Impact assessment on Local Fair Trade Organisations in Central America, Africa and Asia

Abstract

Despite the rising popularity of Fair Trade, a relatively small amount of academic research has been done on its impact on Local Fair Trade Organisations (LFTOs). This paper uses a unique set of data from Shared Interest Society Ltd, the UK based ethical investment co-operative, of 25 LFTOs across Central America, Africa and Asia to make a quantitative assessment of the impact of Fair Trade on them. They have a pivotal role as the buyers from the producer households and the suppliers to both Fair Trade and commercial buying organisations. The key issues are about the ability of LFTOs to achieve an “efficient technology” and diversify into other markets as otherwise they are fragile and may not be in a position to serve the interests of the producer households in the medium to long term. If they are accessing other markets, it suggests they are reaching an efficient technology thereby reducing risk and becoming stronger organisations. The findings suggest, while not confirmed statistically, the possibility that LFTOs in the Coffee Market and All Product Markets might be reaching efficient technology, able to compete with conventional firms, thereby reducing their dependence on Fair Trade markets. It also suggests, while not confirmed statistically, the possibility that the Fair Trade Market is helping the growth of the Local Market through reaching efficient technology. This study leaves open some questions however one option to answer these is rerunning this analysis in 5 years’ time when more data is available or looking for other avenues where data may be available such as Root Capital or FLO. A combined methodology based on the type of analysis conducted here with more data, and a case study-based method with a smaller number of LFTOs, might be a possible way forward.