Situation

Rwanda has nearly 500,000 small-holder coffee producers who possess an average of 200 coffee trees each. Each small plantation is managed like a small garden and is the principal generator of cash for rural Rwanda. Depending on annual production volumes and the New York Board of Trade (NYBOT) commodity price for coffee, the Rwanda coffee sector has generated between $15 million and $35 million in annual foreign exchange earnings.

In 2002, Rwanda sold its first production of high-value specialty coffee whose price does not depend on the NYBOT. This achievement was due to a series of quality interventions along the coffee value chain including the establishment of central washing stations for uniform quality wet processing and direct sales to US coffee roasting companies. Farmers received three times the price for their coffee compared to ‘traditional’ coffee farmers. The idea changed the face of Rwanda’s coffee sector. In 2006, Rwanda has over 60 central washing stations and is selling specialty coffee direct to over 25 U.S. and European companies for prices significantly higher than the traditional system allowed. The price is not pinned to the whims of the volatile coffee commodity market.

The Rwandan coffee sector has enormous potential to create a dynamic and prosperous rural economy through the pursuit of extreme-quality specialty coffee for the U.S. and European markets. Rwanda’s one billion coffee trees indeed have the potential to generate over $150 million in annual foreign exchange earnings. In addition, when farmer-owned cooperatives sell directly to American buyers, approximately 80% of the total gross amount returns to the rural communities. As such, this sector has the power to fully drive the rural economy of Rwanda, empowering the population, creating employment and generating increased revenues. These are key elements for Rwanda’s continued stability, peace and welfare.

The Specialty Coffee market is a $20 billion per year industry in the U.S. alone. Growth is estimated at 10% annual. In order to grow however, the specialty coffee market must have continued supplies of high quality coffee. Coffee products continue to differentiate at the level of the consumer. American companies continue to push the quality envelope of coffee and are paying higher and higher prices for extreme quality. This industry is here to stay and has enormous potential to dramatically change the livelihoods of millions of poor, rural families.

Opportunity

Rwanda has a comparative advantage over most coffee origins since farmers can give maximum husbandry skills to the small garden-like coffee plots where the old heirloom ‘bourbon’ varieties still reign. This is where quality is ‘created’; the interaction between the farmer and his trees. However, because the Rwandan coffee farm is so small, it takes about 500 of them to produce one container load of exportable green coffee! The organizational burden on processing plant management is great. Trucks must be rented and cherry collection points must be installed in order to get the cherry from the farm to the processing plant or washing station. They can’t use animal transport because of over population and lack of biomass to feed the animals. Hundreds of farmers walk in their cherries from their fields two to four kilometers to the collection points, they sit, they wait for the truck, they wait for weighing and quality control, they load the truck and off it goes to the washing station.

The above method results in the cherries arriving at the washing station six to 12 hours or more after picking and sorting. This delay deteriorates the quality of the coffee. Every hour that passes after the cherry is picked, and before it is de-pulped, degrades the quality by allowing bacteria to ferment the sugars in the cherry finally imparting a ‘barnyard’ off-taste to the coffee 20 hours after picking. It destroys all the TLC the farmer has given his small coffee garden plot.

Enter: The coffee-bike program

If the transport time of cherries coming from the coffee field to the washing station was reduced to from six to 12 hours down to two to four, research has shown that cup quality will increase significantly from 82/100 to 86/100 on sensory evaluation scores from which coffee price is determined. This translates into a $0.15 or higher premium per pound of green coffee sold.

It’s our opinion that bicycles can solve the transport problem if a program could make the bikes available to farmers for a reasonable price on credit and where quality premiums would cover the bike’s cost. A collaborative venture is being formed between Project Rwanda (www.projectrwanda.org), Ritchey Design Inc. (www.ritcheylogic.com), and Rwanda Smallholders Specialty Coffee Company (RWASHOSCCO).

In Year One, we are targeting the extension of up to 1,000 coffee-bikes to one or two cooperatives in order to have a significant impact on coffee quality and commercial volumes necessary to attract buyers. Tom Ritchey, owner of Ritchey Design and a director of Project Rwanda, is designing a new ‘development oriented’ bicycle and will have production prototypes ready by the fall of 2006. These prototypes will be tested by growers in Rwanda in October through SPREAD, working out the kinks, and then one prototype will be selected and moved to the full production stage for producing the 1,000 bikes needed by February 2007 for the new coffee season.

The coffee cooperatives will need a credit organization like World Vision where synergies with Project Rwanda exist already. Cooperatives will identify interested member farm families (less than 300 coffee trees) and enter into a three-year contract with each family. The contract will state the terms of the individual ‘micro loans’ to the family. Each family will agree to pay back the loan within three years (20,000frw/year=$50US). They will also agree to transport their cherry production to the cooperative using the high capacity coffee-bike before 3 p.m. This coffee-bike coffee will be processed separately from all other coffee entering the station after 3 p.m. The bike-coffee will then be sold at the premium prices to participating American coffee companies.

Credit would have to be in place at the level of the cooperatives in January or February at the latest. Individual farmer contracts would need to be completed no later than March 1, so that the bikes could be distributed by 15 March, which is the beginning of the coffee harvest.

Family level economic analysis

A family with 300 trees of well-maintained coffee can produce approximately one ton or more of cherries during one season. At 100 frw/kg ($0.20US), that equals 100,000 frw ($200US). This cherry revenue will be used to insure the credit company of a family’s ability to repay the loans. One ton of cherries will translate into approximately 120kg of green coffee. At standard prices (w/o coffee-bikes) this coffee would be sold at around $1.50/lb. Since this coffee will now be separate and four to five points higher in quality, buyers have indicated a willingness to pay a $0.15-.20 premium over the cooperative’s ‘standard’ specialty coffee. That premium times the family’s contribution to the coffee-bike coffee will result in a direct payback to the family of about 15,000-25,000 frw EXTRA to repay the loan without entering into their base 100,000 frw/year cherry sale revenues which are used for health, education, food, home improvement, etc.

National Impact

We understand that a $0.20/lb in turn translates into a $7,500US increase in the price of a 20-foot container of coffee. Extrapolation to hundreds of containers shows that Rwanda would increase total coffee revenues by $1million for every 125 containers of coffee sold on the market each year. Higher premiums would mean even greater economic impact.

Finally, the program has great potential since it not only increases quality and income generation through coffee, it provides a major capital asset to the family. This asset can in turn be used as collateral for loans, generate supplementary income, reduce transport costs and time for water carrying and market going and provide a means to ‘gather socially’ for community events or other friendships that were impossible to attend otherwise.