Microloan Coffee

Microloan Coffee

Organization type: 
nonprofit/ngo/citizen sector
$1,000 - $10,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Unión MicroFinanza (UMF) provides micro loans, technical and supply chain assistance to farmers in rural Honduras. As a sustainable measure, UMF created its own product line, Microloan Coffee. It is great coffee purchased at above fair trade value, is direct trade, and 100% of proceeds go back to help fund more microloans.

About You
Union MicroFinanza
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Section 1: About You
First Name


Last Name



, MI, Washtenaw County

Section 2: About Your Organization
Is your initiative connected to an established organization?


Organization Name

Union MicroFinanza

Organization Phone

US: 231.288.8355 Honduras: 011.504.8950.9255

Organization Address

716 W. Liberty

Organization Country

, MI, Washtenaw County

How long has this organization been operating?

1‐5 years

Your idea
Country your work focuses on

, LE

What makes your innovation unique?

Unión MicroFinanza is inextricable from La Unión, Honduras. This is our single most distinguishing factor – the extent to which our business model is shaped by our community is innovative and unprecedented.
Though we’ve learned from established institutions, we channel our efforts into creating our own model, one that fully compliments its context.
Even in rural mountain villages, context can be quantified – using vast amounts of meticulous survey data, we’ve digitally represented the dense social networks of the 32 villages throughout La Unión. Network analysis (a mathematical evaluation of relationships among people) then allows us to correlate social influence with economic behavior. Academically, this research is the first of its kind. Applied, it sets us apart and pushes us forward – our microfinance approach is community-specific and socially savvy.
In each of our 32 villagers, we’ve selected juntas directivas, which are boards of locally well-connected members. Juntas directivas provide us invaluable information on the reliability of potential clients, a kind of “social collateral.” They also assist us in collecting repayment – their local positions of influence skim the foreign, invasive edge off of microlending.
Our service reflects our responsiveness to these communities. Sustenance here is agricultural, so we loan agricultural-products. To equip farmers with the skills to use these improved products, we partner with agricultural institutions to coordinate training sessions. And to fund loans and sessions without exorbitant interest rates, we sell La Unión coffee – 100% of Microloan Coffee’s profit is funneled right back into these villages as higher wages and microfinance services.

Do you have a patent for this idea?


Tell us about the social impact of your innovation. Please include both numbers and stories as evidence of this impact

Fincas – sprawling mountainside farms – are everything here. Children leave school at young ages to work alongside their parents on coffee fincas and supplement meager family income; to many families, a finca is more worthy of investment than a child’s education. Status here is determined by the size in manzanas of one’s land and the number of quintales of one’s yield. Even successful coffee farmers, however, are rarely “well-off.” This is not a profitable industry; there is simply no other option for subsistence.
Unión Microfinanza provides agricultural microloans, in the form of improved fertilizer and seeds, as well as agricultural training sessions to farmers. Quantitatively speaking, the impact of these services is astounding:
A decent-sized coffee finca is about one manzana large. Without fertilization, it can produce about three quintales, 300 pounds, of coffee. A round of fertilization costs about $150; most farmers don’t have enough saved to purchase this themselves. Were he to borrow a single bag of coffee fertilizer from UMF – enough for one round of fertilization – and use it properly, a farmer could increase his yield from 3 quintales to 25 quintales, or 2500 pounds.
This particular loan would amplify physical capital eightfold. Similarly, a loan of improved corn seeds, worth about $65, could increase the yield of a manzana from 18 to 70 quintales. A training session on common bean plant plagues could save an entire finca.
An increase in physical capital in itself increases the farmer’s quality of life. In communities like La Unión, however, wealth spreads. The farmer can then hire more workers for his finca and pay them higher wages. He can afford to send his children to the local bilingual school, where they have a much higher chance of continuing their education. He can spend at his friend’s local pulperia. And, with newfound confidence and newly acquired trust, he can take out a second loan, perpetuating the cycle of benefit.

Problem: Describe the primary problem(s) that your innovation is addressing

In La Unión, severe poverty is the symptom. The underlying problem is that La Unión is stagnant, which is geographically-induced and poverty-inducing. La Unión is isolated by high altitude and mountainous terrain; a lack of infrastructure makes it terrifying to reach this region. As a result, valuable resources and ideas are slow to penetrate, and life in these communities is much as it was a century ago.
The steep mountainside dictates La Unión’s economy – it is singularly agricultural. All families subsist off of beans and corn, and all are involved in the production of coffee for export. Reliance on a single crop for income provides little economic stability in the face of volatile mountain conditions. Additionally, farmers here are constantly exploited and underpaid by large coffee corporations, simply because they lack the leverage to seek other options.
Though farming forms the crux of the economy, techniques are often primitive and inefficient. Farmers have neither access to nor capital for improved products – were they to have both, they would still lack the skill sets to dramatically improve their yield. Stagnancy here is entrenched, which is our biggest challenge.

Actions: Describe the steps that you are taking to make your innovation a success. Include a description of the business model. What might prevent that success?

We’ve worked to garner the support of locally respected leaders. We’re engaged in political discussions from the local level to the national level to ensure that there is no conflict of interest between our endeavors and governmental programs. These also include local religious leaders, who are highly influential in La Unión – church is the center of life here – and use microfinance to spread a message of empowerment. Many of our employees are Honduran, allowing us to further network within the community and to conduct lending processes and sessions in a culturally sensitive manner.
Our lending processes are simple but painstaking. Each loan application solicits detailed information about the clients’ identity, income, agricultural practices, and understanding of accountability. Because we do not require collateral from our clients, UMF employees and local juntas directivas then evaluate each application for “social collateral,” verifying accountability and need.
Approved clients are given their requested loan packages and a schedule of repayment meetings with their local junta directiva. UMF partners with the Honduran Institute of Coffee (IHCAFE) and the Secretary of Agriculture (SAG) to coordinate agricultural training sessions. Members of each junta directiva attend these sessions and bring that knowledge back to their villages to pass on to loan clients. Simultaneously providing improved products and training sessions is a form of insurance for lender and borrower alike.
As a development-oriented microfinance institution, UMF aims to be sustainable, but not at the cost of accessibility. Microloan Coffee was born to maintain sustainability while keeping interest rates low. The concept behind Microloan Coffee is that by eliminating exploitative import/export/processing intermediaries and overseeing the process from seed to cup, UMF is able to keep costs extraordinarily low and, after covering these costs, return the remaining 70% of every dollar in sales back to communities in La Unión.
The biggest detractor from our success would be shortsighted charity or government “gifts.” At best, these efforts have marginal short-term effects; more often, they create dependence and discourage entrepreneurship with the beguiling prospect of “free money.” UMF believes in empowering people toward self-made and sustainable progress.

Results: Describe the expected results of these actions over the next three years. Please address each year separately, if possible

Within the next year, Union MicroFinanza plans to augment microlending and training services, ultimately distributing around 800 loans and a range of educational resources for clients. We also are in the works of securing profitable markets in the United States for Microloan Coffee by establishing partnerships with coffee shops, restaurants and grocery stores in Michigan and California. Through sales of Microloan Coffee, UMF aims to increase the number of loans available while keeping interest rates low. UMF will continue to work closely with government officials this year at local, regional, and national levels to ensure that there is no conflict of interest between UMF’s microloan services and governmental programs, which have lacked follow-through in the past. By next year, UMF would like to see Microloan Coffee carried by enough vendors for our microloan services to reach all qualified members in the 32 villages of La Unión. We also plan to reevaluate our lending model based on rates of repayment. Long term, UMF sees the La Unión experience as a pilot project for other similarly mountainous, isolated regions of Honduras. We hope to become a national model for sustainable agricultural reform.

How many people will your project serve annually?


What is the average monthly household income in your target community, in US Dollars?

Less than $50

Does your innovation seek to have an impact on public policy?


If your innovation seeks to impact public policy, how?

Unión MicroFinanza seeks to replace the Honduran political tradition of poorly-distributed governmental handouts with a tradition of empowerment. At present, the Honduran government gives irregular gifts of seed to farmers; misplaced generosity often arrives too late to be useful or is insufficient in quantity. To redirect these efforts, UMF is working closely with the Honduran Secretary of Agriculture to shift governmental funds from handouts to microloans. Unlike gifts, microloans promote entrepreneurship and accountability among farmers. Accompanied by training sessions, these loans empower and equip farmers to double their harvests.
Increased yields benefit from expanded markets, so UMF sells Microloan Coffee through a number of vendors in the United States to increase farmers’ profits and eliminate the need for handouts. By increasing both farmers’ revenue and access to microloans, we hope to replace governmental “gifts” with the gift of self-sufficiency.

What stage is your Social Enterprise in?

Operating for 1‐5 years

Does your organization have a board of directors or an advisory board?


Does your organization have a non monetary partnerships with NGOs?


Does your organization have a non monetary partnerships with businesses?


Does your organization have a non monetary partnerships with government?


Please tell us more about how partnerships could be critical to the success of your Social Enterprise

UMF has partnered a number of specialized organizations to design the most innovative and efficient solutions to poverty in western Honduras. Our research partnerships with the University of Michigan and Harvard University develop our approach to client selection. Our partnership with the Honduran Secretary of Agriculture augments our ability to distribute seed and fertilizer loans effectively. We collaborate with the National Institute of Professional Training (INFOP) and the Honduran Institute of Coffee (IHCAFE) to provide agricultural and business training. We distribute and process our Microloan Coffee through partnerships with Uncommon Grounds, eve the restaurant and Rainbeau Ridge Cooperative. Our loan clients’ markets are expanded through partnerships with churches, coffee shops, grocery stores, and restaurants. Our diverse partnerships are crucial to every aspect of our endeavors, from agricultural and market research to loan distribution and training to coffee processing and distribution. They are our doors to development.

We would like to learn more about how your initiative is financially supported. Please explain your business plan/revenue model

Unión MicroFinanza maintains financial sustainability for its microloan services through sales of La Unión’s own Microloan Coffee. Traditionally, coffee passes through the hands of multiple intermediaries, leaving the farmer with little profit; in fact, the farmer generally gets only about $.08 of every dollar spent on consumer coffee. Microloan Coffee keeps its coffee in its own hands, overseeing every step of the process. By eliminating the exploitative chain of intermediaries, UMF is able to not only pay La Unión farmers substantially above fair trade prices for unprocessed “green” coffee, but to return 70% of all processed coffee revenue directly to La Unión in the form of microloans, simply because processing costs – the profit-sucking export, import, roasting, packaging, and transport expenses – have been kept unusually low.
Available for purchase at churches, coffee shops, grocery stores, and online, Microloan Coffee gives consumers the opportunity to directly support farmers. The goal remains, though, that farmers support themselves; UMF’s emphasis on rigorous training sessions and use of various social techniques to select qualified clients serve to illustrate the importance of accountability and repayment. Thus, while coffee sales make it possible for us to increase the number of loans available, they in no way allow us to relax collection of repayment – this is the oft-made mistake that has crumbled many a microfinance institution. Rather, we use our backing by local leaders to reinforce adherence to a repayment schedule, and mandate that all debts be settled before loan applications are even considered. As we’ve mentioned, empowering La Unión is part microfinance and part molding mindsets.

The Story
What was the defining moment that led you to this innovation?

Unión MicroFinanza and Microloan Coffee began a little less than two years ago in a coffee shop, where a PhD candidate and I were discussing how mathematics could change the world. Our coffee shop conversations centered on microfinance, giving small, collateral free loans to people who are too poor to access traditional economic services. It is hypothesized that social capital, the value in the bonds between people in small groups, is the mechanism responsible for loan repayment when collateral is not a factor. Though social capital is rather ambiguously defined, most theorists believe that advanced mathematics may hold the key to understanding this concept better. Two months and countless hours later after the coffee shop discussion, a team of 25 University of Michigan Students traveled to La Unión, Honduras – population 7,000 – to conduct a three month study of the surrounding communities. The goal of this survey was to collect information about the relationships between people and how these relationships affect how communities work together. Microfinance relies on these relationships to help discern who is responsible enough to repay loans, monitor people who have taken out loans, and enforce repayment when clients are delinquent.
At the end of three months, the team left La Unión but we had plans to return and start Unión MicroFinanza. Finding that La Unión farmers grew high quality coffee and in need of funding to continue our work in La Unión, we decided to try to sell bags of coffee during Christmas. After one week, we had managed to sell all of our coffee. People were excited to have the opportunity to empower communities in La Unión while also purchasing high quality coffee. From this we found that with a good product and good marketing we could support La Union farmers with their own coffee. Now Microloan Coffee and agricultural microloans form an innovative cycle which provides a sustainable solution to poverty in La Unión.

Tell us about the person—the social innovator—behind this idea.

Union MicroFinanza and Microloan Coffee has never been the product of one single mind. Instead, the organization, and the principles and ideas that guide it are a product of a team of people that are passionately dedicated to what we do. This has resulted in many incredible and innovative ideas and methods, including the organization itself and Microloan Coffee.

The core group consists of Derek Stafford: Derek is a Ph.D Candidate at the University of Michigan in the Complex Systems Department. He is the mastermind behind math and research that is the foundation to the organization.

I, Andrew Boyd, have been traveling to this area of Honduras since 2005. I always wanted to start microfinance in the area. I had the passion. The rest of the team has helped me make it a reality. I first shipped coffee to the US in December 2009 as a small fundraiser. From the success of this, the team began brainstorming and we came up with the concept of Microloan coffee.

Patrick Hughes is the head of our operations in Honduras. Long before this all began he loved coffee. He has a great palate for it and is very passionate about it. He has refined it into a product of outstanding quality as well as working closely with farmers in Honduras on a daily basis to improve their methods.

Michael De Wit and Dan Schwartz joined us in the first initial research stage as summer volunteers. They could not leave and have become and integral part of the organization. Michael also has a passion for coffee.

Bret Abel and Laura VandenBosch: Bret has designed both our websites and Laura has designed our coffee label and other marketing materials. Both do everything without asking for a penny.

How did you first hear about Changemakers?

Friend or family member

If through another source, please provide the information