Fairtrade Social Premium

I’ve mentioned the social premium aspect of fairtrade in previous posts. I consider that at least as important as the guaranteed price, the other leg of the fairtrade system. My visit to the Toledo Cocoa Growers Association, though, taught me that there are different ways to distribute that social premium.

OK, I know I should have expected that. But I took the Kuapa Kokoo Farmers Union model for granted. Here, in a nutshell, is their model. Cocoa farmers join the KKFU as village societies–the entire village group joins. The social premium received by the KKFU from fairtrade sales is turned over to the Kuapa Kokoo Farmers Trust. The KKFT, in turn, accepts applications for funding by village societies to initiate and support community projects. Depending on the availability of funds, these project are the funded. The water pumps, privies and schools I saw during my visit last year are all example of such community projects.

In Belize, I found out that this model would not work for the farmers belonging to the Toledo Cocoa Growers Association. The reason is simple, farmers join the TCGA as individuals. Often they are the only farmer in a village to grow cocoa. So community projects make little sense for the farmer. Armando Choco, the TCGA manager, told me that farmers prefer extra cash in hand to a community project that benefits mostly people not belonging to the TCGA.

So the TCGA had to come up with a way to distribute the social premium in ways that follow the guidelines set out by the Fairtrade Labeling Organization (FLO) and benefit the community of members. Here’s how they handle it. The TCGA gives education scholarships to children of cocoa farmers every year. It has also begun to construct post harvest processing facilities, particularly bean drying centers that farmers and other community members can use. The TCGA also uses the funds to train farmers to become extension agents who, in turn, help other farmers.

In short, different organizational models require different arrangements.