Products financed

The chart below shows the split of lending for different types of products as a percentage of overall disbursements made.

In terms of lending products, coffee remains our largest focus, mainly due to the scale of Fairtrade coffee production, with more than half of all Fairtrade certified producers growing this commodity. CSAF reported that 55% of the total disbursements from all of the social lenders in the group was for coffee. Prices had been steadily increasing since 2021, partly due to unexpected weather conditions in Brazil, where coffee trees were weakened by a drought, then hit by two severe frosts in less than a month. The changes in temperature are believed to be down to the effects of climate change and the heavy frost has been especially damaging to young trees, which may affect output for years.

In the past 12 months, the C price – the benchmark price for commodity-grade Arabica coffee on the New York International Commodity Exchange and the world benchmark for coffee futures contracts – has been very volatile. Initially prices continued their trend from 2021 and consistently broke new multi-year highs, reaching above 2.5 USD per pound in February. This was due to a smaller crop harvest, along with problems with containers and shipping, leading to a large drop in exports of all forms of coffee in Brazil. In the latter part of the year, the price has been largely falling due to the stronger US Dollar and an improving crop forecast, following news of high rainfall in Brazil, promoting flowering and suggesting high yields next year. On top of that, investment bank Itau BBA said there are also concerns about coffee demand in Europe, the world's largest consuming region, due to ongoing economic difficulties. Overall, the price has dropped 2.1% this year, but is up 13% year-on-year.

Although other CSAF members have recorded an increase in cocoa lending, our disbursements for this commodity have reduced from 28.3% in 2021 to 21.8% in 2022. We believe this is partly due to the high number of lenders operating in these regions and their ability to provide larger facilities at a lower interest rate.

The world’s cocoa supply is mostly concentrated in Africa, which represents 74% of global production. Latin America produces 16% of the world's cocoa beans. The Ivory Coast and Ghana are by far the two largest producing countries, accounting for more than 50% of the world´s cocoa. Yet according to the World Bank, cocoa farmers in Ghana make approximately 1.0 US Dollar per day, while those in Ivory Coast make around 0.78 USD per day compared to the threshold for extreme poverty at 1.90 USD per day. According to Fairtrade International , the average cocoa farming household in Ivory Coast is made up of eight people and has an annual income of around 3,000 USD. However, Fairtrade Foundation research concluded that the average cocoa farming household should earn around 7,500 USD a year to cover their full cost of living. Based on the latest estimates by the International Cocoa Organization (ICCO), there was a Year-on-year decline of 6% in the global production of cocoa this season. They reported that this was driven by agricultural climate issues, trade disruptions, and increased freight costs.

Handcraft and textile products continue to have an important place in our lending as we maintain our focus on small and disadvantaged producer groups. In addition, we believe that Shared Interest remains the only social lender to provide finance to this sector.

You can read the full Social Accounts document here.

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