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Finance Alliance for Sustainable Trade
Sarah Rich, 20 Jun 07
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The Fair Trade label and its many derivatives and relatives have become familiar to consumers in the last few years as awareness of the backstory behind products drives demand for increased transparency. We want to know that the people who produced our goods did so in just and equitable circumstances, and without harming the natural environment or exploiting local resources. These certifications offer values-based consumers the assurance they seek. But the farmers and producers (almost all in the developing world) who send their goods to us with fair trade labels represent only a portion of the number of farmers and producers wanting to join the network of international trade in fair and environmentally-responsible goods. In order to be a part of that chain, though, they have to have sufficient financial stability to create the relationships with international traders that position them for success. If they can't obtain the financial leverage to prove to trade partners that they're a safe bet, they struggle endlessly to profit from choosing more sustainable production practices, while on the other hand, if they can't convince lenders to finance their enterprises, they can never get in the door with the trade partners. Ultimately they may revert to environmentally destructive practices without the incentive of increased profit. In other words, the poorest producers stay poor, and poverty has a direct negative relationship with ecological degradation.

An effective solution to this problem, according to a new association of investors, lenders, and development groups, lies in finance. More specifically, in facilitating "lending for enterprise activities that lie at the nexus of responsible natural resource management, community-based development and international trade." The Finance Alliance for Sustainable Trade (FAST) launched recently with a plan to simplify and centralize access to capital and resources for farmers who want to build sustainable sustainability businesses, as well as a plan to demonstrate to commercial banking institutions that financing sustainable production is a valid and valuable proposition.

FAST's website is currently rather sparse, but the Sustainable Food Lab, some members of which were involved in the development of FAST, has a useful report on the organization:

As markets for sustainability initiatives have grown, the availability of producer trade finance has not kept pace. Small-scale agriculture activities in low-income, indigenous communities bring in political stability as well as environmental conservation but local financial institutions consider them too poor or under-asseted to be regarded as bankable.
Credit sources fall to local moneylenders known as “coyotes” because of their exploitative practices. These middlemen use the geographical isolation and scarcity of credit to secure products at low prices or profit guaging interest rates. Where local commercial finance is available, producer groups are often quoted prohibitively high rates. The cycle of poverty, lack of credit-worthiness and environmental degradation continues.
According to their business plan, FAST lenders are different.
"An explicit goal of all socially focused lenders is to challenge high interest rates which are predicated on the illusion that sustainable producer groups are inherently risky (or riskier than less sustainable concerns). By lending to producer groups without experiencing significant levels of lending defaults, many of the socially focused lenders have been, and should be, able to prove to local commercial lenders that lending to cooperative producer groups is profitable and makes good business sense."

FAST currently has just under twenty member groups, some of whom are highly influential players in global trade, and others of whom hold high positions in the world of environmental advocacy. FAST provides structural and organizational tools to help both sides; the lenders get social impact assessments and loan guarantees, and the producers get consolidated information and tools for financial literacy. This kind of additional support, assurance and education will permit more efficient and rewarding partnerships, and leverage struggling producers into the global sustainable trade market.

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Comments

To Whom it May Concern:
My husband and I are master level counselor in rual Vermont. We are very aware of earth changes. Our dream is to build a "green home" and promote this as a learning experience to others. We have a letter explaning our goals, we have house plans, we are seeking help w/financing this project. Please let us know who might be interested.
Thank You, Philip and Kim Lightbear MA


Posted by: philip -kim lightbear on 8 Jul 07



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