Access to Credit & Long Term Relationships

Fair Trade enables pre-financing for producers who require it, and facilitates long-term trading partnerships. So what does this mean for producers?

Many of the world's producers do not have access to financial advances, or mutually agreed contracts. This makes it difficult for them to plan, and presents obstacles to sustainable development. Fair Trade enables producers to achieve greater control over the trading process, facilitating long term planning.

Access to Credit

Fair Trade Standards require buyers to give a financial advance on contracts, called pre-financing, if producers ask for it. This facilitates access to capital, which is often one of the biggest obstacles to development. Access to credit promotes entrepreneurship and may assist with the economic development of entire rural communities.

When producers request pre-financing, Fair Trade buyers must provide pre-finance up to 60% of the contract value (or more, if both parties agree). Fair Trade also encourages traders to offer other forms of payment such as pre-payment, advance-payment, or crop-finance.

             Shea Butter Producer at Agbanga Karite, Mali / Photo: Eric St-Pierre

Long Term Relationships

Fair Trade relationships provide producers with long-term access to markets. These relationships should be based on mutual respect, transparency, and commitment, and grow stronger over time.

Companies trading Fair Trade products must sign contracts that allow for long-term planning and sustainable production practices. Contractual agreements should be mutual agreed, well documented, and clearly understood by both contracting parties.

Another important element is the exchange of information. This allows producers to plan their production more effectively, and to ensure that that can deliver the required amounts to buyers on time. Buyers might also choose to participate in quality training, risk sharing plans, and more.