Olam secures funds for sustainable coffee work in Asia

The Asian Development Bank (ADB) and the Japan International Cooperation Agency (JICA) were the lenders on a facility which will be used to fund capital expenditure and working capital requirements in Vietnam, Indonesia, Timor-Leste and Papua New Guinea.

There are two tranches to the package: a five-year slice worth USD 83 million and a seven-year tranche worth USD 80 million. The seven-year tranche is for Café Outspan Vietnam Limited (COVL), a local subsidiary of Olam in Vietnam focused on soluble coffee manufacturing.

This is in addition to the USD 500 million sustainability-linked revolving credit facility the company inked last week. On that facility, the pricing will be reduced if it meets certain performance criteria. It attracted 15 lenders in equal parts, with Olam saying that the company was in the market for sustainability-linked finance.

Olam is working with these development banks, which usually offer preferential terms, although these have not been disclosed. This loan also has a sustainable facet: Olam will use the funds to improve sustainable agricultural value chains for tens of thousands of smallholder farmers in the countries stated. Among the capital expenditure will be the expansion of the COVL coffee processing plant in Vietnam, which will help advance the country’s agricultural sector.

Agriculture plays a key role in Vietnam’s economy, where 66% of the population live in rural areas, while smallholder farmers with 0.5 hectares or less land account for 70% of the rural population.

It is the world’s second-largest producer of coffee, providing 17% of the global market share, second only to Brazil. Advancing its coffee processing industry is a stated aim of the government in Vietnam, on its journey towards industrialised nation status.

Developing formal value chains is essential for farmers in Asia and the Pacific to integrate with the global economy and increase the value of their products, said ADB.