This article titled “How one co-operative is lending to support fair trade farmers” was written by Andrew Bibby, for guardian.co.uk on Friday 14th September 2012 06.00 UTC
One of Britain’s most unusual â€“ and in some ways, most daring â€“ co-operatives comprises more than 8,800 people. They have together put about Â£28m of their money into a fund that in turn has lent it out worldwide to support fair trade farmers and producers.
The co-op’s name is Shared Interest, the name reflecting the principle that has guided it since 1990 when it was set up with help from the pioneering fair trade venture Traidcraft. Shared Interest helps fair trade farmers’ and producers’ groups with the working capital they need to get their crops grown and harvested during the long wait to receive the money for the produce they eventually sell. It means that Shared Interest’s loans may be used to buy seeds and fertiliser, farm equipment and vehicles, or even to pay the costs of replanting exhausted crops.
Bankers would no doubt be appalled at Shared Interest’s cheerful defiance of conventional lending prudence. The co-operative lends primarily to small business ventures, often in developing countries and usually without taking collateral as security. This is, as Shared Interest’s managing director Patricia Alexander accepts, a risky line of business, something she says her members fully understand. “We don’t want people to put their life savings in,” she makes clear.
Shared Interest does have its own ways of being prudent, however. The key to its operation, Alexander says, is the strong link between fair trade producers and fair trade buyers and importers. “We’re very keenly concerned with the relationship between the producer group and the buyer, because that’s essentially our security,” she says. As she explains, Shared Interest typically gets its money back not from the producers but directly from the buyers, from part of the funds due for the produce being purchased.
Advance working capital
Fair trade has boomed in Britain in recent years, the overall market having doubled in two years. With companies such as Cadbury’s and Sainsbury’s â€“ and of course the Co-operative Group â€“ endorsing fair trade, it might seem curious that there is a still a need for a small operator such as Shared Interest. But according to Alexander, the lack of available capital remains acute for fair trade producers. Choosing her words with care, she points out that many larger manufacturers and retailers acquire fairly traded goods through intermediaries who do not offer to advance working capital. “Gaining access to the market is most important [for producers], but it’s a shame that more larger organisations don’t offer pre-finance,” she says. She adds that the demand for loans from Shared Interest far outruns the resources currently available from members’ deposits.
The coffee farmers’ co-operative in the southern Mexican town of Huatusco is one of those groups who have come to Shared Interest for working capital. The co-op is able as a consequence to pay its farmers in advance of the harvest, protecting them from having to sell their crops at prices dictated by two large transnational coffee businesses that operate in the market nearby. The co-operative has also been able to sponsor 80 local young people to attend a local university (the deal is that once they graduatethey work initially to help strengthen the co-op).
Coffee, as in Huatusco, is the most important crop in Shared Interest’s loan portfolio, followed some distance behind by cocoa and fruit (handicrafts is also significant). But as well as lending direct to fair trade producer groups, Shared Interest also helps the fair trade movement more generally by lending to fair trade buying organisations. One example is the Ottawa-based co-operative La Siembra, which markets the Camino range of fair trade chocolate bars and produce to the Canadian market. The producer/buyer split in Shared Interest’s total loan book is currently about 40:60 although Shared Interest is rapidly trying to increase the share of its lending in developing countries. It has recently appointed staff in Peru, Kenya and Ghana to help this process.
The recent global downturn has given the fair trade movement its own challenges. Somewhat unfortunately (not least given its name) Shared Interest’s members have had to accept a 0% rate of return on their investments since 2009, although Alexander says that her board is hoping to reinstitute interest on deposits next year. As an Industrial & Provident Society cooperative, Shared Interest’s maximum member deposit is set by law at Â£20,000 although the average individual investment is in fact a relatively modest Â£3,000 or so. But Shared Interest’s members do appear to care very deeply about the work their co-operative undertakes: almost two hundred turned up for the AGM earlier this year, and there is also a team of active volunteers who promote Shared Interest’s work. Shared Interest’s Board of Directors is aided and scrutinised by a nine-strong members’ Council. In an interesting innovation to the practice of co-operative governance, Shared Interest regularly draws at random the name of one of its members and invites them to join the Council. (Most agree.)
Alexander is particularly keen to bring more younger people in as members of the co-operative, the average age currently being over 60. “A lot of people give money to charity, but by putting money into Shared Interest it gets used again and again, allowing people to help themselves and to gain respect,” she says. With over 20 years’ trading history behind it, Shared Interest has demonstrated that high principles can also work out in practice.
Andrew Bibby is a professional writer and journalist
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