Conversations with sustainable trade producers, and discussions with related stakeholders, including associated NGOs, buyer organisations and international development organizations, have clearly indicated that one of the largest barriers to growth for sustainable SME producers has been their inability to access affordable finance throughout the year to support their businesses.
This "financing gap" has been evidenced by the rapid growth in recent years of the number of sustainable trade "socially focused lenders", lending institutions with explicit social organizational goals, missions and objectives. Such lenders have entered the sustainable trade lending marketplace due to the unfulfilled demands of producer organizations for finance. Often, these lenders are linked to charities and development organisations and enter the lending market as they understand that the lack of producer finance is preventing local SMEs in creating employment and raising incomes in their regions. The number of socially focused lenders, lending directly to producer groups in developing countries, now exceeds 20 with estimated lendable funds, directed almost exclusively at sustainable trade finance, estimated at USD $250-300 million.
However, if one is to assume that the average sustainable trade producer might require up to 60% of the value of their orders in trade finance to operate sustainably, and that current sustainable trade exports amount to over USD $3 billion per annum, this would imply that the total demand for agricultural sustainable trade finance massively exceeds the total amount of finance which is currently available.
While local commercial banks do offer limited amounts of trade finance, especially to the larger sustainable producer groups, these loans are often solely for the period of export and not for pre-harvest finance or longer term investment in infrastructure. Even with limited amounts of local bank commercial finance, anecdotal evidence continues to suggest that there remains a significant and growing unfulfilled demand for finance throughout the sustainable trade area.
In summary, despite the entry of increasing numbers of socially focused lenders and an increasing number of commercial lenders becoming socially oriented, there remains a growing "financing gap" that risks undermining, or at the least reducing, the potential growth of the sustainable trade market. Tackling this gap has the potential to encourage further growth of the sustainable trade sector which in turn will result in increased poverty alleviation and environmental sustainability in the poorest parts of the world.