STiR coffee and tea magazine

STiR coffee and tea 27 Majestic Coffees co-founders Fernando Patiño (top left) and Juan Vargas (top right) with quality control manager Yiver Vargas (center). Photo credit: Majestic Coffees Algrano estimates that one load (125kg) of dried parchment coffee costs the average Colombian farmer $629 to produce. If that load were sold for $750, a farmer would earn a profit of $121. Taking into account different types of loans and interest rates, Algrano determines how much or little profit a farmer actually walks away with at the end of the day. Charts credit: Algrano That access evolved into logistics, and logistics into prefinancing. Eventual- ly, the company made a critical decision: "We decided that we aren't going to do loans; we're going to start doing prepay- ments," comments Schaffner. Algrano is not a bank. It doesn't issue loans in the traditional sense. Instead, it prepays producers and exporters against purchase contracts. Instead of relying on traditional credit scoring, Algrano uses its own proprietary behavioral data. "We know if the coffee arrives on time, we know the quality score, and we know the buyer. So instead of looking at a credit history, we use our internal data," Schaffner explained. The flexibility of this system enables it to serve a broad range of producers and small exporters. "The average ticket we finance is about $60,000. The smallest we've ever done is $1,300," Schaffner said. This agility helps bridge the critical timing gap between investment and income. When Patiño first experimented with Algrano's Grower Capital, the experience was surprising. "We applied, and in four days we had the money in our account," he said. DAO-ish Finance: A New Kind of Credit Score While Algrano is not a Decentralized Autonomous Organization (DAO), its fi- nancing model resembles one in spirit. DAOs operate on decentralized, transpar- ent rules enforced through smart contracts. Algrano's system is likewise rule-based, leveraging performance data — such as on-time delivery and contract consistency — to allocate capital. Instead of relying on collateral or formal credit histories, Algrano builds trust through the behavior of its community members. Each producer creates a de facto credit score by showing up, delivering quality, and keeping their word. "We built the track record with our own funds. Now we're scaling with partners," Schaffner adds. It's not autonomous — there's still a central operator, and it's not blockchain- native. But the decentralization of trust and transparency of logic offer a glimpse of what DAO-style finance might look like in coffee: grounded in community, governed by performance, and executed with speed. The Honduran Coffee Financing Crisis In 2024, a financial earthquake rocked Honduras. Banco de Occidente, a long time dominant lender in the Honduran coffee sector, abruptly stopped financing coffee operations, creating a sudden credit vacuum. This set off a domino effect, causing farmers to scramble for lending alternatives. Algrano experienced a surge in requests for prefinancing from Honduras, but it could only serve those already within its ecosystem. For the rest, it was a race against time. The Honduran case demonstrates the fragility of financial ecosystems in coffee- producing countries. When a single institution controls the majority of lending, any withdrawal, whether due to risk concerns, regulations, or macroeconomic shifts, can paralyze an entire sector. Diversifying sources of finance, both public and private, be- comes essential not only for stability but also for resilience. Asymmetry in the Coffee Chain The credit crunch reveals the underlying asymmetries in the value chain. Producers have the least power and the least liquidity, and they face the most risk. Exporters, although better connected, remain vulnerable to logistics bottlenecks and currency fluctuations. Importers and roasters in Europe or the US enjoy stable access to trade finance and long payment windows. Cost Per Load $2,500,000 COP ($629) Selling Price $750 Profit Before Interest $121 Financing Period 3 Months Impact of Financing on Profitability Base data per load (125kg of dried parchment) Source of Annual Effective Rate Interest Paid Final Profit Final Profit Financing Interest Rate (3 Months) (USD) (USD) (%) Algrano 12% 3% $18.87 $102.13 13.6% Finagro 19% 4.75% $29.85 $91.15 12.2% Banks 25.62% 6.4% $40.26 $80.74 10.8% Loan 250% 62.5% $393.13 -S272.13 -36.3% sharks Comparison Table Interest Rates and Real Profit

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