In the modern fair trade movement, it is obvious that many different business models exist. Each around the world must have a culturally appropriate system, which means having many diverse approaches toward alleviating poverty is a good thing! However, there are organizations that make substantially more profits than the artisans they have pledged to support. Indeed, there are costs of doing import/export business, but some certainly seem to be abusing the fair trade system.
With that in mind, my question to everyone is, "What numbers make trade fair to you?"
Village Markets of Africa pays artisans upfront fair living wages for products AND engages in direct profit sharing. 50% of profits from sales in North America are returned to artisans in the form of job training, education, machines and tools to upgrade production, and microcredit loans to make small business expansion possible. Selling products at fair prices only enables their business to continue. Returning profits enables them to move into other areas of production and increase volume to develop into a poverty alleviation tool for all those involved.
Very few fair trade organizations engage in profit sharing with their artisans. Village Markets of Africa feels that this is the only way to maintain a "fair" relationship and actually help artisans move beyond the basic needs of survival.
Please keep your comments positive, but state the facts about the actual finances of fair traders you know. I know many of you like to speak out passionately against those you feel have violated fair trade guidelines. Let's keep this as factual as possible to create a database others can use to learn about fair traders in the market today. Sharing stories of individual artisans is great for selling products, but I'm looking for concrete numbers on where the money goes!
Please visit our website for more information on how we do fair trade: www.villagemarketsofafrica.com
"What numbers make trade fair to you?"
Jacob Schmalzle
US Coordinator
Village Markets of Africa
www.villagemarketsofafrica.com
jacob@villagemarketsofafrica.com
The SERVV/A Greater Gift program has obviously done a lot for the fair trade movement. As a proud Lutheran, I am happy to support and recommend A Greater Gift. They are truly one of the fair trade giants!
The following is a link to A Greater Gift's 2007 Annual Report: http://www.agreatergift.org/uploads/media/2007AnnualReport.pdf
It is incredible to see that over $3.5 million was paid to artisans for their work. My only qualm with their numbers is the same qualm I have with most other large organizations...administrative costs. Over $2 million was spent on salaries and benefits. I understand the logistics of sourcing products from 35 countries must be staggering, but these costs ARE taking away from potential development dollars that could be used to further assist artisans.
Only $83,951 was returned to artisans as "grants to producers/producer development". Other costs of doing business put aside, this is less than 1% (.008) of the gross revenue they have to work with.
I certainly cannot argue with the many good things A Greater Gift has done for people around the world, but they could probably be doing more.
Ten Thousand Villages is another Fair Trade giant. They are one of the oldest and largest fair trade companies in the world, with over $12 million in sales. The following is a link to their annual report:
http://www.tenthousandvillages.com/pdf/Annual%20Report%2007_08_v6.pdf
Their model of fair trade development stops with the purchase of products at a fair price. As far as I could determine from the report, there is no profit sharing involved in their business model. They did purchase almost $9 million in products from around the world, but they also spent almost $2.7 million in administration. Another wonderful business that has great impact, but could be doing SO much more to develop artisan production.
After speaking to the owner of African Village Market, Susan Root, she explained that she is confident that she pays a "fair price" for products, but most of the community development work she does is US-based, such as Africa Re-Connect that helps African Americans reconnect with African ancestors.
Again, we see wonderful intentions and fair price purchasing, but little producer contact afterward. She said she is just getting started online and has no financial data yet available.
Just to clarify, "African Village Market" is a separate organization from "Village Markets of Africa".
We are a small producer located in Viet Nam. For our workers in our city production facility we pay a minimum wage based on the Fair Wage Guide, and in most cases after the workers have ben with us some time we pay above these rates. In addition we pay the Government legislated social insurance payments, plus (not required by law) a 24/7 accident insurance coverage.
For farmers who grow/produce our loofah we have formal contracts whereby we make advance payments and then progress payments as growing/harvesting/production progresses. The prices we pay for the raw loofah are above market prices, and workers are paid according to the Fair Wage Guide.
All workers/growers receive free training provided by us, and are provided with a fairly liberal leave and sickness benefits.
As we are a relatively new company (less than 2 years) we are not yet in a position to profit share, however do provide production bonuses.
"Ten Thousand Villages is another Fair Trade giant.
They are one of the oldest and largest fair trade companies in the world,
with over $12 million in sales. The following is a link to their annual report:"
http://www.tenthousandvillages.com/pdf/Annual%20Report%2007_08_v6.pdf
"Their model of fair trade development
stops with the purchase of products at a fair price...."
What is this price exactly that is claimed to be "a fair price"?
Unless 10,000 Villages would show its purchase invoices, one can only
estimate from the financial report. Note that the sales for year 2007 are
25.5 million dollars. and Purchases are 9.5 million. This ratio is similar
to the 2007 financial report of A Greater Gift. Let us see what this means.
There are two types of handcrafts suppliers to 10,000 Villages and Greater Gift
1. Legal entities styled as cooperatives
2. Traditional handcraft consolidators
In the 1st cases, a certain percentage of the payments of 10,000 Villages and/or
A Greater Gift necesarily goes for overhead and staff expense, maintenance of
physical production plant, accounting and taxes. In the second case as well,
all of the above, as well as normal business profit. Since we do not have the
purchase invoices of the Fair Trade companies, we will have to make estimates
as to what percentage of the gross income of the average or typical Greater
Gift of 10000 Villages supplier does not get anywhere near an artisan rather
it is spent on the general categories as indicated here. Taking as an estimate
that the average supplier company (whether of type 1 or 2 as described above)
as having annual sales in the area of 100,000 dollars, or, at least, this would
be typical of the smaller suppliers, lets say. Well, a production business in
the Third World doing 100,000usd annual business can reasonably be expected to
have operating expenses in the area of 30% of gross income (sales of product).
Once may quibble about this number still it is going to have to be some number.
So now the amount received by the artisans is reduced by this amount equivalent
to the overhead and operating expense factor, the 9million dollars paid out by
10000 Villages is reduced to something like 6million dollars. And since, in
many classes of goods, certainly including that of silver jewelry, the cost of
materials is usually about the same as the cost of labor, this $6million dollars
of 10,000 Villages is actually only about 3 million dollars that go to artisans.
According to the numbers supplied by 10,000 Villages and A Greater Gift to the
government for tax purposes, a fair estimate of what the artisans earn for their
creativity,diligence, skill, and hand labor is around 3 million on 25.5 million
gross sales in the case of Ten Thousand Villages,and something like one million
usd$ on 9.5 million dollars gross sales income, in the case of A Greater Gift.
Wow, Village Markets of Africa and Indochine Natural, both of you have such great models in the treatment of producers. This is really inspiring. The world would be a much better place for all of us if more businesses took a cue from you and cared just as much about the development of producer communities as they do about profits. I wish you both the best of luck!
While I am a World of Good, Inc. employee, these opinions are my own.