Fairtrade Access Fund’s first loans making impact
US$ 3.7million to seven co-ops – and the Fund is just getting started
05 June 2013
The Fairtrade Access Fund, established to address the long-term financing needs for smallholder farmers in developing countries, is growing fast.
So far, a total of US$ 3.7 million has been distributed to seven cooperatives in Latin America, and the Fund is continuing to gather steam. By the end of 2013, the Fund is expected to grow to US$ 25 million, and will eventually expand to Africa and Asia.
Farmers are feeling the benefits of the Fairtrade Access Fund’s first long-term and local-currency loans, along with working capital and trade finance loans.
Long-term loans allow farmer organizations to invest in projects that will improve farmers’ income in the long run, but they are the most difficult for farmers to access. A survey conducted by Fairtrade International in 2012 revealed that Latin American Fairtrade farmers report they need over US$ 500 million to cover their financing needs. Over half of that amount would need to be covered by long-term loans. Long-term loans will eventually become the largest portion of all Fairtrade Access Fund loans as the Fund grows.
Most of the loans so far have gone toward trade finance loans (that includes the Fund’s very first loan, to COPROCAEL in Honduras) While trade finance loans are more commonly available, they are still an essential system of support for producers and will continue to play a role in future loans from the Fairtrade Access Fund.
The Fund is a collaboration between Incofin Investment Management, Incofin cvso, the Grameen Foundation and Fairtrade International (you can read more about how the fund works here).
The Fairtrade Access Fund’s very first long-term loan was given to COCLA, a Peruvian coffee and cocoa cooperative. The two-and-a-half-year, US$ 370,000 loan will allow COCLA to invest in new equipment for drying coffee and cocoa. Once the new machinery is in place, the efficiency of the coop’s drying process will increase by five to ten percent, quality product exports will increase by at least five percent, and operating costs will sink by five percent.
COCLA has been operating in Peru for over 45 years and represents eight thousand small producers from 24 coffee, cocoa, and tea agricultural cooperatives in the province of La Convención, Cuzco. COCLA was Fairtrade certified in 1996, and its 4,340 tons of organic coffee make it the highest volume exporter and one of the most important small producer organizations in Latin America. Late COCLA manager Raúl del Águila was also an important leader within the Fair Trade movement.
A US$ 350,000 trade finance loan goes to the coffee cooperative UCASUMAN. The region covered by UCASUMAN is a particularly important one, providing up to 60 percent of Nicaragua’s national coffee production.
UCASUMAN’s existing contracts with the importer Volcafe were critical in securing the Fairtrade Access Fund loan. Luis Marin García, UCASUMAN’s manager, said Volcafe pays a good price for the coffee that the organization exports, 23% of which is bought by Volcafe. “Each member is more satisfied, more at peace, and content to know that being Fairtrade certified helps us obtain resources and facilitates access to international markets,” Marin García said.
The loan will enable UCASUMAN to purchase Fairtrade certified harvested coffee from the many smaller cooperatives that make up UCASUMAN, meaning farmers and communicates can continue to rely on the jobs and economic development provided through UCASUMAN.
The 24-month Fairtrade Access Fund loan given to the non-profit savings and credit programme of the Peruvian cooperative, NORANDINO, is the Fund’s second long-term loan and the first to be given in a local currency. The loan is for 2 million Peruvian Soles (approximately US$ 760,000) and will mainly be used to offer financing to current and future Fairtrade coffee farmers.
The Fairtrade Access Fund offers the option to receive loans in local currency – a choice that is up to each producer organization – which is important for NORANDINO. In the eight years since to co-op was founded, more than 7000 members have benefitted from loans with interest rates that are below the Peruvian market rate. Receiving funds in Peruvian Soles helps protect the farmers against currency depreciation – an important consideration for other Fairtrade Access Fund loan recipients, as well.
NORANDINO consists mostly of coffee farmers but also includes Fairtrade certified cacao and certified organic sugar producers.
It’s been over four months since the coffee cooperative COCAFCAL received its US$ 500,000 trade finance loan from the Fairtrade Access Fund. The cooperative will use the loan to purchase coffee with FLO-Certificate from their members during the harvest season 2012/2013 and export to the U.S. market.
The Cooperativa Cafetalera Capucas Limitada (COCAFCAL) is an organization of coffee farmers located in the southwestern hills of Honduras. COCAFCAL received Fairtrade certification in 2009 and includes 716 small farmers.
FAF made its sixth disbursement to the cooperative UCOSEMUN in Nicaragua of US$ 500,000 for 12 months. UCOSEMUN will use this working capital loan to finance five Fairtrade certified member cooperatives in preparation for the 2013/2014 harvest season.
The Honduran cooperative COAGRICSAL was granted a loan of US$ 600,000. With this loan the organization will purchase Fairtrade-certified coffee from their members during the harvest season 2012/2013 and export to the European and American markets.
COAGRICSAL has over 15 years of experience in the coffee producing sector and from 2010, exporting directly through “Beneficio de Exportación de occidente (BEO)”, which has formed in partnership with two others coffee cooperatives in the region. The organization has been diversifying its operations with cocoa production since 2010 and the marketing of pepper.