Lending

A Celebration of Giving – Part 2

September 11, 2014

Click here to see the first story in this series

KelleyBuhles_Books_Large (2)by Kelley Buhles

As RSF Social Finance celebrates its 30th anniversary, we feel deep gratitude for all the supportive relationships that have nurtured, inspired, and challenged RSF to expand and deepen how it goes about transforming the way the world works with money and that are bringing associative economic principles into daily practice.

Over the next few months we will be posting a series of stories about some key catalytic gifts and givers who saw potential within RSF, seeded future possibilities, and in turn, have become part of our destiny.

A Prophetic Gift

Voices of the prophets have been heard in most cultures throughout human history. They are traditionally seen as harbingers if not agents of change. In 2002, RSF received a prophetic gift from an anonymous donor that would eventually transform the way we work with lending.

Prior to this gift, RSF was making loans solely to non-profit organizations. At that time, the field of social finance was nascent and there were few models for how to work with money in alignment with social and environmental values. Through dialogue with RSF’s community of clients and partners, the idea emerged to expand our work to begin lending to mission-aligned for-profit businesses.

However, RSF’s ability to lend relies on the investments we receive from the RSF community. Because most of our individual investors don’t have the risk tolerance necessary to experiment with lending to an emerging field of borrowers, RSF was not able to experiment with this idea without a source of capital beyond the Social Investment Fund.

Fortunately, one of RSF’s donors was inspired by the idea and decided to make a gift of $2.5M to guarantee loans to mission-aligned for-profit businesses, thereby allowing RSF to gain experience lending in this new way. This initiative was called the Fair Economies Program.

The Fair Economies Program provided financing to businesses in emerging industries that were environmentally restorative while providing fair working wages, humane working conditions, and supporting self-determination in economic development. An additional goal was to support these social enterprises in underserved regions.

The program was developed both to provide early-stage socially responsible enterprises access to low-cost capital, and to demonstrate that enterprises created for social and environmental benefit could be sustainable and provide value to the communities they served.

Through this program RSF was able to contribute to the growth of many successful businesses such as Organic Bouquet, Indigenous Designs, and Root Capital.

RSF_30th_purpleAnother gift RSF received was experience—both the experience of lending to organizations in fields that we previously hadn’t worked in, and of using new and different types of financing. The Fair Economies Program provided bridge loans, term loans, convertible loans, purchase order financing loans, and working capital loans, most of which had not previously been provided by RSF. We also gained experience working in sustainable agriculture, independent media, and fair trade, whereas our previous experience was mostly working with Waldorf Schools and other organizations inspired by the work of Rudolf Steiner.

Additionally, through our dealing with projects in need of early stage financing, RSF provided necessary technical assistance and client attention while supporting some of the companies through challenging situations. While not all of the projects funded by the Fair Economies Program were successful, the lessons RSF learned from it were documented, reflected upon, shared, and eventually fed back into our operations, thereby making RSF a more knowledgeable and experienced lending partner to mission-aligned, for-profit businesses .

The donor and the gift that facilitated the creation of the Fair Economies Program inspired and ultimately provided the experience necessary to create our for-profit lending program as it is today – standing at 50% of our social enterprise lending portfolio. For this we are very grateful.

Kelley Buhles is Director of Philanthropic Services at RSF Social Finance

RSF Seeks the Next 25 Social Enterprise Stars

September 2, 2014

Socent logo

Today we’re excited to launch the Next 25 Social Enterprise Stars campaign to attract a new cohort of extraordinary borrowers.

We’re looking to add 25 social enterprise stars to our loan portfolio over the next year—and we need the help of everyone in our community to find them. You’ll be hearing from us about our search and our newest borrowers here on this blog, on social media, at events, in our newsletter—everywhere.

We know there are exciting enterprises across the U.S. and Canada that could grow with our help, but they may not know about us—and we may not know about them. So we’re asking you—our investors, borrowers, advisors, partners and friends—to be our eyes and ears and send compelling candidates our way. You’ll be expanding your impact, and the enterprises you refer will benefit from working with a pioneering funder that has a true commitment to helping social enterprises succeed.

Why are we doing this now? Our assets have grown 39 percent over the last three years, as more and more investors are putting their money to work for social benefit. That means we’re able to lend to more social enterprises than ever.

Here’s what we’re looking for: established businesses and non-profit organizations that are doing groundbreaking work in food and agriculture, education and the arts, or ecological stewardship—and could significantly expand their impact with a loan of about $200,000 to $5 million. (Our average loan is $800,000.)

To receive a loan from RSF, an enterprise should have these qualifications:

  • A social benefit mission in one of RSF’s three focus areas: Food & Agriculture, Education & the Arts, and Ecological Stewardship
  • Incorporation in the U.S. or Canada
  • Strong collateral (which may include pledge or guarantee communities)
  • Excellent history of repayment (both interest and principal) on any existing debt
  • Funding needs ranging from $200,000 to $5 million ($100,000+ for arts organizations)
  • 3 or more years of operating history
  • Operational profit, or a clear path to profitability in 12 months
  • Annual revenue of $1 million or more ($500,000 for arts organizations)

Please send candidates that meet the criteria to our Next 25 Social Enterprise Stars page.

Thank you for helping to build the next economy! And please share news of our search through the social media you use—we’re using the hashtag #SocentStars.

Uncle Matt’s Organic Revolutionizes Florida’s Citrus Groves

July 31, 2014

With its subtropical climate and rich pest population, Florida has been slow to embrace the organic movement: fewer than 8,000 of its 541,328 acres of citrus groves are organic. Matt McLean has made it his mission to change that. As the founder and CEO of Uncle Matt’s Organic—the largest and oldest organic orange juice company in the U.S.—McLean not only sells delicious juices, he’s making it easy for other small Florida citrus growers to transition to organic.

noelle mclean

Photo courtesy of McLean Photography

Uncle Matt’s sells a huge quantity of organic orange and apple juices, lemonade and whole fruits to retailers such as Whole Foods and Publix each year. But its most innovative initiative is its agricultural management company. Uncle Matt’s Ag provides “one-stop shopping” for grove owners who want to go organic. The company actively recruits conventional farmers, handles all the paperwork for them throughout the transition and certification process, creates a full farm plan and oversees every aspect of caretaking, from riding the tractor to tamping down the weeds. Uncle Matt’s then markets all the grower’s fruit at top dollar, ensuring that organic farming is economically viable.

It’s a model that—with the help of a credit line from RSF—has fueled both consistent sales growth and positive changes in Florida agriculture.

Inspiration

McLean didn’t set out to be an organic grower. A fourth-generation Florida citrus grower, he grew up working in the groves, and escaped to college as soon as he could to get away from “manual labor in Florida’s summer heat.” After earning a business degree from the University of Florida, he started an import-export company, selling juice to companies in Europe. When one of his clients asked for biologic white grapefruit juice, he consulted his father and grandfather.

His grandfather, who had used organic methods in the past, insisted that “not only could we grow that way, we should be growing that way,” McLean says. “We are too focused on single-factor analysis—if you have a pest, then you’re told to find a pesticide. Instead, we should think holistically: why is that pest attracted and how can we help the trees’ immune systems defend against it through better soil and plant health? This is an organic farmer’s way of thinking.”

UMO

Photo courtesy of McLean Photography

Innovation

McLean started Uncle Matt’s Organic in 1999 with just five acres. As the company grew, it needed more fruit, which meant it also needed more organic farms. But farmers were hesitant, even afraid, to go organic—despite the fact that prices for organic fruit are consistently higher—and McLean knew he had to make the process as easy as possible. Thus Uncle Matt’s Ag was born in 2002.

One of the biggest challenges in persuading grove owners to grow organically was—and is—the threat of citrus greening disease, or Huanglongbing (HLB), a bacterial infection spread by gnat-size psyllids that can wipe out groves. It hit Florida in 2005 and has killed millions of citrus plants in the southeastern U.S. While Uncle Matt’s groves have not fully escaped the disease, several groves have proved 100 percent resistant—an anomaly the University of Florida is studying. Uncle Matt’s Ag is experimenting with nourishing root and soil health to keep disease at bay, and unleashing parasitic wasps into groves to keep the psyllids’ population under control.

With its innovative approaches to grove management and increasing consumer demand for organics, Uncle Matt’s has grown continually. But like many food and beverage companies, Uncle Matt’s faces a cash flow gap between the time when it pays farmers for the harvest and when the juice hits grocery stores and starts generating a profit. By 2011, McLean needed more financing.

The company had a line of credit with a local community bank, “but it was post real-estate bubble in Florida, and the banks were very risk-averse,” he says. So Uncle Matt’s hired McLean’s friend Aubrey Hornsby, a manager of the Conscious Capital Fund, to help it find additional funding. “Aubrey introduced us to RSF in September 2011,” says McLean, “and at that point a lot of things came together.”

Several members of the RSF lending team visited Florida, where they toured the groves, packinghouse and storage facility and closely examined Uncle Matt’s business model. “They understood our business right away,” says McLean, “and they really had a passion for our space and our mission.”

Based on this, RSF provided a $1.2 million line of credit that Uncle Matt’s uses to finance the juice inventory from season to season—and keep growing.

Impact

For the past three years, Uncle Matt’s sales have grown 20 to 30 percent annually. The company has also introduced two new juice blends, orange-mango and orange-tangerine, and has expanded to new retailers including Safeway, Kroger, Fred Meyer and Walmart Neighborhood Markets.

But the greatest proof of success is in the groves: In the last 12 years, Uncle Matt’s has converted more than 1,500 acres in Florida’s Lake, Highlands and Polk counties to organic cultivation.

“I started Uncle Matt’s as a business challenge,” says McLean. “But my grandfather’s passion just kept me thinking, ‘Hey, this is a better way to farm and we need to be a leader.’”

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Photo courtesy of McLean Photography

Integrated Capital for Social Enterprises

July 17, 2014

Originally published on the Stanford Social Innovation Review

Don Shafferby Don Shaffer

A thriving social enterprise sector is essential to increasing community resilience and improving the lives of those who’ve been marginalized by the global economy. Social enterprises—which are in business to solve social and environmental problems—are willing to tackle complex systemic problems, build new infrastructure, and develop products and services that address pressing needs even if their profit potential is not obvious or will develop only over a long term.

These enterprises’ ability to succeed is hampered, however, by the current division of capital resources into overspecialized sectors, such as venture investing and charitable foundations, that fund only narrowly defined types of enterprises at particular stages. This situation won’t produce the breadth of social enterprises we need to solve systemic problems, because these enterprises confound the expectations of conventional funders in many ways:

  • They may have to build a supply chain or other systems (rather than just plugging into an existing infrastructure), which results in relatively high up-front costs.
  • They may have slower revenue growth or relatively low profit margins—by definition, they aim to maximize social value before profit.
  • They may have hybrid business models that put them outside conventional for-profit and nonprofit funding models (for example, a revenue-generating business with nonprofit charitable status).
  • They think about growth as a way to serve their mission, not as an end in itself. They may intend to remain rooted in a community and serve as a model to others, for example, rather than pursuing rapid and far-reaching expansion.

To build a thriving social enterprise sector, we need to rethink the purpose of capital and employ an integrated capital strategy. Integrated capital is the coordinated and collaborative use of different forms of capital (equity investments, loans, gifts, loan guarantees, and so on), often from different funders, to support a developing enterprise that’s working to solve complex social and environmental problems.

Read the full article here

Don Shaffer is President & CEO at RSF Social Finance

RSF Funds Development of Sebastopol Charter School’s New Campus

March 27, 2014

RSF Social Finance (RSF) is pleased to announce a new loan to The Charter Foundation, the fundraising organization that supports the K-8 Waldorf-inspired Sebastopol Charter School. RSF was selected by the Foundation as their lender of choice to finance the acquisition of a 20-acre property and the construction of a permanent, unified campus for the entire school population on the new site

charter_ribbonsSebastopol Charter School was founded by Greg Haynes and Ursula Kroettinger, two former Waldorf school administrators who wished to bring Waldorf education to their community without the financial barriers of private school tuition. Waldorf education, developed by Rudolf Steiner in 1919, is an arts-rich approach to education that focuses on teaching the whole child – head, hands, and heart. Waldorf schools have traditionally been private and more readily accessible to middle and upper class families. However, a shift is occurring: according to the Alliance for Public Waldorf Education, the number of Waldorf-inspired public schools has risen quickly, from around a dozen in 2000 to over fifty in 2014, making this education model available to far more children regardless of family income.

“RSF is inspired by the work of Rudolf Steiner and we believe in the importance of supporting creativity and human spirit,” says Ted Levinson, Director of Lending at RSF. “We have a long history of supporting Waldorf education in private schools and seeing these values transferred to the public education system is an important step in developing the next generation of inspired leaders.”

As one of the first Waldorf-inspired charter schools in the nation, Sebastopol Charter opened its doors in 1995 to its pioneering kindergarten class. Each subsequent year another grade was added as the previous class advanced, until the first 8th grade class graduated in 2005. With the school’s rapid expansion, The Charter Foundation was founded with the mission of establishing and supporting a permanent, Waldorf-inspired charter school.

charter_music1“Since the school’s founding nearly two decades ago we’ve searched for a permanent campus site that would provide our students the spaciousness to move with freedom and to explore and learn through their natural environment,” says Chris Topham, Executive Director of Sebastopol Charter. “Since that time, RSF has been a key partner in helping us realize that dream, first providing the backing needed to develop our current urban campus, and now supporting our efforts to take our school to the next level at our new, unified campus.”

RSF initially provided a loan to the Foundation in 2000 to help build the school’s downtown campus, housing the third through eighth grades, while the K-2 program is housed on a separate site leased from the chartering district. The downtown facility, now owned free and clear by the Foundation, has served its purpose as a temporary home and investment property while the school searched for the ideal site for its new home. This new RSF loan has been used to acquire a 20-acre parcel of land, and will support the development of the first phase of the new campus which will finally unify the entire school.

Sebastopol Charter School has been successful in recruiting and retaining high quality teachers, providing a full and rich Waldorf curriculum including strings, handwork, woodwork, Spanish, games, social inclusion and eurythmy, and attracting a dedicated and informed parent body. As a result, Sebastopol Charter is now widely regarded as one of the leaders in public Waldorf education nationwide. Its success has encouraged scores of other public schools to offer a Waldorf-inspired education to any child, regardless of the ability to pay.

 charter_music7

About The Charter Foundation

The Charter Foundation is the fundraising organization for Sebastopol Charter School, a public charter school in Sebastopol, California. Established by the school’s founders in 1998, the Foundation is charged with the mission of supporting Sebastopol Charter School in providing both a full Waldorf program and in establishing a permanent, unified, and spacious campus. www.thecharterfoundation.org

RSF Makes a New Loan to 18th Street Arts Center

March 17, 2014

RSF Social Finance (RSF) is pleased to announce a new loan to 18th Street Arts Center (18SAC), a non-profit artist residency program that provokes public dialogue through contemporary art-making. This loan will allow 18SAC to refinance their existing mortgage and provide funds for reserves. As 18SAC celebrates their 25th anniversary this year, RSF also looks forward to growing with the organization in the coming years as they build out the facilities to expand their programing – and gear up for another successful 25 years.

283585_10150737152565454_1365260_nArtist residency programs exist around the world, in both urban and rural settings, serving anywhere from one artist to over 50 artists. The residency programs can appear in art museums, retreat centers, schools, universities, independent non-profits, or community centers and their focus can be multidisciplinary or focused on specific areas, such as visual arts, dance, theater, technology arts, writing, and more. According to The Alliance of Artist Communities, a leading association of artist residency programs, there are more than 500 programs in the US and thousands more across the world serving more than 10,000 artists domestically and 20,000 more worldwide. Most are multidisciplinary, like 18SAC, and are considered research and development labs for creative work.

Founded in 1988, 18th Street Arts Center has fostered and supported the work of many of Los Angeles’ most engaging and diverse artists, and has built bridges to artists communities around the globe. The organization values art-making as an essential part of a vibrant, just, and healthy society.

“18th Street Arts Center is a deeply committed social enterprise which plays an important role in the arts landscape both in Southern California and internationally,” explains Reed Mayfield, RSF Senior Lending Associate. “By providing affordable live/work studios and a creative space conducive to an artist’s professional development, 18SAC facilitates inter-cultural collaboration and community engagement in the arts.”

18SAC provides a hub for contemporary art through two program areas that reflect its mission: 1) A three-tiered Residency Program that fosters inter-cultural collaboration and dialogue and 2) A Public Events and Exhibition Program that focuses on engaging with the public and revealing the art-making process through exhibitions, events, talks, publications and other opportunities.

The Residency Program has three strategies to support artists. The first is a long-term residency for mentoring artists and ‘anchor’ organizations, which have helped to define the character and scope of the organization. The second is a mid-term residency, which is a three-year program for California artists to advance their careers. Lastly, they have a short-term residency for national or international visiting artists and curators who reside at 18SAC for one to three months.

The Public Events and Exhibition Program includes 18SAC’s signature Artist Labs series, the new Curator in Residence Program, presentations of emerging artists, and a lecture series featuring artists, curators, and scholars whose presentations relate to exhibition content and themes explored in residencies.

Housed in five buildings on its 1.25-acre site in Santa Monica, California, 18SAC provides a physical center that promotes collaboration and dialogue for contemporary art in a region characterized by its de-centralization. 18SAC is the largest arts organization in the City of Santa Monica, and is the largest artist residency program in Southern California.

“18th Street Arts Center is privileged to own this exceptional community resource and we are thrilled to have RSF as a new finance partner supporting the work we do for artists as we celebrate our 25th Anniversary,” says Jan Williamson, Executive Director at 18SAC. “RSF’s loan is helping us make plans for the next 25 years.”

ArtCenter

About 18th Street Arts Center

Founded in 1988, 18th Street Arts Center (18SAC) is an artists’ residency program in Santa Monica, CA that provokes public dialogue through contemporary art-making. The organization values art-making as an essential part of a vibrant, just, and healthy society. Through artist residencies, 18SAC fosters inter-cultural collaboration and dialogue. 18SAC residencies, exhibitions, public events, talks, and publications encourage, showcase, and support the creation of contemporary art. 18SAC is a non-profit organization generously supported by its Board of Directors, individuals and corporate donors, private and corporate foundations, and government agencies. A corpus of over 50 dedicated volunteers support 18SAC’s visitor services, programs, and administrative functions. www.18thstreet.org

Creatively Financing the Arts

January 30, 2014

This essay was originally published in the Winter 2014 RSF Quarterly.

Reed Mayfield 3 (2)By Reed Mayfield

Can you recall a moment when a song, a painting, a dance, or a theatrical performance moved you deeply? If you can, perhaps the experience caused you to gain a new or different emotional awareness. The arts have a unique ability to transcend age, socio-economic status, geographic location, and ranges of personal experience. The arts can simultaneously facilitate an artist to produce their work and a patron to enjoy the experience, piece, or production; the arts can also create economic value. Art promotes creativity, expression, identity, innovation, and aesthetics. These things are what we typically associate with the arts. What is less understood, however, is the multidisciplinary impact the arts have on social development, learning, and the economy. These three aspects are at the heart of what RSF focuses on through its lending activity to arts organizations, and they are the indicators of RSF’s values—the arts can serve the highest intentions of the human spirit.

Art takes many forms, and there are many types of organizations that foster the arts through their programs and services. RSF is committed to supporting arts organizations that promote creativity, spiritual awareness, and provide community to people of all backgrounds. Specifically, we fund organizations that contract directly with schools or community-based organizations; provide support systems for artists, or arts organizations; and facilitate the economic prosperity of the arts.

Non-profit arts organizations face several challenges to reaching financial sustainability. In particular, these organizations have historically relied heavily on foundation and individual giving. According to a 2012 report from The Stanford Center on Poverty and Inequality, the recent recession contributed to a 10.9 percent drop in individual giving between 2007 and 2010.  Another financial issue art organizations face is the reimbursable grant format: an organization must incur the expenses related to the programming before a grant is awarded. This form of grantmaking can cause strain on the cash flow of an organization, and make it hard to meet overhead responsibilities, let alone budget for program growth. Arts organizations also tend to have untraditional assets such as contracts, incoming grants, or pledges, which may limit access to credit for growth or operations.

With a strong history of supporting the arts and an understanding of how non-profits work, RSF is uniquely poised to address these financial challenges. In particular, RSF is able to provide critical financing for working capital, facilities renovations, construction projects, or acquisition of space—financing that arts organizations often could not receive from conventional lending institutions. RSF is able to do so by employing innovative financing structures. For example, for working capital needs, RSF is able to offer a Grants Receivable Line of Credit. This entails looking at a forward rolling year of confirmed grants and making funds available based on this total. This gives an organization access to capital when their cash flow may otherwise be strained by inconsistent funding and reimbursable grants. In other cases, some financing needs are addressed by Pledge or Guarantee Loans where the organization’s community participates by providing the assets necessary to secure a loan. This creates a strong financial relationship that involves organizational leadership, beneficiaries or customers, and donors.

As of late, RSF has reinvigorated its historical focus on the arts. Given the state of our culture, the arts and access to them are more important than ever. At RSF, we believe the social value created through the growth of the arts has deep, long-term positive impact in the world. We invite you to join the conversation and share your insights into the arts and how we can create the systems necessary to support their financial and creative sustainability.

Reed Mayfield is Senior Lending Associate at RSF Social Finance

RSF Video: Relationship Matters

January 9, 2014

RSF is transforming the way the world works with money by building relationships within our financial transactions. Our quarterly pricing meetings are a great example of what that process can look like. Each calendar quarter, RSF resets the interest rates for investors and borrowers in the Social Investment Fund community. In keeping with our values of interdependence, trust, and community, we invite our investors and borrowers to take part in a facilitated discussion with RSF staff to help determine what rates will best meet the needs of all stakeholders.

Watch this video, from our September 2013 pricing meeting held in Philadelphia. Learn why relationship matters for borrower – Common Market Philadelphia, and investor – Irma Jennings.

RSF Links Socially-Conscious Borrowers, Investors

December 18, 2013

RSF was recently featured in an article in the The Press-Democrat. Author Cathy Bussewitz interviewed Don Shaffer, President & CEO, and other attendees of the recent Pricing Meeting in Santa Rosa, CA.

It was a strange place for a meeting about interest rates.

On a cold night at the Summerfield Waldorf School in Santa Rosa, while a crowd mingled in the school auditorium munching on locally made hors d’oeuvres under the warm lights of a Christmas tree, a group of borrowers and investors hashed out specifics on the details of their loans.

The event was held by RSF Social Finance, a San Francisco-based nonprofit that provides loans and investment opportunities to socially-conscious enterprises. It was part of RSF’s attempt to make finance more transparent, by bringing borrowers and lenders together in one room.

“Our stated mission is to transform the way the world works with money, and the way we look at it is one relationship at a time,” said Don Shaffer, president and CEO of RSF.

Press-Dem image

Esmerelda Arreola packages tea displays of Guayaki yerba mate at its Sebastopol facility. (John Burgess/ Press Democrat)

“The way I describe our financial system today is as complex, opaque and anonymous, based on short-term outcomes,” Shaffer said. “And what we try to do at RSF is to model financial transactions that are direct, transparent and personal, based on long-term relationships.”

To accomplish that goal, RSF creates an unusual opportunity for the borrowers — companies like Sebastopol beverage maker Guayaki — to meet with investors. In the gatherings, known as “pricing meetings,” the borrowers explain how they’ve been spending their money and how a change to their interest rate would impact their bottom line. Investors have a chance to meet the entities they’re helping to develop, and they also get a chance to chime in on what a change to the interest rate would do for their financial outlook.

“The pricing meetings are so powerful,” said Susanne Karch, owner of Estate Services, based in San Rafael, who has invested about $17,000 in RSF. “After those meetings, I always go home and write another check.”

Read the full article here

 

Small Grain, Big Change

November 19, 2013

This essay was originally published in the Fall 2013 RSF Quarterly

by Jillian McCoy

In 1993, Caryl Levine and Ken Lee decided they wanted to start a business together. They took a market research trip to China and while visiting rural farmers, they found their calling. Caryl and Ken were introduced to the culture of rice and some of the issues connected to it: an astounding loss of rice biodiversity, the plight of farmers at the base of the pyramid, and unsustainable agriculture practices. “The most unique rice widely available in US supermarkets at that time was Basmati. It was shocking to learn that thousands of varieties were going extinct because there was no market,” says Levine. “When we started to think about the larger economic and environmental impacts, we knew we had a great opportunity in front of us.”

These economic and environmental impacts are of no small measure. Nearly half the world’s population relies on rice as its dietary staple and about 75% of that supply is generated by small-scale, irrigated production—simply put, small farmers. This type of production consumes up to one-third of the Earth’s annual freshwater supply, depletes soils, and after cattle, is the second leading cause of man-made methane production (a major contributor to climate change).

Two years after that trip, Levine and Lee co-founded Lotus Foods, Inc. with a mission to support sustainable global agriculture by promoting production of traditional heirloom rice varieties, some of which may otherwise have become extinct, while enabling small family rice farmers to earn an honorable living. Lotus Foods works with in-country partners to source rice from Bhutan, Cambodia, China, India, Indonesia, Thailand, Italy, and Madagascar, and distributes it in natural food and specialty grocery stores in the US and Canada.

When Lotus Foods was founded, distributing fair-trade heirloom rice varieties from farmers in developing countries to North American consumers was new ground. “We were totally winging it,” says Levine. “We had to take a crash-course on rice, farming, and the whole industry.”

In addition, Levine and Lee faced a challenging supply chain. On one side, they were working with farmers to improve quality assurance (for US markets), and helping to educate them on the long-term impacts of sustainable practices versus the short-term economic rewards touted by conventional distributors. On the other side—distributors, retailers, and consumers—needed education on the value of diverse rice varieties and fair-trade pricing. But their passion for their mission was always there, and, slowly but surely, the company gained traction.

Group shot

Ken and Caryl with farmers from the Ramnagar Project in the Himalayan State of Uttarakhand, who are growing traditional basmati rice organically using System of Intensification methods

In 2005, Lotus Foods developed a game-changing partnership. They were contacted by staff at Cornell University who were involved in promoting research and awareness about a sustainable rice-growing methodology called System of Rice Intensification (SRI). The SRI methodology uses significantly less water than the conventional flooding methods used to grow rice, and results in higher yields and the need for fewer inputs (seed, synthetic fertilizer and pesticide, and often labor). Furthermore, whereas the water-logged soil of conventional rice paddies is ideal for methane production, SRI fields with drier soils and healthier plants are not.

SRI improves global food security, empowers poor households, conserves water resources, and promotes human and environmental health. Today, SRI is enabling some of the world’s most marginalized farmers to double their yields (or more) using 50% less water, 80-90% less seed, and no agrochemicals. Over 2.5 million farmers in 50 countries have recorded successful adoption.

Despite this success, SRI has experienced some resistance. “True of any great development, it always meets initial skepticism,” says Lee. “This approach is the exact opposite of input-driven agribusiness. It’s very farmer friendly and you don’t have to buy any inputs like seeds or fertilizers.”

As for resistance from the scientific community, “Farmers know best how to make this work on their land. It’s a methodology not a technology,” says Lee. “Researchers are challenging this because they can’t replicate it in their labs. As long as farmers are seeing it work in their fields, I don’t really care what the dissenters are saying.  And consumers and the food industry have been very supportive of our efforts to create market incentives for SRI farmers.”

Lotus Foods now helps their current farmers transition to SRI growing methods, and partners with existing communities of SRI farmers to bring their rice to market. Sustainability and economic empowerment remain at the heart of their efforts. “New farmers must produce enough for themselves and their community before exporting even becomes a possibility,” says Lee.

As farmers flourish, so does Lotus Foods. In recent years, the company made significant investment in rebranding their line, building their management team, and solidifying their commitment to SRI. Despite some losses during the recession, the company is now poised for growth and has been profitable for the past two quarters.

Lotus Foods recently developed a new partnership with Whole Foods which is now distributing a new value-added product line. The company is continuing to develop new products and distributes via other major retailers like Safeway and Costco. In January 2013, RSF financed a line of credit to support this growth.

Working with RSF was a natural fit for Lotus Foods. “We’ve always valued working with a mission-aligned financial partner,” says Lee. “A financing relationship is one of the most important for any business owner.”

As the company grows, Levine and Lee are still focused on what inspired them in the first place: social and environmental impact. When it comes to the company’s success, they aren’t concerned with growth simply for the sake of profit. “What we really want is to expand the market for our product, so that more farmers have an opportunity to grow this way,” says Lee. “Global warming, water resources, food sovereignty, poverty alleviation—major issues worldwide—these can all be positively affected just by changing how rice is grown.”

Jillian McCoy is Senior Associate of Communications at RSF Social Finance

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