Providing financial support to Fair Trade producers moves beyond simply paying fair price for products. Many times financial support simply means pre-payment on at least a portion of placed orders to allow the producers to secure raw materials. Remaining payments are to be made promptly, unlike large corporate counterparts which typically wait 60-90days.
While purchasing items on several months’ credit is commonplace in business making an artisan or farmer to wait several months before receiving his/her only income causes undue hardship on producers and their families. Beyond payment for goods, Fair Trade relationships are based on a long-term goal of mutual success. Fair Trade importers are therefore invested in the growth and success of their counterparts, and will frequently give small micro-loans to help with product expansion, capacity building, quality control and funding for certification.
These micro-loans can be integral to the success of small businesses, yet are hard to come by through conventional means. Typical banks shy away from loaning money to assest-less poor, and many charitable organizations are focused only on massive undertakings and will not involve themselves in small loans. Loans and financing are a business necessity that Western operations take for granted when starting up or expanding. Micro-financing has been proven to be a successful development tool. One of the pioneers of micro-financing, the Grameen Bank, was awarded the Nobel Peace Prize and the resulting publicity has brought such micro loans and their high return rate into public awareness.
Kiva was created to help bridge the gap between people with a small amount to loan and those which need it. Kiva is a Swahili word meaning “agreement” or “unity” and their website allows you to enter into this agreement quite easily. What sets Kiva apart is that it allows average-income individuals to lend small amounts (as little as $25). Kiva is a non-profit and supported solely through additional donations, so you’re assured 100% of your loan is in the hands of the person requesting and thus far Kiva has experienced a 100% repayment rate on all business loans. The individual stories and progressive journal entries allow you to personally connect with those you wish to help.
It is through financial assistance rather than blanket charity that small businesses and this poor communities will be able to grow and thrive.
This is the fourth in a series of posts discussing the Fair Trade criteria. Also check out Fair Trade: Transparency, Fair Trade: Fair Wages and Fair Trade: Environment.