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Investing in Impact: Ensuring Farmers Receive A "Fair Price"
05/12/2014 - 11:42 AM

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When Ashoka Fellow Paul Rice was working as a rural development specialist in Nicaragua during the 1980’s, he recognized that small coffee farmers in Estelí, Nicaragua faced incredible challenges to get their products to market, including lack of access to transport, market information, and credit. Even if the Nicaraguan farmers owned a produce truck, Estelí's mountainous terrain and exposure to the brutal fighting of the Contra War made it nearly impossible for them to carry their harvests to the nearest marketplace—located two hours away in the capital city of Managua. Their removed location also prevented them from discovering current coffee prices or visiting a bank. As a result, farmers had no choice but to rely on intermediaries and exploitative middlemen, who offered them much less than market price in return for transporting and selling their harvests.  Traditional development programs in Nicaragua unsuccessfully sought to increase the farmers’ incomes by increasing their production levels. But Paul recognized that as long as farmers were paid below the price of production, they would never be able to feed their families or invest in their businesses, and would have little chance of escaping poverty. Paul, therefore, devised an intervention that would tackle the problem on farmers’ isolation from global markets: Fair Trade certification.

Global markets for commodities such as cocoa, bananas, and coffee are worth billions of dollars, but millions of smallholder farmers worldwide cannot make ends meet because they are paid prices that are actually below their production costs. Cote d’Ivoire, which produces 35% of the world’s cocoa, provides a demonstrative example of this. 

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