Products financed

The chart below shows the split of lending for different types of products as a percentage of overall disbursements made.

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Coffee

Coffee remains the largest sector in our value chain, and in our Latin American portfolio. This highlights the robust demand for Fairtrade and organic coffee which require trade finance. Despite broader fluctuations in the financing landscape, we saw an increase in disbursements from 48% in 2023 to 51% in 2024, reflecting the growing importance of financing in this sector.

This rise aligns with the steady increase in coffee prices, driven by climate change impacts on major coffee-producing nations. Drier conditions in Brazil and extreme heat as well as a drought in Vietnam have significantly reduced both Arabica and Robusta outputs, pushing prices higher.

Additionally, new EUDR requiring precise tracking of coffee origins are expected to further increase expenses. Despite a slight dip in global demand, coffee prices are forecast to remain elevated in the near term, driven by reduced supply and logistical challenges.

Cocoa

The majority of our cocoa customers are based in West Africa.  We have seen cocoa disbursements decrease of our total from 30% to 25% in the year, reflecting broader challenges in the sector. Climate change is exerting a significant impact on agricultural production across the region. Cocoa farmers are grappling with increasingly unpredictable rainfall patterns, which have contributed to lower yields. Moreover, pest and disease outbreaks, such as the spread of the swollen shoot virus, are becoming more prevalent. This issue has been particularly severe in Ivory Coast, where a major pest infestation in 2023 led to a 40% reduction in cocoa harvests among co-operatives. Similar to coffee, cocoa is also a commodity subject to the new EUDR.

Current analysis shows that cocoa farmers in West Africa typically receive between 4-6% of the retail price of a chocolate bar. Under Fairtrade terms, farmers are guaranteed a minimum price plus a premium, which as of 2024 stands at a minimum price of $2.40 plus a premium of $0.24 per kg of cocoa beans.

However, the challenge persists that even within the Fairtrade system, African cocoa farmers struggle to achieve a living income, typically selling only about half their production under Fairtrade terms due to limited market demand for Fairtrade certified cocoa.

The co-operative structure continues to provide significant advantages for Fairtrade certified farmers, including the provision of essential training which enables farmers to offer buyers more reliable quantity and quality guarantees, leading to more favourable contracts. Collective benefits of co-operatives for farmers also include:

• Shared costs for transportation
• Equipment
• Storage facilities
• Enhanced negotiating power

Handcrafts and Textiles

The handcraft and textile sectors continues to play a significant role in our portfolio, accounting for 8.1% of total disbursements, down from 8.4% in 2023. The global recession has reduced demand for handcrafts, including textiles, impacting lending in this segment.

Nevertheless, we remain committed to supporting small and disadvantaged producer groups, maintaining our position as the only social lender active in this sector. The majority of disbursements for handcrafts continue to be made through buyer lending.