Based on the Root Capital case, write a memorandum (not to exceed one page double spaced) suggesting which and how many of the seven loans detailed in Exhibit 1 you suggest Root Capital undertake. Your memorandum should include a framework for comparing the deals.

What Criteria should I choose? should I choose and if you can provide an example to help me in writing my assignment.

To be successful in reaching beyond its direct investments to catalyze more competitive markets for the rural missing middle, Root Capital would need to be bold in its choice of which strategic direction to pursue. Which path should it take?

1 Loans under Consideration Prospect 1: A $2 million, six-month trade credit loan to a Fair Trade and organic cooperative of 2,000 smallholder coffee farmers in southern Mexico. Of the full amount, $250,000 would be disbursed three months earlier as a "preharvest" loan, which the cooperative would lend to its members to purchase inputs and cover working capital needs at the household level. Since 2001, Root Capital had issued over $4 million in both short-term trade credit and long-term loans for investment in equipment and infrastructure to this borrower. Although the organization had struggled in 2002-2003 when the global coffee market crashed, it had managed to rebuild itself and had maintained a strong credit record with Root Capital. For the most recent coffee harvest, Root Capital had made a loan of $1 million. The cooperative was a leading provider of specialty coffee to a large buyer in the United States that was one of Root Capital's closest partners. Sales over the past five years had hovered around $5 million. Prospect 2: A $300,000, nine-month trade credit loan to a private company that was based in South Africa, purchased chili peppers from 300 smallholder farmers, and exported chili mash for use in hot sauce by a brand-name company in the United States. The company was cofounded in 2003 by a zoologist who had been working on elephant conservation in Southern Africa. He found that elephants would encroach on settlements and eat farmers' crops, which would lead the farmers to hunt and kill the elephants. The zoologist noted that elephants do not like chili peppers and began working with community groups to plant protective barriers around their fields that would keep elephants away and reduce conflict between villages and wildlife. He subsequently found a business partner and launched a company to purchase surplus chili peppers from smallholder farmers in Southern Africa and process them for export. Sales from the previous production cycle were $300,000, and the company projected that it would generate $500,000 in sales for the upcoming year. Prospect 3: A $75,000, six-month trade credit loan to a cooperative of 150 organic cocoa farmers in the Dominican Republic. The loan would be to a first-time borrower that exported cocoa beans to an early-stage Massachusetts-based confectioner of premium chocolate. The cooperative was founded in 2005 and had been selling most of its cocoa beans to a local buyer at a discounted price until it met one of the cofounders of the chocolate company, which offered a premium price for beans that were shipped directly to its facility. Organic cocoa production occurred on small family farms on the periphery of a national park. The cooperative had some basic infrastructure where it dried cocoa beans before shipping them. It had a solid organizational base rooted in the local community but limited managerial capacity. It was being supported by a Peace Corps volunteer from the United States who would be leaving during the course of the loan. Prospect 4: A $350,000 capital expenditure loan over five years to increase production capacity for an animal feed plant in the central highlands of Peru. The loan would be to one of Root Capital's most established borrowers, a second-level coffee cooperative that was Fair Trade Certified and organic certified and consisted of 8,150 smallholder indigenous farmers organized into 23 primary- level associations. Root Capital had been making trade credit loans to the cooperative since 2002, but this was the first time the cooperative had presented a request for a long-term loan. The cooperative had diversified its activities from exporting its members coffee and launched the animal feed business in 1997. The business purchased organic grains from cooperative members, converted them into nutrient-enriched animal feed, sold the animal feed back to its members at a discounted price, and then sold surplus on the local market to compete with private companies. The previous year's sales of animal feed were $135,000. The proposed investment would enable the business to increase production capacity from 600 metric tons to 7,200 metric tons for an underserved market estimated at 88,000 metric tons. The loan would be made in dollars and secured against the business's warehouse with annual repayments made in dollars from the cooperative's coffee export sales.

Exhibit 1 (continued) Prospect 5: A $300,000 loan over three years to capitalize a savings and loan cooperative (COOPAC) in northern Peru. The COOPAC was founded in 2005 by three coffee cooperatives that were longtime borrowers of Root Capital. It operated in a remote region where financial services were not otherwise available to smallholder farmers, and it offered savings accounts and lending services for more than 3,000 farmers that were members of the three founding cooperatives. In 2008, the COOPAC made loans of $1 million that were used for both productive and consumption purposes by farmers during the off-season and preharvest periods when they were low on cash. The COOPAC had a repayment rate of more than 99%. The loan would be made in dollars to the COOPAC, which issued loans to farmers in local currency. Root Capital was aware of five other institutions in Peru that were similar to the COOPAC and interested in building their capital base. Prospect 6: A $350,000 for a five-year loan to a private company to construct a processing plant in southeastern Senegal. The company began operations in 2007 and was led by a young Senegalese entrepreneur who had studied in France and worked for several years in a French bank. She had returned to Senegal and launched a company that purchased native plants and nuts, such as shea and baobab, from associations of rural women in remote parts of the country and then processed these raw materials into essential oils and natural cosmetics for sale on the local market and for export to Europe. The company owned a small facility in Dakar that housed its offices, a small research lab with two scientists, processing equipment, and a production line to package the finished goods into bottles and jars. It was working toward organic certification, and the entrepreneur had recently received a prestigious global business award. Root Capital was considering either a straightforward long-term loan secured against fixed assets or a quasi-equity investment consisting of a long-term loan with a fixed interest coupon and a royalty on sales to share in potential upside if the business was successful. Sales in 2008 were just over $250,000. Prospect 7: A $300,000 for an eight-month working capital loan for a local seed company in Kenya. Founded in 2005, the seed company was working closely with the Kenyan Agriculture Research Institute and the Alliance for a Green Revolution in Africa, an initiative cofounded by the Bill & Melinda Gates Foundation and the Rockefeller Foundation and chaired by former UN secretary general Kofi Annan, to develop hybrid seeds for maize and other basic grains and pulses that would perform well in Kenya's drought-prone regions. The company contracted more than 1,000 smallholder farmers in various regions of the country to grow hybrid seed varieties and "bulk up" its volumes for future sales to a much larger number of farmers. The loan would be used to advance farmers seed and small amounts of fertilizer, purchase the farmers' harvest four months later, and tide the company over until the second semiannual growing season, when it could resell the drought- resistant seed. The loan would be made in local currency, and sales would be at the wholesale level to local agrodealers that retailed the seeds to individual farmers. The company had a sizable plot of land for its own production, a warehouse, and farm equipment that would be offered as collateral. The company had made a small profit in 2008 on sales of roughly $400,000.