Starbucks has pledged a $1.3 million investment in a Fairtrade fund to help smallholder farmers with long-term loans.
The Fairtrade Access Fund is run by Incofin Investment Management, Fairtrade International and Grameen Foundation; and Starbucks is the first private investor in the program.
The fund will provide farmers’ co-operatives and associations the long-term loans they need to renew their farms or adopt new technologies and equipment.
Smallholder farmers in developing countries have tremendous potential, according to the Fund, but are held back from growth because they cannot access the financing they need. According to a 2010 survey conducted by Fairtrade International, Fairtrade farmers in Latin America alone say they need $500 million to cover their financing needs, more than half of this for long-term loans.
The fund offers a range of loan types and technical assistance to enable farmers’ organisations to strengthen and secure their businesses, including a new facility that will allow farmers to receive timely information on Fairtrade certification practices, crop management and localized market information via their mobile phones.
Financing will be provided to farmer cooperatives, which is the most popular business model according to the Fairtrade Labelling Organisation, and other producer organisations that are Fairtrade certified or are applying for certification. Through Fairtrade, farmers’ organisations will have improved access to international markets, a minimum price safety net and other economic benefits.
The fund will launch in Latin America later during the second half of the year and expand into Africa and Asia in a second phase. It targets a launch size of $8-12m (€6m-9m), and is projected to approach $25m (€20m) by the end of year two. The three sponsors have committed the initial locked-up capital. The fund offers investors a competitive financial target return with the possibility of a yearly dividend. Its open-ended structure gives investors flexibility to redeem their shares.
The fund is a unique collaboration between a social investment firm and two global nonprofits that focus on helping people in developing countries improve their lives.
Loïc De Cannière, Managing Director of Incofin Investment Management, said: "The Fairtrade Access Fund is an effective way of promoting agricultural finance and achieving a high social impact for smallholder famers. This new initiative is entirely in line with our social mission and underlines our commitment to supporting rural businesses in emerging economies.”
Tuulia Syvaenen, Executive Operating Officer of Fairtrade International, commented: “In Fairtrade we’ve witnessed how farmers can transform their own lives if they just have the means. With the help of our partners and investors, the Fairtrade Access Fund will fill a critical gap so producers can drive change in their communities.”
Alex Counts, president and CEO of Grameen Foundation, added: “Grameen Foundation is pleased to be partnering with Incofin and Fairtrade on an innovative, holistic approach to solving the challenges that poor smallholder farmers face and ultimately help them reduce their risks and increase yields and income.”
Ben Packard, vice president, Global Responsibility, Starbucks, said: “Investing in smallholder farmers directly reflects our desire to strengthen coffee supply chains and improve the livelihood of farmers around the world. By working with the Fairtrade Access Fund, we come that much closer to our goal of establishing $20M in farmer loans by 2015.”