Tag Archive: sustainable human development


under the fair trade label: cryptic coffee

lesson of the day:  fair trade impacts the coffee industry differently from other industries: in order for a farmer to get the fair trade label, she must sell her beans to a local distributor.  this distributor will combine her beans with other farmers’ beans to create a mixed product.  as a result, the farmer gets a lower price than they would selling directly to a buyer in the US.  therefore… the coffee growers with the best quality coffee don’t need fair trade.  instead, institutional conflict behind the fair trade distributors acts as a crutch to producers who make bad products – fair trade can sustain bad quality coffee.

I learned all of this by calling Global Village, our local organic café on Hillsborough.  Take note that fair trade itself is not the reason that the coffee producers earn less – the distributors who are fair-trade certified cause the price to go down.  But, the distributors are the ones who are “fair trade certified.”  What we need to do to fix this is to encourage NGOs like the Fair Trade Federation (FTF) to certify individual farmers instead of distributors.

In an example, the owner of Global Village has chosen to pay a small farmer in Nicaragua directly for his coffee because the quality is unbeatable.  If he bought it from the distributor, it would be mixed with everyone else’s lower-quality coffee.  But now he can’t call it fair trade, even though he has paid the farmer more.

The fair trade practices at Beleza are such that the owner either pays the artisans directly or through a co-op.  Again, because we are not working with a fair-trade certified distributor, the products aren’t necessarily “fair trade certified.”  But what’s the ultimate goal?  Having a stamp of approval or directly improving the lives of the producers?

microcredit micromanaged

Fair trade is an integral part of sustainable human development.  So, too, is microfinance.  People in developing countries need access to credit so they can have the capital to start a business or make their crafts.  Many of the artisans at Beleza got started with a microcredit loan.  Unfortunately, last week’s Economist featured an article stating, among other things, that Bangladesh would be capping the interest rate on microcredit loans at 27%.

Why is this bad?  The interest charged on the loans helps pay for training programs and the administration costs it takes for locally-employed loan officers to bike from door to door establishing new loans and checking on the lending groups.  By capping the interest, Bangladesh is effectively limiting the amount of loans available.  It’s a shame this is happening here, where it all started by the work of Dr. Mohammed Yunus.  I just finished his book, “Banker to the Poor.”

Link to the article:  http://www.economist.com/node/17522606

microcredit

New interest cap will reduce amount of loans available