the different risk criteria that we have for a traditional financial institution, plus those that we might have for an agricultural institution.  It’s going to be things as varied as, financial risk, what’s their ROA? What’s their ROE? What is their gross portfolio? What’s the portfolio quality? What’s their capital make up? Currency exchange is a big part of it, and we’re looking at their growth trajectory.”


“Are they going to be in a sustainable capital situation in five to 10 years from now?  In terms of institutional risk, we’ll look at our organizational governance, management, business model. Transparency is particularly is big for us working in the financial sector and coming from micro finance.”


“If they’re a partner that has not been doing credit before, we see what they’re planning to do.  How do you know your farmers are going to repay?  We want to know if they’re doing the monthly installments or yearly installment.”


We want to they’ve got transparent systems to make sure that if there were perchance, fraudulent activity, they’re able to identify it.  Loan officers or credit officers  accepting cash for payments in the field, for example is not  something we would want to see.”


At this point  in the conversation Kate Cavallin from Ecom dials into the meeting. Michael and Nancy take time to introduce the background and goals of the From the Ground Up series, and review of the organizing question’s for the afternoon session.


“The open dialogue then continued with Kate from Ecom introducing herself:  “I work for a company in Ecuador called Agroarriba, but it is part of the greater Ecom group. Ecom manages coffee, cocoa, cotton and other and other commodities. What I do in Ecuador is manage the origin sourcing side.  We work with farmers and  the whole value chain at origin, and then export to Ecom offices around the world as well as some of the small chocolate makers  in the United States and Europe.”


Kate spoke to the original four question sent by email that she discussed with colleague, Richard Falotico,  Ecom’s cocoa trader in New York. “Our biggest question was around how we measure impact, direct relationships, and actual projects on the ground.  It’s very difficult for small and start up chocolate makers to be able to invest in farmer training or direct activities beyond certification.”


“How you create a culture that makes it easier for farmers to report challenges and ask for support.” ~ Kate, Ecom


“But one of the question’s that stuck out for me, was how you create a culture that makes it easier for farmers to report challenges and ask for support.”


“Richard reports that the big issue he finds is little to no communication with the farmer co-op when situations are going wrong.  That’s one of the biggest reasons why Ecom has operations in the country, just to understand what’s going on and have a cultural context.  It’s very easy to get sub-par quality and to say, that the cooperative or the association or the expert is negligent, but it’s also really dependent upon the weather, the availability of machinery, or systems that could physically make it impossible for you to create the quality that you normally can.”


“I don’t know any certification or system that really creates a dialogue…”


Kate speaks to the need for trust and mutual accountability, “Part of the issues, especially for specialty chocolate, is that the communications between buyer and farmer doesn’t have any sort of insurance claim.  That’s something that Ecom is stuck in the middle of, if the quality doesn’t reach the level  wanted, the farmer should still get paid for the cocoa. This is a process of trust.  I don’t really know of any certification or system that really creates a dialogue other than going down and visiting the cooperative on a yearly basis, and having a good relationship with them, and that’s not necessarily systematized  obviously that’s based on the person and the relationship.”


I add,  “What’s interesting about the craft industry is they can all fit in room. They know one another including each person’s skills, preferences and biases. For example, they may know that Greg from Dandelion likes bold flavors and trust the way he rates flavor and quality whereas another chocolate maker may have different preferences and trust another maker’s evaluation and opinion.  I see an opportunity to create a system of matchmaking and crowd verification where there is some level of mutual accountability and process for learning and improvement.”


The discussion continued with examples of personal content platforms and crowd-sourced apps based on on personal trust, knowledge of  preferences, and current information.  Kate (Kiva) chimed in, “Sounds like you’re describing a Linkedin of chocolate or whatever, where you can see who’s done business with who, and how many times, and whether they’re a producer or a buyer, or what have you?”

“Yes, that’s right,” I add.

Kate (Kiva)referenced a website called Mixed Market  an example from the financial world which serves as an informational database for all microfinance institutions where you can look up and compare organization across different indicators.

Pam Schreier joins the conversation.
 Pam is the Regional Sustainability manager for Ecom in cocoa based out of Guayaquil, Ecuador and works directly with farmers.  


Responding to the initial discussion questions, Pam asks “what kind of impact are you looking at? The way we measure impact of our program is based on improving yields as a way to improve economic livelihoods.  Are we talking about impact of a higher price because it’s direct trade? Other factors are harder to measure and small chocolate makers, in particular don’t have the finances to invest in impacts beyond their focus on quality.”


I ask,  “Besides the focus on productivity for livelihood generation, do you monitor for environmental and social factors?”


Pam responds, “Yes, cocoa as an industry is concerned with child labor, which is not necessarily a problem so much in Ecuador, but we look at other social or health related issues within the communities we work in.  For example access to water is a big issue in one community we work with.  Or health care. We work with a network on the ground, and even the ministry of health, to provide additional services such as nutrition,  hygiene training, other health care programs to have greater reach. We do the agronomy side of things and then we find other partners to help us fulfill the needs on the ground to make an impact in that area.”


“But, our main driver driver as a cocoa buyer is to make cocoa a sustainable livelihood so the farmers continue to farm.”


I inquire further,  “Are you also looking at differences in livelihood indicators based on the type of production?  Ecuador was known for its focus on quality cacao and now I believe is in a transition  into providing more productive yielding varietals. Have you noticed an improvement in livelihood factors or quality of life?


Pam “Ecuador is the top producer in Latin America and it’s been our experience that the quality and specialty markets represent a small subset of the total market.  Although these  small market niches can have deep impact on improving management and conservation.”


“A lot of the chocolate makers we talk to want something that’s really exclusive to them… They want quality first, then story.”  ~ Pam, Ecom


In terms of small chocolate makers, Pam said “a lot of the chocolate makers we talk to want something that’s really exclusive to them, a good story, but if the quality is not up to the standard they are looking for then they immediately disqualify it. They want quality first, then story.”

Kate (Ecom) points out that typically the bigger the buyer, the less they are going to be interested in paying higher premiums.  The small chocolate makers, and bean-to-bar group in the states will pay 1000 to 2000 over the market value (for quality), but the “willingness of the chocolate maker to give money per ton for environmental impact is not really common. Trying to scale (this approach) is what I see as the challenge.”


What criteria is essential to developing better trade relationships?


Kate from Kiva, steers the conversation toward the third question, ‘What criteria is essential to developing better trade relationships’?  Kate answers “It depends on the type of financing, at least speaking for Kiva. For us what we’d love to be able to see upfront for both farmers and buyers (cooperatives, exporters) is the financing needs and the cash flows throughout the year for both parties. What are the shocks such as weather or pests that individuals and cooperatives are facing? What financing has been done previously and where are the gaps?  What is the relative efficiency of different financing alternatives, not only the rate charge but also operational costs. For example certification may be required in order to access needed technical assistance.  In sum, we want to know where the buyers and sellers are coming from so we could fill that gap.”


Pam (Ecom), explains about some of the needs she sees in Ecuador, “A lot of producers have had bad experiences with associations and so they’re not necessarily willing to work through a cooperative or association to sell their products. Working directly with farmers, their needs are largely based on what investments they can make on their farm.  So, for example, we did a small fertilizer program to support farmers, selling them fertilizer at cost and giving  a period of six months to pay it back, through harvest time. The idea was to work with farmers that we had a history and relationship with, of buying and selling, and those that are also part of our certification program.  So we know what their farm looks like and their willingness to invest in their farm and those are the basic criteria we use to determine who could be in the program.”


Pam adds, “I think Ecom’s advantage is the amount of  people that we have on the ground that work directly with farmers.   Our staff offers technical assistance and provides the farmer with with a little prescription about what needs to happen, and when it needs to happen. They are like an on call service.  We’ve gotten a lot of credibility on the ground and that helps us get loyalty. Even if we don’t always have the highest price, and we don’t,  they’ll maintain a certain amount of loyalty because at this point we’ve been invested there for three years. They’ve seen us grow and grow, and they trust that we’ll continue to be there.”


The conversation turned to “shock” factors such as severe weather, market fluctuations and even currency exchange losses. Understanding the value of the dollar to local currencies is important especially for this doing exporting and importing because if if local currencies fall and hyperinflation like seen in Columbia and Brazil (200%) occurs, this “puts the institution in a challenging position.”  Kate (Kiva) states, “I think it’s a challenge for us too that one of our goals is to provide “patient capital” and one of the risks of patient capital is currency evaluation.


“To reiterate, Kiva’s capital is what we call, “Risk tolerant,” so if the farmer doesn’t pay back the full value of their loan to our field partners, the field partner doesn’t pay back the full value of the loan to us.”  None the less we do want our money back and but it’s a balance we also want to make sure that organizations who wouldn’t otherwise be able to fund a risky client working matter are able to do so.

At this point Laura Kowler joins the conversation. She is currently in Peru working with an organization called Solidaridad focused on supply chains and is currently looking at the potential for private sector  investments in sustainable production practices in the sectors of coffee, cacao, oil palm and timber reforestation.

Laura chimes in:  “Something that I’m seeing here (in Peru) is major advances in these larger development programs such as, I mentioned it last time, the USAID funded program – La Alianza Cacao Peru that provides technical serviced and capacity building.  These programs I think  goes along well with alternative funding and  financing options. The programs that organizes cooperatives and provides them technical services, capacity building. They are  essentially there to help build internal capacity.  I wonder how Kiva and others would connect micro-financing with these other services.


Pam from Ecom responds, “I know Ecom has had experience in other countries, working in coffee mostly, but tying the technical assistance we provide on the ground, to the conditions of the loan from a third party. Our technical team will help create farm management plans for the farmers that are going to receive pre-harvest financing, so that they understand how much they need and when they need it during  on the harvest cycle.”


Kate (Kiva) asks, “From whom do they typically receive that pre-harvest financing or from what types of entities? Is that from you?”


Pam: “In some cases we loan directly. Other cases when it becomes kind of larger we work with third party,  typically other banks. In Mexico is where we have most of the programs and we work mostly with local banks.”


Kate (Kiva) mentions that Kiva is  just now exploring the possibility of doing direct lending but she states, “The due diligence process takes up a lot of time. For this reason, I’d rather go through a current partner.  For example Agora is a partner of ours, as a social enterprise, we’ve already done evaluation of a business model, a financial evaluation, a risk analysis.   If they’re my partner, I trust them and know that they’re already doing a good job which  significantly lowers our transaction costs down the line.”


I ask about metrics, “At the consumer end, how do you track impact?”


Kate (Kiva) responds, “In broad strokes we have an impact scorecard that is based on a number of different things such as  CERES  and the SPI which are specific it to the microfinance world. The B Corp assessment, which I’m sure you’re familiar with, will tell us how the institution treats its employees and whether clients and producers have a voice.”


“I’ll want to look at if they are providing technical assistance. Are they providing some sort of flexible loan terms? Are they providing some kind of input or is the loan in-kind.  What kind of collateral are they asking for? Are they providing crop insurance? And what is the profit margin that you’re making off of that farmer?”


“When we’re working with educational institutions, microfinance institutions, coffee cooperatives and cacao cooperatives in particular, it’s really hard to create sort of impact metrics that are flexible.”


I inquire “Is the information you collect transparently shown?”


Kate responds, “The annual percentage rate on a loan, interest rate – portfolio yield, profit margin, ROA – those are all on the website. But it gets slightly trickier when you’re talking about ‘okay how do I calculate the annual percentage rate on an in kind-loan that was provided up front for 150 and later on they wrapped in services and it’s 160 with a partner?” It gets a little hairy, but yes, those are things that we actually update every two years for partners.”


Nancy turns the conversation back to the specialty chocolate sector, “Do the people in your supply team see an opportunity to grow the specialty market?


Pam responds, “Definitely,  I think that it’s a growing market and potential.  Just in the eight years that I’ve been involved in cacao, I’ve seen that specialty beans in our industry grow significantly.  I think that’s a great question for the chocolate makers themselves because we seem to send out samples, I don’t know what the barrier is because we just don’t seem to have that much demand.”


I don’t know if  there’s a dozen different origins and each small chocolate maker might want to have a little bit from each one. We have to wait until there’s more of a critical mass to have a bigger impact at the actual origin level just because it’s spread out over origins. This is more of a question for the chocolate makers.”


Kate (Kiva) clarifies, “You’re primarily demand constrained, not supply constrained. You have the beans you need at the quality you need, at the cost you’d like it to be but it’s more just finding buyers to meet that cost at scale.”


Pam explains, “I think that my experience in Ecuador is that with a fair level of certainty we can get a buyer what needed if [a buyer] gives the qualifications or specifications. There’s enough diversity, there’s just not a ton of demand.”


Michael asks, “In terms of opportunity, you said that the bigger buyers are less likely to pay that premium either for quality or for story. Based on your experience in the industry, do you see any interest from larger buyers for quality cacao?”


Pam replies, “Yes, I definitely think that bigger buyers are shifting. The structure is a little bit different though in that it wouldn’t be such a large premium, but will be based on more volume. So you can create a program based this on that adds depth and impact. Then the smaller makers can invest more for talent (quality) but with a smaller amount of producers.”


I inquire about interest in joint shipping and orchestration between multiple buyers.


Kate (Ecom) responds,  “I do know that in the Dominican Republic as in Ecuador, we’ve split 25 tons between four or five buyers before. For specialty beans, we sent a 12 metric ton container to New York to try and highlight some of our farmers as a kind of a trial for us to see what people were looking for. I would say that the demand was there but not necessarily, I think it took about a year to sell that, all of those “microlots”, as we would call them.


I ask, “How did you highlight these farmers? What were your marketing channels?”


Kate:  “We put together a one page description with some photos, an aroma wheel, a spider web that highlighted different flavor notes within the cacao and some details about the farmer or the association. We did have a few really interested sources and this was a trial to see what people are looking for.”


“The difficult thing is that the (specialty) industry, for me at least, feels like  you have a head or a founder who is interested in adventuring out into origins to find their sources. So it sort of a back and forth in terms of trying to market to chocolate makers going to origin. In Peru there were government funded trips for chocolate makers to visit associations at origin.  From our side, Dan Domingo in New York did most of the heavy lifting, sending out samples and following up with people.”  


“The reality is that everybody is looking for something different and everybody also has a different taste.  A lot of it is marketing. Uncommon Cacao does a great job in Guatemala and Belize and one of the best things they do is marketing, creating an interactive and a constant communication. Belize now has a list of hundreds of chocolate makers who want to buy the cocoa, but unfortunately, the volume isn’t there.”


Kate (Kiva) adds, “Sounds like you would attribute part of Uncommon Cacao’s success then not necessarily just from marketing but to those personal relationships that they have.”


“At the core of it, Yellow Seed is a pilot to test if there is a way to strengthen connections and build trust, then new opportunities to transact can emerge. The process of relating also uncovers what gaps and challenges arise along the way. However, surfacing information from many smaller actors in the supply chain requires a system to coordinate that information flow so it’s relevant and not overwhelming. For example, the same information can be sorted and filtered so Kiva receives information relevant to vetting a field partners and Ecom can view aggregate reports of buyer preferences.”


Kate (Kiva) added, “To your point, the big question is if we’re offering a particular type of financing, where is it the most impactful? Do you provide affordable financing to the end buyer and chocolate maker, that could create ripple effects throughout the rest of the chain or do you provide financing directly to producers?  Obviously, it’s not one versus the other, it’s not that black and white.”


“Today, instead of a dozen chocolate makers trying different origins and different suppliers, now you have 100’s. Harnessing their feedback is more difficult.” ~Kate, Ecom

Kate (Ecom) added, “Hearing your feedback in terms of the how relationship works with craft chocolate and levels of confidence in, I completely agree with you that outreach is important. But today, instead of a dozen chocolate makers trying different origins and different suppliers, now you have 100’s. Harnessing their feedback is more difficult.”


I agree, “Yes, the story, reporting and continual feedback is a lot of information to manage because it is constantly changing depending on the context.  And while there are ways to celebrate diversity, there are many opportunities to get people on the same page and develop a common set of indicators or language around flavor for example.”  


And the awareness of quality and idea that chocolate tastes different from different places, raises the bar for the industry as a whole. For example, speciality coffee and craft beer provide good examples.


Nancy continues, “Yellow Seed aims to help each player amplify their work by creating ways to bridge the gap and scale the market as a whole.  Session 3 discussion pointed to different types of loans and the need for orchestration and organization of joint shipping.”


Kate (Ecom) responded,  “The difficult thing that I see  is providing a chocolate maker with the FLD cost versus the warehouse costs in the location that they’re taking control of the cocoa. If it’s a few tons you can double your cost depending upon where you’re shipping it and how you’re shipping it and that’s mad. The most efficient thing would be a certain consensus at origins and the difficult thing there is that consensus first of all, but then also timing.


I agree,  “Timing and order process, right, that’s what we’ve been learning too.”


At this point in the conversation, we took a 10 minute break in order to come back and wrap up the session.


~ Short break ~


At the return, Michael poses a question among the group, “Are there any opportunities that we see specific to Kiva, specific to Ecom, to Yellow Seed that would be interesting for us to explore in the context of this conversation?”


Kate (Kiva) speaks to the opportunity to work with producers, “I’ve looked at the cooperatives on Yellow Seed and I’ve already asked myself ‘who are these cooperatives? What are their financing needs? And what has the relationship been? What is their track record financially? And would you recommend any of them for Kiva partnership?’  I think that there’s definitely opportunity for conversation and definitely opportunity to build that out for the Kiva or the Root Capital or the Oikocredit or whoever it is who’s also working in our field.”


“That’s great!” I responded. I asked about the proposal process and due diligence.


Kate responded, “I think fundamentally, when we say due diligence all we’re trying to figure out is what does this organization want to do and are they good at it? What they want to do typically is sell, be financially solvent and that’s really easy to monitor and measure. I think on the impact side of it we have particular metrics that we look for in agricultural partners, but at the end of the day it’s what is important to you.”

For example for Ecom if poverty alleviation is what to them is most important then for us what we would ask is, “Are you improving yields?” I think a big indication for us too, is an organization good at what they do, is and do they care what they do? A bit part of the trust building is, are they asking themselves, “Are we doing what we doing, at least in terms of impact, are we alleviating poverty?” If it’s a different type of organization with a different type of mission, whatever it is, are they measuring it?


I suggest, “It sounds like a learning process too.”


Kate replies, “Yeah absolutely.”


I add,  “And rather than an absolute, it’s more like a ‘how’s it going?’ and ‘how are you improving?’


Kate continues with that thought, “And where are you now that you weren’t 4 years ago?


Regarding profit margin, we want to make sure that the cooperative is looking out for the farmer, that it is truly a cooperative, truly member owned and directed. We want to know, what’s the oversight like for that organization or that cooperative? Is there funder oversight or some kind of certifying body or government entity that provides some level of oversight?


We’ll look at who’s working with the organization and who is the management team and the board? How did they come to work there? Do the producers have a voice in the organization and how are they involved? We also look at the financial administration of the organization, what is their planning process? Is it realistic? Does it involve members of the organization outside of the one executive director? Are they allowed to provide what on paper is a loan. In Peru, rural and agricultural cooperatives cannot do that, you can provide certain things on credit but you can’t provide a loan. The same is actually true in Ecuador which is why Cooperativa Norandino, the coffee cooperative, started a credit union that was separate from their entity. Also, are they legally able to land in the country  is really important to us.”


Kate adds a few more things they look for “just to round it out. Do they have transparency? Do they make sure that loan officers aren’t stealing money in the field. We also look at what does your market look like?  What’s your competitive edge with buyers, with your producers? And what’s your growth trajectory, etc.?”


I ask, “how do you verify this information?”


Kate (Kiva) responds, “We do reference checks. Financials are pretty easy to verify, we’ll look at audited financials.”


Michael adds, “B Lab struggles with the same thing.”


Kate adds, It’s really challenging without just sending a person down to meet them in person and that is costly. We tier our due diligence, if I’m offering someone a $15,000 line of credit versus a 2 million dollar line of credit I’m not going to visit that small partner for a year or two.”


I continue, “That’s a question that we’ve had for a while, is how might a mobile app help verify information from the farmer or workers themselves, particularly about wage?  For example, information that is posted on the site can be collectively verified through multiple sources that are aggregated together. The collective verification of wage, flavor or any sensitive information distributes power and creates a level of safety. Technology can make this cost effective if designed well.”


Kate (Kiva) adds, “For Kiva we also look at, are they fairly compensating their workers? If they provide us with some level of information about profit margin on a farmer or wages provided, what have you and it looks really great but we can see elsewhere they’ve made no social investments in the lives of the farmers or they’re just not investing in anything that’s impact oriented. That might be an indication that it seems like you’re making an awful lot of money based on what I can see in your financials. Seems like your costs are quite low and it looks like you’re making zero investments anywhere but infrastructural projects. There are different ways at least that we can understand what is happening.”


Kate recommends to Yellow Seed, “I think for your use, or for the use of the people that are here around the table right now, I think just providing information on profit margin up front and in a really easily digestible way and in a consistent way across cooperatives. Given that we don’t have a ton of experience in cacao, having an intermediary body like Yellow Seed or someone who can assess profit and tell us yes that’s feasible, or not, is big.


I ask, “with all these questions, is it a dialogue, or is it all reporting?  How do you integrate B Corp in that process? Do you just pull their criteria?


Kate responds, “That is all dialogue. It is all in the conversation that I’ll have up front with an organization that applies for partnership.”


Michael chimes in, “Which is why it’s so intensive for once you get below a certain value of a loan amount?”


Kate agrees, “Yeah, if I’m providing a line of credit of $50,000 I’m not going to spend the same amount of time that I’ll spend with the 2 million dollar partner. I’ll ask these questions but I won’t dig in point by point. I will spend 20 to 30 hours on my 2 million dollar partner because that’s a high risk investment for us.”


I ask, “Is that process all interview?”


Kate replies, “It’s a combination of interviews, show me your distribution plans, show me your credit manual, show me all of your processes. I will go in person and talk to every member of their management team and their branch officers and all the rest of it. For the $50,000 line of credit which is the most basic, it’s largely conversation and documentation that’s provided to us. It’s largely word of mouth. I’ll go and say to Oikocredit or Root Capital, “Hey, do you know these guys and what do you think?”


Michael reflects on risk, “Kiva’s unique too because it is philanthropic dollars.. Obviously you want to protect your portfolio but it’s not as critical as it would be in like traditional financial institution where if you lost a $50 K loan, is that true, would you say?


Kate responds, “It depends. It goes both ways. For example, Cooperativa Norandino, I know that one of their funders is providing them funding that is earmarked for clients that were affected by coffee rust.  that’s a really risky profile but they know it. That’s kind of a good type of risk as opposed to the farmer that just doesn’t have the capacity to repay. That’s the bad risk.


I shift the conversation restating the question Michael posed about ways to collaborate to Pam and Kate from Ecom.


Pam responds, “ I think on one level Ecom can be a big support for Yellow Seed for a lot of improved communications. We could also potentially aid in finding other groups that could benefit to other co-ops or other origin locations that could benefit from that same platform. Ecom could help coops market themselves through something like Yellow Seed. I feel like there would be a way that Ecom could help measure or find based on the criteria you decide.


I replied, “Great. Yes, It would be interesting to see how Ecom might use Yellow Seed as a marketing platform as a content provider for some of the origins you work with. “


Pam responds, “Quite honestly it would be a great combination. Managing all of the different interests and potential sources is necessary. You’re growing in a number of chocolate makers and you’re growing in a number of potential origins. I think it’s a natural progression and in anyway that we can be a resource in terms of providing information to make it robust and useful,  would be great.”


Pam adds, “Thank you again for putting another one of these conversations together.  There is a lot of communication and information sharing that is helpful for all of us.


The group concludes with a round of thanks.


~ end of discussion.


Thank you to all who participated in this session and to the readers for your interest in this collective journey. It is a joy to be of service to facilitate and amplify the passionate and committed voices of those who are committed to making a positive impact.


Session 4 Participants


Kathleen Bennett, Kiva

Kathryn Cavallin, Ecom Trading

Laura Kowler, Solidaridad – remote

Pam Schreier, Ecom Trading

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