IFC’s exposure will be to farmer cooperatives which are legally incorporated in Ethiopia but will be collaborating with TechnoServe and NIB for the 2010/2011 coffee season. TechnoServe, is a reputable international NGO with 40 years experience in rural economic development. It operates in 17 countries in Africa, Latin America and Asia and is active in agricultural sectors including coffee, horticulture, dairy, tea, cocoa and cashew. TechnoServe is funded by various public and private donors including the Bill and Melinda Gates Foundation, USAID, and Rockefeller Foundation. NIB is a licensed commercial bank in Ethiopia with interest in expanding its agribusiness portfolio especially to small farmers producing coffee, Ethiopia’s main export commodity. The bank has made remarkable growth in all areas of its operations since its establishment in 1999. At the end of March 2010, the authorized and paid up capital reached Birr 1.0 billion and 580 million respectively. Shareholders and employees number increased to 3,284 and 1,595 correspondingly. The number of full-fledged branches also reached 45. NIB has received international recognitions and won several prestigious awards including “Bank of the Year in Ethiopia” award winner for 2005 and 2008 by The Banker magazine as well as “Best Bank Award” winner in Ethiopia for 2006, 2007, 2008, 2009 and 2010 by Global Finance magazine.

The total size of the financing program over the 3-year period is expected to be up to $21 million to be phased as follows $8.5 million in 2010; $15 million in 2011 and $21 million in 2012. Up to 20% of the program will be for equipment loans of a 3-year maturity while the remaining 80% will be post-harvest working capital loans of up to one year. Each working capital loan will have a clean-up period. IFC’s investment will be up to $10 million revolving guarantee facility.

10.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	10.0
Loan
Equity

* These investment figures are indicative

The farmer cooperatives are located in the coffee growing areas of rural Ethiopia especially Jimma and Limmu. Processing of the “cherry” coffee would take place in wet mills located in these rural areas. After processing, the “washed” parchment coffee will be transported to warehouses of the Coffee Service Providers (“CSP”) in Addis Ababa, for dry milling and packaging for exports as “washed” green bean coffee.

The Program is expected to have the following development impacts: Strengthen the competitiveness of the Ethiopian coffee sector; Support economic livelihoods in the Ethiopian coffee supply chains, particularly small farmers and household labor; Develop a commercially sustainable model of long-term and short-term financing for the Ethiopian coffee supply chain, with potential for expansion to other countries/sectors dominated by small scale suppliers; Establish the credit worthiness of selected cooperatives;

Without IFC’s participation, the farmer cooperatives would be limited in their abilities to access financing. As a result, the Program commercial banks would be limited by internal exposure limits and would reach fewer smallholder farmers. IFC acts as a catalyst for future similar Programs, as it also has a good demonstration effect and potential for replication with other financial institutions and possibly in other countries. IFC also uniquely contributes sector knowledge to provide guidance to participating commercial banks and other constituents to mitigate agricultural risks in the coffee sector and provide stakeholders with environmental and social best practices.

The proposed intensification of coffee yields on existing lands of cooperatives’ farmers and the construction and operation of the wet mills will have limited impacts on the biophysical and social environment. The screening process established by TechnoServe for site selection, site planning and technology selection of wet mills identifies and assesses the potential environmental and social impacts during the construction and operational phases. Mitigation measure for these impacts will be incorporated into the project design. These are generally site-specific and temporary and none are regarded to be significant. Those impacts can be avoided or mitigated by adhering to generally recognized performance standards, procedures, guidelines or design criteria. As such, this is a Category B project according to IFC’s Environmental and Social Review Procedures.

The key environmental and social issues assessed by IFC during project appraisal were: 1) TechnoServe’s environmental, social, health and safety management systems; 2) review of TechnoServe’s agronomy best practices program; 3) site selection screening process for the installation of the wet mils, including impacts assessment on biodiversity and water resources, site planning and local government permitting requirements; 4) technology selection, including energy and water consumption efficiency; 5) recycling and treatment of process effluents, domestic wastewater and organic solid wastes (coffee hull); 6) occupational health and safety (OHS) for workers at the wet mill; 7) life and fire safety; and, 8) cooperative’s coffee farmers welfare and OHS.

An Environmental and Social Action Plan (ESAP) has been prepared to ensure the effective implementation of TechnoServe’s Sustainability Guidelines and related construction & OHS manuals. A wet mill environmental and social compliance report will be prepared and shared with IFC for wet mills proposed in FY2010 to ensure the robustness of the TechnoServe’s due diligence process. For the 20 wet mills constructed in 2009, rehabilitation plans and timetable for the implementation of the mitigation measures will be provided. Additional action items are proposed in the ESAP to ensure compliance with IFC’s Performance Standards 1, 2, 3, 4 and 6 and IFC’s General and Plantation Crop Production’s Environmental, Health and Safety Guidelines.