Asia | Smallholder farmers

Higher incomes through shorter cinnamon chain

31 October 2020 13:53

Cassia Co-op builds a bridge between Indonesian cinnamon farmers and global purchasers. In so doing, the enterprise contributes to a shorter, more efficient, and more fair cinnamon chain.

Cinnamon farmer in Indonesia

Smallholder farmers are often dependent on unreliable middlemen, so they have trouble receiving a fair price for their products. Individual farmers usually don’t have access to financial resources, knowledge, or a fair sales market. But in Kerinci, Cassia Co-op manages to provide them to cinnamon farmers. Patrick Barthelemy, Steven Koelewijn and Adrian Akhza founded Cassia Co-op in 2010. The enterprise has its headquarters on the Indonesian island of Sumatra, and a trading office in Amsterdam. In Indonesia, Cassia Co-op purchases cinnamon directly from 2,200 smallholder farmers in the Kerinci region. It then sells the spice to purchasers around the world via the office in Amsterdam. By removing the middlemen from the chain, Cassia Co-op can pay the farmers on Sumatra a better price. “They get the market price”, says Barthelemy. “Plus an extra premium, because the cinnamon is organic and certified by Rainforest Alliance.”

From openness to growth

Cassia Co-op invests considerable time and effort in building a good long-term relationship with the farmers. “In our own training center, they gain extra knowledge about aspects such as sustainable production and quality standards. We’re also very transparent about the revenues. The company doesn’t use cash; all of the farmers now have a bank account and are paid directly. That way, we can ensure that the farmers trust us, become more entrepreneurial, and feel even more responsible for high levels of production and quality. That high level of production is important to us, because in principle we don’t want to pass on the additional costs for certification to the buyers.”

From cinnamon to herb

There’s no lack of cinnamon trees in Indonesia. The spice is made from the cleaned bark of the tree. Unfortunately, after harvesting the tree needs another 10 to 25 years to grow new bark. Therefore, farmers can only earn an income from a tree two or three times during their lifetimes. Which means they need other sources of income as well, so they can become self-reliant and create better living conditions for themselves. That’s why Cassia Co-op encourages farmers to grow the herb patchouli organically. Barthelemy: “We use it to make patchouli oil on Sumatra, which is used around the world as an aroma in products such as soap.”

How Rabo Foundation adds value

Cassia Co-op has received funding from Rabo Foundation since 2015. “We borrow money for working capital. Thanks to that financing, we can sign pre-financial export contracts. That allows us to pay the cinnamon farmers quicker, and the company is less vulnerable to price volatility in the market. In fact, it’s going so well now that we’re ready to switch to the Rabo Rural Fund.”