Innovative move to help coffee farmers

The Vietnam Challenge Fund said this new business model, including a certification system, could be replicated by farmer cooperatives other than Dak Lak province’s Cu M’gar district Ea Kit cooperative, either on their own or in collaboration with coffee traders.  The total project budget was just $435,000, of which the Vietnam Challenge Fund contributed just under $160,000.

This project has the potential to play a leading role in the development of a significant new market segment for value-added Vietnamese coffee in the international market.

“It was the project’s potential to catalyse a major systemic change in one of Vietnam’s main agricultural and export sectors that first attracted us,” said Buddhika Samarasinghe of the M4P2 project.  
“The project addresses one of the fundamental weaknesses in Vietnam’s coffee industry, that of poor processing, resulting in low and inconsistent coffee quality in the international market.  In short, this project is a ‘game changer’,” Samarasinghe said.

The direct results of this project have been impressive.  Over fifty farmers in Ea Kiet have been certified by Fair-trade and 30 jobs have been created at the coffee facility itself, and a further 100 seasonal ‘on farm’ jobs have been newly created.  In the first harvest season alone, almost 400 metric tonnes of Fair-trade semi-washed coffee was produced and exported by the facility.  

The price premium achieved for this Fair-Trade semi washed Vietnamese robusta coffee was over $440 per metric tonne, said Nguyen Tung of the Vietnam Challenge Fund.  This resulted in a 2.5 times increase in the aggregate income of the householders participating in the project.  

Such an increase in income – achieved in one season only – was equivalent to roughly 1.5 times the total investment by the farmers’ in the facility.

“I am delighted that the project has delivered these outcomes for our coffee farmers,” said John Clark, managing director of Dakman Coffee. “The results have shown to us that it is possible to deliver a commercially successful project that can also benefit farmers in the province. We hope to replicate and expand this project in coming seasons to impact on even greater numbers of coffee producers,” he said.

But the main impact of this project has been to demonstrate the commercial viability of growing and processing higher grade Robusta coffee.  This has the potential to impact favourably on a significant proportion of the 150,000 farmers growing coffee in Dak Lak province.

The Vietnam Challenge Fund is a component of the ‘Making Markets Work Better for the Poor, Phase 2’ or M4P2 project, funded by UK Department for International Development (DFID) and managed by the Asian Development Bank (ADB), in collaboration with the Ministry of Planning and Investment.  

Dakman was founded in 1995 as the first foreign invested joint venture company licenced by the Vietnamese government to process and export robusta coffee from Vietnam.