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Filling the gap between farm and fair trade
By David Bornstein
THE NEW YORK TIMES, October 25, 2010—We’ve all seen the ads for fair trade coffee with the beautiful photos of villagers hand picking coffee cherries in exotic regions around the globe. Fair trade is one of those ideas that’s always in the air, but we don’t often consider what it means. What does it really take to connect rural producers in the developing world with consumers in wealthy countries — so that everybody benefits?
Willy Foote is an American banker who has spent the past decade answering this question. In the early 1990s, Foote worked for Lehman Brothers doing corporate finance in Latin America, where he fell in love with the culture and learned to play dozens of revolutionary songs on guitar. In 1996, he left Lehman to pursue a business journalism fellowship in Mexico, and he and his wife spent two years traveling around the country in an old pickup truck, interviewing villagers. What he found was that the missing link between small producers in the developing world and middle-class consumers who like to buy their morning coffee at Starbucks is a special kind of banker. That’s why, in 1999, Foote founded Root Capital, a not-for-profit organization that helps environmentally sustainable grassroots businesses gain access to capital, skills and markets.
Of the 2.6 billion people who live on $2 a day or less, three quarters live in rural areas, and many are small producers — which is why the World Bank says agricultural businesses are the most effective vehicles to reduce global poverty. The problem is that their businesses, even when they form associations, are too small and risky to be served by banks and too big for Grameen Bank-style microfinance. To succeed, they typically need access to loans between $10,000 and $1 million. This is a banking no-man’s land — often called the “missing middle.” While the global market for natural goods is booming, millions of small producers who dream of accessing it are shut out. Every day, we hear politicians trumpet free-market solutions as a cure for economic ills, but few have worked out the messy details to make the slogans real — especially for people in the countryside.
That’s what Root Capital does.
