Fair prices for smallholders

On behalf of the German Federal Government, KfW Development Bank has participated in the Fairtrade Access Fund (FAF) since 2012. This fund provides loans and advisory services to smallholders in Latin America, Africa and Asia so that they can establish themselves as fair trade producers. KfW currently holds a 57% share of the fund.

KfW helps smallholder farmers and cooperatives in numerous African, Asian and Latin American countries to certify their goods for the Fairtrade Mark and other sustainability seals. This opens new markets to them. Fairtrade Access Fund borrowers include producers of coffee and cocoa beans, avocados, sugar cane, nuts, soy beans, grains, quinoa and honey.

The contribution smallholders make to food production should not be underestimated. Approximately 60% of worldwide agricultural production is done by smallholders in family-run operations. They generate around one third of the gross national product in agriculturally orientated countries. However, smallholders can only keep pace with larger agricultural operations if they successfully adapt to market conditions.

This market is ready; the demand for Fairtrade or similarly certified goods in Germany continues to grow unabated. Since 2011, sales of these products have risen from close to EUR 400 million to more than EUR 2,9 billion in 2024. The Fairtrade label is among the most esteemed sustainability seals for fair trade. It certifies economic, social and ecological minimum standards. The producers receive a guaranteed minimum price which hedges against price fluctuations on the global market.

The fund is seeing a lot of interest from investors. The original aim to achieve a volume of USD 38 million by 2020 was achieved two years ahead of schedule. KfW's significant commitment supports the fund in further expanding its portfolio. The target volume is USD 100 million by 2026. The fund currently comprises a volume of a good USD 78 million.

Borrowers also show great interest in the fund’s benefits. Since its inception, it has paid out more than USD 574 million to 136 institutions in 21 countries, thus funding 530,000 smallholders by the end of 2024. The farmers generate higher and more stable income when they participate in fair trade. This improves their living conditions and simultaneously ensures employment in rural areas.

The fund tackles the climate challenges of our time and places smallholder farmers and sustainability at the heart of its investment and impact strategy. Targeted initiatives and the use of innovative environmental economic instruments, such as Payments for Ecosystem Services (PES), play a key role. In doing so, the fund is seizing a unique opportunity to scale up solutions that combat climate risks and food insecurity whilst restoring ecosystems and improving the livelihoods of local communities.