Fair prices for smallholders

KfW supports small and medium-sized producers of fair trade goods with a fund

a men rotates the coffee beans by hand
A coffee cooperative employee rotates the coffee beans by hand.

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 and Africa so that they can establish themselves as fair trade producers. KfW currently holds a 36% share of the fund.

KfW helps smallholders and cooperatives in numerous African and South 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 adjust to the market.

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 2,1 billion in 2021. The Fairtrade Mark 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. By the end of 2021, over 425,000 smallholders had already benefited from the project.

The fund is also seeing a lot of interest from investors. The original aim to achieve a volume of USD 38 million by 2020 had already been achieved two years before. KfW's significant commitment supports the fund in further expanding its portfolio. The target volume is USD 100 million by 2025. The fund currently comprises a volume of just under USD 60 million.

Borrowers also show great interest in the fund’s benefits. Since its inception, it has paid out more than USD 350 million to 72 institutions in 21 countries, thus funding over 425,000 smallholders. 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.

Despite the pandemic, the fund was able to successfully continue its work in 2020 and 2021 and expand it, primarily in Africa. Payouts were even back above pre-pandemic levels by the end of 2021.