Access to Finance

Smallholder farmers in developing countries often face extreme barriers to finance. When options are available, the loans are often saddled with exorbitant interest rates and/or difficult terms. As the maturity of the loan increases, the availability of agricultural credit decreases. Long-term finance, which could help farmers to improve their productivity and quality, is especially rare.

For smallholder farmers to succeed, timely access to short-term finance for inputs (e.g. seeds, fertiliser, pesticides, herbicides, machine services, transport, labour, and fuel) is fundamental. Some products (e.g. Fairtrade tea, bananas and flower) have the advantage of a continuous cash flow because of year-round harvests. In contrast, the seasonality of coffee, cocoa and cotton means that all input costs are incurred before the harvest; farmers sometimes need to borrow up to 60 percent of their harvest income upfront.

Due to the financial risks, this type of finance is often unavailable to Fairtrade coffee, cocoa and cotton farmers, even though most cooperatives and unions do their best to negotiate bank loans to supply their farmers with inputs on credit. In coffee, traders are playing an increasing (but still insufficient) role to provide producers with input finance. Fairtrade cotton producers often source inputs from their suppliers on credit. National subsidisation and input provision schemes exist, but coverage is far from universal. Without access to short-term finance, an unintended consequence is that many coffee and cocoa farmers are organic by default.

According to a survey conducted in 2012 with 456 Fairtrade producers, 91 of them had unfulfilled credit needs. Of this, 65 percent were in need of investment credit and 29 percent for input (seasonal) finance.

91% of all Fairtrade producers have unfulfilled credit needs. This represents a considerable opportunity.

Beyond seasonal investments, most Fairtrade producers also lack access to long-term finance for production improvements due to insufficient credit, equity capital, and related financial services such as insurance. This holds back productivity and product quality, as well as the farmers’ capacity to adopt better technologies, build their business, and preserve the local environment.

If farmers are to grow their businesses, they must be able to do more than survive from year to year on their harvest. Long-term investments in productivity and quality, and value-added processing are needed (e.g. cotton gins for processing, coffee washing stations, shares in tea factories and more).

The Fairtrade Approach

Fairtrade International’s Global Producer Finance Unit (GPFU) is working to improve access to financial resources. Activities include:

  • Information provision:Local and international financiers are always looking for new partners, but the lack of information on and opacity of Fairtrade producers is a great problem. GPFU will assist producers in providing relevant and reliable credit profiles, and disseminating this to potential finance providers.
  • Financial product development: GPFU supports financial institutions in pioneering and developing Fairtrade financing services, in particular services relating to investment finance as this is the biggest finance challenge to Fairtrade producers. This includes the development of loan, equity and guarantee funds for Fairtrade producers and other activities that are beneficial to many Fairtrade producers (like in the Fairtrade Access Fund).
  • Project development: GPFU will continue undertake operations on a project basis. GPFU will be instrumental in developing and launching access to finance services via specific projects at the level of individual countries or FT-value chains including design of finance schemes (e.g. input finance, investment credit, leasing, credit guarantees) to address bottlenecks in particular commodities and countries, possibly in concert with capacity building in cultivation techniques to increase agricultural productivity which is the main reason farmers struggle to repay loans.

How Access to Finance is addressed in the Fairtrade Standards

Fairtrade’s Trade Standard contains a specific section on pre-financing for Fairtrade producers. Pre-financing is the short-term finance that allows producer organisations to purchase agricultural producer from their members. Specific product standards provide additional guidance.

The relevant elements from the Trade Standard on pre-financing include:

  • Producers can request up to 60 percent of their contract from their buyer to finance the purchase of agricultural products from their members.
  • Pre-financing is provided by the trader or processing company that signs a contact with the Fairtrade producer.
  • The buyer may charge interest on the pre-financing, but no more than the company’s own cost of borrowing.
  • Pre-financing is an obligation on the Fairtrade buyer and can lose Fairtrade certification if they deny producers access to finance without good reason.
  • Additional guidance on pre-financing can be found in the Trade Standard.

Beyond the Standards

While pre-financing outlined in Fairtrade's Generic Trade Standard is a reliable tool for Fairtrade producers working with seasonal crops requiring large amounts of cash over a short time period (e.g. coffee, cocoa and cotton), the pre-finance requirement is less relevant to crops with a constant cash flow (e.g. flowers, tea and bananas).

The Producer Finance unit works to strike a balance to ensure that producers have access to pre-financing at appropriate cost and time throughout the year to ensure a successful business. The unit works toward more flexible schemes that allow traders and businesses to provide other types of help through in-kind support.

One of the primary workstreams of the producer finance unit is to develop new finance options for producers to address the need for investment capital. This includes partnering with other organisations to provide innovative tools to help producers. Current efforts to date include:

  • The Fairtrade Access Fund - Launched in 2012, this fund is projected to grow to $25 million in rotating capital to help producers finance long-term needs. The fund currently serves producers in Latin America, but will be expanded to Africa and Asia. For more information on the fund, see the brochures below or send an email to
  • Kreditanstalt für Wiederaufbau (KfW) funding for Africa

Additional Links and Information

The Fairtrade Access Fund is a joint project of the Fairtrade International, Incofin Investment Management and the Grameen Foundation.

Other Fairtrade partners for investment and other resources include:

Explanatory Documents

Our brochure for the Fairtrade Access Fund includes information for producers on how to apply for funding from this unique program.

Recent News on Producer Finance


Making Trade Fairer: Trader Standard Revised

12 March 2015

Fairtrade Trader Standard strengthens core requirements and encourages importers, exporters and businesses to move past simple compliance towards greater commitment to sustainable trading practices.


Fairtrade Access Fund’s first loans making impact

05 June 2013

US$ 3.7million to seven co-ops – and the Fund is just getting started


Fairtrade Access Fund To Provide Long-Term Loans To Smallholder Farmers

24 April 2012

Incofin Investment Management, Fairtrade International and Grameen Foundation partner on international investment fund with first US$1.3m (€1m) investment from Starbucks


Fondo de Acceso Fairtrade facilitará préstamos de largo plazo a Pequeños Productores

24 April 2012

Incofin Investment Management, Fairtrade International y la Grameen Foundation se asocian en un fondo internacional de inversión con un primer monto de US$ 1,3m (€1m) procedente de Starbucks

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