Banking Beyond Wall Street…and Into the Field
Putting my Passions to Work: From Skyscrapers to Coffee Fields
In June 2015 I left a comfortable job as a VP in HSBC’s Corporate Banking group in New York City, and with few possessions and a mountain of uncertainty, moved to Medellín, Colombia to volunteer for the Grameen Foundation. Grameen supports smallholder coffee farmers in the Antioquia region of Colombia via technical assistance projects and the development and implementation of technology applications to connect them to markets. You are probably thinking to yourself, as most of my family and friends were at the time, that “he must have had a late-20s crisis” or “he must have really hated his life in New York City.” It is very reasonable to make these assumptions, but they were actually not the case. I did have a crisis, but it was a crisis of conscience and personal fulfilment. I did not hate my job at HSBC and I certainly did not hate my life in New York City. Instead, I had the incredible fortune of discovering my professional passions and deciding to follow them to the fullest extent. In 2014 I discovered the impact investing sector while volunteering with the Bankers without Borders program. This experience taught me that the skills I had gained while working in finance can be applied in a way that helps socially impactful business grow, and in doing so, lift people out of poverty. What an epiphany this was! It opened my world to a new set of professional possibilities and instilled in me a passion for social impact through private entrepreneurship and market-based solutions. The idea of leaving a corporate job to work in the social impact space grew and grew until I couldn’t fight it anymore.
In Colombia I was working on a project to build a credit risk algorithm tailored to smallholder coffee farmers. Although ~70% of the world’s food supply is provided by smallholder farmers (typically defined as a farmer with < 2 hectares of arable land), many of these farmers are locked out of credit markets because they are perceived as too risky to lend to. Not only are they excluded from borrowing from traditional lenders (i.e. commercial banks), the lowest rung of smallholders is locked out of nontraditional credit markets (i.e. agro focused microfinance institutions). Due to their lack of assets to pledge as collateral and non-existent credit history, an innovative, technology-based solution is required. The Grameen Foundation’s response to this challenge was to build a credit risk algorithm that utilizes nontraditional data to predict smallholder coffee farmer credit risk. They staffed me on this project because I could bring commercial lending and credit risk analysis experience to the table, as well as a traditional lending perspective. In addition to statistical number crunching, I had the incredible opportunity to visit coffee cooperatives in rural Antioquia to learn about their credit offerings, processes and the needs of the farmers in order to apply these finding to Grameen’s product.
To Finance an Agribusiness…
My experience in Colombia was everything I had hoped for and affirmed my commitment to the social impact sector, so I began the search for a full-time position where I could both utilize my existing skill-set and have room to acquire new skills. I came across the associate fellowship position at I-DEV on the GIIN career site, and was immediately drawn to the unique combination of consulting and investment advisory that the position offers. My experience so far at I-DEV has been an excellent combination of investment advisory, where I have been able to immediately contribute my skill set while learning the impact investing landscape, and consulting, where I have been learning a completely new skill set. The first project I was staffed on at I-DEV, a capital raise for an agribusiness that sources from smallholder farmers, proved to be a seamless transition from the work I had been doing in Colombia. The business has a strong social impact on the 1,400+ smallholder farmers it sources from by connecting them to markets via guaranteed purchase contracts at a fixed and fair price, and supplying technical and financial assistance, including agronomist support, certification training, working capital and farm management technologies. The Company has built a vertically integrated global supply chain that allows them to receive a price premium from high-end retailers that share the company’s social mission and transfer that premium on to smallholder suppliers. I-DEV is helping the company raise $3M-4M in growth capital to expand their sourcing networks, improve their packaging plants, and bolster the sales platform which will allow them to scale their social impact to 3,100+ smallholder farmers by 2020.
I-DEV’s role is to get the business investment ready, put together the investor materials, market the investment to our network and represent the Company during the negotiation of terms. To gain an understanding of the business’ strengths and weaknesses, I took due diligence trips to the company’s major sourcing operation in Guatemala and headquarters in Europe. We then put together an investor pitch deck that highlights the investment rationale, the company’s competitive strengths, growth strategy, etc. We built a long list of potential investors from across the investment landscape, including impact investors, strategic investors, and PE firms, and we are now in the process of reaching out to these investors to gauge interest.
Solutions for Sustainable Agribusiness
My experience working with businesses that improve the lives of smallholder farmers has been an eye-opening and rewarding experience. I am troubled by the fact that the poverty of smallholder farmers subsidizes the cost of food consumed across the world, but I am also very optimistic about the growing awareness of the unsustainability of this model and of the people who are dedicating their lives to transforming the food value chain paradigm. These experiences have armed me with a solid understanding of the core challenges smallholder farmers face, including financial insecurity, disconnection from markets, a lack of access to affordable finance, the challenges conforming with high quality standards demanded by export markets and their susceptibility to climate change. It has been incredibly exciting to learn about the innovative solutions to these problems that are cropping up, including the Grameen Foundation’s innovative technical assistance programs that leverage the knowledge of local smallholders, mobile applications that connect farmers to markets and allow them to better plan and control their harvests such as TaroWorks (www.taroworks.org), and mobile applications that help farmers comply with certification requirements such as farmforce (www.farmforce.com).
Incorporating Artisans into a Global Textiles Value Chain
I have also enjoyed building my consulting experience with I-DEV. For example, I-DEV was hired by two major apparel companies- Eileen Fisher and one of their leading suppliers, Indigenous Designs- to research the feasibility of applying a secondary benefits program framework to the alpaca and organic cotton textiles value chains. A secondary benefits program- an I-DEV concept- is a multi-tiered program designed to reward supply chain partners via non-monetary perks and upgrades that improve quality of life. Beneficiaries start out with a set of basic benefits and can unlock additional ones as they grow with the business and move through tiers of the program. These programs are designed to benefit both the suppliers and the business by catering to critical social needs while also helping to address specific supply chain bottlenecks, such as farmer side-selling, employee abseenteeism, low adoption of production best practices, or high reject rates due to poor quality. I-DEV pioneered this program with an agriculture cooperative in Peru many years ago, and has rolled out tailored programs to agriculture clients globally, but a program has never been applied to textiles before. In order to fully understand the needs of alpaca artisans we visited a business in Arequipa, Peru that manufactures alpaca hand-knit and woven garments & accessories using a unique outsourcing method that allows ~90% of the garments to be produced by small artisan workshops. We held focus groups with both the company’s management team and directly with the artisans, almost all of whom are women, and many of whom contribute >50% of household income. Based on the knowledge gleaned from these focus groups we structured an illustrative secondary benefits program that enhances the stability and capacity of alpaca artisans and workshops via programs to help sustain them during the low period, enhance the quality and efficiency of their work, and provide much-needed benefits such as enhanced healthcare and education funding.
Take-aways and What’s Next?
Working at I-DEV has offered exposure to the various players in the social impact space, from working directly with socially impactful businesses to DFIs, impact investment funds, foundations and multilateral institutions. I have appreciated the opportunity to continue to hone and develop a well-rounded skill-set- and the variety of work never gets boring! I am amazed and motivated by the businesses that are designing innovative solutions to social challenges. Helping these businesses to improve their operations, build their strategies, and raise growth capital to scale social impact has been extremely rewarding and enlightening. There are a ton of exciting and diverse projects in the pipeline, including a capital raise for an innovative stevia company and a market expansion strategy for a cutting edge biodigestor business. At the conclusion of the four-month fellowship I-DEV gave me a full time offer, which I happily accepted, and I may soon have the opportunity to work in I-DEV’s Africa office for six months! I look forward to growing with I-DEV and continuing to contribute to and learn from the social impact sector.