Value Chain Financing in Coffee Agribusines (the Case of a Cooperative in Pangalengan, West Java, Indonesia)

Abstract

Economic globalization encourages coffee farmers to prepare themselves to adapt and compete. In dealing with this issue, Margamulya Coffee Farmer Group has transformed into a cooperative under the name of the Margamulya Coffee Producers Cooperative (MCPC). MCPC sold 80% of its coffee production to PT Taman Delta Indonesia (PT TDI) and was committed to its permanent supplier. In fulfilling its role as coffee suppliers, farmers were faced with a lot of capital needs to produce quality coffee. MCPC needs capital to pay farmers cherry as well as processing and marketing costs. This study aims to describe the coffee value chain in MCPC, to identify the perpetrators and their business processes, and to design financing pattern suitable for farmers and MCPC. The method used was case study at MCPC using value stream mapping technique. The results show that there are two value chains in coffee agribusiness in MCPC while the actors in the chain consist of Farmer-Cooperative-Exporter and Farmers-Cooperatives-Retail (café/others). The business process in farmers remained in coffee producing, while the cooperatives focused on processing and marketing. The result of this study shows that the proposed financing model of value chain financing for its success requires the involvement of stakeholders from outside the supply chain. Value chain financing for structured markets gives more guarantee of business sustainability due to market certainty and price. This encourages farmers to maintain both the quantity and quality of their coffee products.