Microfinance Focus, February 7, 2012: Switzerland’s social investment company responsAbility has recently launched a Fair Trade Investments Fund which will finance the short-term working capital needs of fair trade institutions.

The Fair Trade Fund made its first investment in Canaan Fair Trade, a company that sources products from and provides services to fair trade cooperatives in the West Bank, Palestine.

In total, 1,700 suppliers of fair trade products profit from the price guarantees, the stronger bargaining power, and the marketing and distribution services offered by Canaan, responsibility said.

The responsAbility Fair Trade Fund addresses an important financing gap in the fair trade value chain. The financing gap exists mainly at the level of fair trade exporters. These are either cooperatives of fair trade producers or small and medium-sized traders who need to purchase the agricultural products from members or clients, the small farmers.

Usually, at that point, advance payments need to be made to those small farmers, while revenues from importers are only available once they have received the products at their end.

While the responsAbility Fair Trade Fund will mainly finance the short-term working capital needs of fair trade institutions, a certain allocation will also be made to equity investments and to fixed asset investments – typically, agricultural equipment or post-harvest production facilities.

Origination and investment assessment are handled by responsAbility staff in local offices or representations in Lima, Nairobi, Mumbai, and Beirut, and coordinated by the fair trade team members in Zurich and Paris.

The social investment company is also seeking to expand its investment activities in Africa. In the past year, its assets under management in the region have risen from USD 12 million to USD 35 million.

Expanding in Africa, responsAbility has made sustainable agribusiness a priority. In the future, it hopes to strengthen domestic trade within African countries so that they can create value locally. With these aims in mind, the company has set its sights particularly on Ghana, Rwanda, Kenya, Tanzania, and Uganda.