Democracy in Action: Investing the Fairtrade Premium

8 November 2016   |   Fairtrade America

In case you didn’t notice, it’s Election Day! We all have the privilege of voting on the direction we want our country to take. It’s democracy in action, which can be a beautiful thing.


Fairtrade understands the value of democratic action and self-determination. Fairtrade Premium a unique feature of the Fairtrade system, gives producer organizations the opportunity to elect how they invest in their communities.

Take for instance the workers at United Nilgiri Tea Estates (UNTE), who vote how to invest their Fairtrade Premium each year. Workers have used Premium funds to improve education with the construction of eight classrooms and one audio visual room that benefits 900 students, as well as by purchasing school buses and hostels that enable more children to attend classes. They’ve also chosen to improve community health by establishing a medical center that has already received thousands of patients.

The votes they cast were the culmination of hard work, and exemplify how Fairtrade sales make it possible for farmers and workers to invest in their communities.

What Is the Fairtrade Premium?

Simply put, the Fairtrade Premium is a set amount over the price that the producer organization receives for their products. This income is earmarked for producer organizations to invest in their communities according to the priorities of their members and community. The more Fairtrade product a producer group sells, the more they have to invest.

In small producer organizations, like cooperatives and associations, farmers vote how to invest the Fairtrade Premium at their annual general assembly. On plantations and estates, a Fairtrade Premium Committee made up of workers votes on how to invest the Premium in consultation with other workers; management is excluded from decision-making to ensure that the Premium benefits workers and the community.

Globally, producers received an estimated $153 million in Fairtrade Premium in 2015. Strong increases in sales volumes of Fairtrade products like bananas (12 percent growth), coffee (18 percent), and cocoa (27 percent) fueled growth in the Premium.

According to producer-reported data from 2014, the average producer organization receives more than $110,000 in Fairtrade Premium. Members of each producer organization vote on how to invest Premium in ways that provide the greatest benefit to their community and their members.

The value of the Fairtrade Premium doesn’t go unnoticed. Valliyammal, a worker at UNTE, says, “Because of the Fairtrade Premium we got a better school for our children.”

Importance of self-determination

Self-determination is important in Fairtrade. We believe that the farmers and workers we serve are best placed to determine their priorities. There are hundreds of ways that farmers and workers choose to invest their Fairtrade Premium because each community where Fairtrade works has different needs.

According to Fairtrade International’s monitoring report released in 2015, plantation workers elected to invest 26 percent of their Premium on education efforts; small producer organizations invested 31 percent of their Premium in supporting productivity and quality improvements. Check out the latest Monitoring & Impact Report here.

In 2013, members of ECOOKIM, a cooperative in the Ivory Coast, elected to distribute their Premium in three ways: building two schools in villages where they are active; expanding infrastructure; and providing training that covered harvesting techniques, production of organic fertilizer, fermentation and drying of beans.

In 2014, members of KBQB, a coffee cooperative in Indonesia, invested heavily in their business and services to farmers, including building plant nurseries, providing training, and infrastructure. They prioritized planting shade trees, cultivating replacement coffee plants, and environmental education in 2015.

Value your vote

The Fairtrade Premium plays an important role in encouraging democratic decision-making in communities and countries where people may not have much practical experience with democratic action. Remember that exercising your right to vote is not something to take for granted.

That’s the great thing about democracy; your vote gives you the opportunity to affect change.

Read more about the Fairtrade Premium here.

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