First Fund to Help Smallholder Farmers with Long-Term Loans

Wednesday, April 25, 2012

Incofin Investment Management, Fairtrade International (FLO) and Grameen Foundation will establish a ‘First Fund’ to focus on the unmet demand of smallholder farmers for long-term loans. Starbucks Coffee Company will also join as the fund’s first anchor private investor with a commitment of $ 1.3 Mn. The fund will offer investors both financial and demonstrable social results.

Long term loans will be provided to the farmers’ cooperatives and association as they will need to renew their farms and adopt new technologies and equipment. Smallholder farmers in developing countries have tremendous potential but are held back from growth because they cannot access the financing they need.

A survey conducted by Fairtrade International in 2010 revealed that 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.

Unique offerings by the Fairtrade Access Fund include full range of loan types and technical assistance to enable farmers’ organizations 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.

The Fund will provide financing to farmer cooperatives and other producer organizations that are Fairtrade certified or are applying for certification. Through Fairtrade, farmers’ organizations will have improved access to international markets, a minimum price safety net and other economic benefits.

The first phase of the fund will include Latin America and the second phase will expand into Africa and Asia. The launch size will be $8-12 Mn and is projected to reach $25 Mn by the end of two years.

Source: Microfinance Focus (link opens in a new window)

financial inclusion, smallholder farmers