Innovative finances and coffee: a new kind of brew

Coffee tasting training

When we drink our morning coffee, we may think about its flavour, bitterness, and origin. An organic coffee consumer may think about the shade of the agroforestry systems, which are rich in biodiversity and prevent agrochemical residue in their beverage. For a fair-trade certified coffee consumer, the thinking may also veer towards the guaranteed prices offered to coffee families, for example, in the mountains of Chiapas and Oaxaca in Mexico.

The GEF Small Grants Programme has supported organic production and fair trade for 30 years in Mexico and Latin America, and now, consumers worldwide can taste Mayan honey or Zapotec coffee at home or at their preferred coffee shops. Those coffees are cultivated by small producers under the shade of the rainforest, using Arabica varieties and are free of agrochemicals. What is less known is that most of those products are also produced by cooperatives.

The United Nations General Assembly has officially declared 2025 as the International Year of Cooperatives (IYC2025), celebrated under the theme "Cooperatives Build a Better World". A better world means for Indigenous coffee producers to maintain their livelihood, even in the face of considerable variations in the international commodities market due to the impact of the climate crisis.

Mexico's Small Grants programme has been working with cooperatives to tackle these issues.

Regarding the climate crisis, the programme is funding two strategies. The first is the "Blindaje" in Spanish or "Shielding" in English. This locally designed methodology allows each grantee to invest up to 5% of their budget in preventive actions against the climate crisis. In coffee production, it can be invested for example in the locally-designed indoor coffee dryer in Kajwel Tøjk to dry coffee even during humid years. Another strategy is the establishment of tree nurseries to replace plants affected by climate-related pests quickly. The blindaje is mandatory and implemented in every project funded by the programme.

Coffee tree nursery

Another strategy focuses on creating community-led resilience funds as a loss and damage mechanism. For example, the Unión Majomut Cooperative in Chiapas is working on creating its fund to provide loans to coffee producers in case of extreme weather events in the Altos de Chiapas region. Those innovative finance mechanisms are also being created for honey and agroecology cooperatives See more information here: https://www.ppdmexico.org/post/infografiasresiliencia 

The variation in international prices is an even more challenging topic. When prices are high, intermediaries tend to compete with cooperatives, thus affecting the organization. When prices are low, the cooperatives do not have the financial capacity to harvest the coffee at a fair price. To tackle this situation, two cooperatives of Oaxaca proposed the creation of harvesting funds owned by the producers. In alliance with FINDECA, a local financial organization that funds productive and environmentally sustainable projects in the rural areas of Oaxaca and Chiapas, the projects supported the creation of two funds. The first step was to buy a computer with internet access and work on the governance of the funds,. which was achieved after several meetings to collectively decide the precise operating rules. The coffee harvesting funds were launched in 2024: currently, the cooperatives Unión de Pueblos Indígenas Zapotecos de la Sierra Sur and Unión de Productores de Café de Quetzaltepec Mixe can harvest their fair trade and organic certified coffee each year, with less risk of competition from middlemen.

The organization and financial capacities of cooperatives are not common indicators for international cooperation programmes. The lessons learned from the Chiapas and Oaxaca pilot project in coffee are that investing in governance and innovative finance mechanisms to create community resilience funds or coffee harvesting funds allows a long-term impact on environmental projects. The Kunming-Montreal Global Biodiversity Framework to Halt and reverse biodiversity loss includes TARGET 10, which focuses on Enhancing Biodiversity and Sustainability in Agriculture, Aquaculture, Fisheries, and Forestry. Resilience against climate-related events or commodity price variation will be essential to ensure that target 10 is reached and that results have a long-term impact.  

Fund governance design workshop - UPIZSUR - Oaxaca