Rabobank Group

The coffee sector in Vietnam provides a living for approximately 2 million people. Although it constitutes just 3 percent of national GDP, its economic and social importance in rural areas is far greater, as coffee growers consist mainly of smallholder farmers.

Establishing and supporting coffee cooperatives in Vietnam

Coffee ranks among Vietnam’s top export products. Yet faced with growing competition and more demanding policies in the consumer countries on quality, traceability, food safety standards and regulations, maintaining its dominant position on the international trade market is a major challenge.

In 2009, a study by Rabo Development found that an inability to access formal sources of finance was the main obstacle for coffee farmers to grow and invest sufficiently in the quality of their products. Rabo International Advisory Services proposed a value chain approach, in which coffee producers organise themselves in cooperatives, and work closely with input suppliers and off-takers.

To follow up on the recommendations of this study, a public-private partnership was formed by the Vietnamese and Dutch Ministries of Agriculture, Douwe Egberts Foundation, and the Rabobank Foundation. The four-year programme aims to boost efficiency in the supply chain in the Vietnamese coffee sector; enhance the position of coffee growers through the establishment of farmers’ organisations; and enhance coffee quality in Vietnam. The direct beneficiaries of the project are 2,500 coffee farmers in the Dak Lak, Lam Dong and Gai Lai provinces.

With the assistance of Rabo Development, the first coffee cooperative was established in September 2010 in the Lam Dong Province. The Lam Vien cooperative was set up by an initial 237 farmers, covering about 440 hectares of coffee fields. With a partial guarantee provided by Rabobank Foundation to serve as collateral, the Lam Vien cooperative was able to obtain a loan from the Central People’s Credit Fund - also a partner of Rabo Development.

Rabo Development will continue to support Lam Vien by advising on day-to-day management, business planning, attracting bank finance for the coming years, and linking with value chain partners.

In Dak Lak and Gai Lai, community development activities are underway to strengthen cooperation between coffee farmers. If these prove successful, next steps could include setting up coffee cooperatives in these provinces too.