Improving income for farmers, artisans and workers
Increase in capital available to lend
Share Capital provides the key source of funds for our lending services, and at 30 September 2023, we held a total of £51.6m in invested funds (a net decrease of £0.7m on 2022) (see Part I for more detail). These funds have helped us continue to support farmers and artisans who either hold a recognised Fairtrade membership or follow the 10 Principles of Fair Trade.
The graph adjacent shows that the committed value of lending is higher than the value of Share Capital held. This is because not all customers borrow at the same time due to the different harvest periods across regions. To mitigate risk further, we have set a limit to ensure that the total committed value is never above 135% of our Share Capital. The committed value represents facilities where funds are ready to be drawn by the customer (short-term lending) and the remaining balance of Term Loans.
Over the course of the year, we saw a net reduction of 12 customers across the portfolio. Three of those who closed accounts due to high-risk factors had combined facilities of USD 2m. This sharp reduction in customer numbers resulted in the value of committed facilities reducing to £56m.
Access to fair and affordable finance
With 33 years of working collaboratively with farmers and artisans, we have developed a deep understanding of the challenges faced by producer groups. We have fostered strong relationships, based on two-way communication and trust, which has enabled us to find the best possible financial solution while considering customers’ harvest time and cash flow limitations. By carefully monitoring the market volatility and increasing our visits to customers, we have been able to continue working with organisations struggling to meet their repayments. In some instances we have extended the lending terms and as a result of this and other interventions, some producers were able to see an improvement in their business trading conditions, restart their repayments, and ultimately reduce their outstanding debt.
This applied when a Ugandan coffee co-operative faced financial difficulties after their Egyptian buyer ceased coffee imports due to foreign exchange challenges. This situation led to a three-month arrears period but the co-operative was proactive and secured a new buyer in Europe. Following payment from their new buyer, they successfully cleared their arrears.
In Rwanda, a coffee co-operative received financial support from Shared Interest, during a period when they awaited the government to establish a fixed farm gate price. Our working capital enabled the co-operative to provide advance payments to their farmers, which were used to pay their children's school fees.
The co-operative and the farmers then worked together to determine a fair price for their coffee. Taking the government's minimum price into account, the final agreed price exceeded the government's minimum increasing the farmers income overall.
“Shared Interest started supporting us when we had no relationship with any other financial institution, it shows the confidence they had in us. Now a lot of other partners are chasing us up for collaboration every day.” ~ Ivorian cocoa co-operative Cadesa Managing Director, Esther N’goran.