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Worldshops ’ and Importers’ finance-related needs

Worldshops ’ and Importers’ finance-related needs. The producers. We will analyze the situation of the main actors in the integrated Fair T rade supply chain - producers, importers and worldshops .

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Worldshops ’ and Importers’ finance-related needs

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  1. Worldshops’ and Importers’ finance-related needs

  2. The producers We will analyze the situation of the main actors in the integrated Fair Trade supply chain - producers, importers and worldshops. From the financial standpoint the producers benefit from one of the constituent criteria of Fair Trade: get, if they so request, the pre-financing by the importer of the goods or other forms of micro-credit or ethical credit. (The importers’ support to producers includes other areas with economic impact)

  3. The Importers At the same time then the first financial commitment of the importer is the pre-financing of the purchased goods (usually up to 50% of the value at the order and the rest on delivery). Moreover, in general the importers’ Invested Capital consists mainly of stock, receivables to customers (worldshops and other players of the traditional market) and tangible assets (equipment, etc.).

  4. The Importers– Altromercato Case study Actually the totalamount of operatingnet working capital isnot 21,3 millionseurosbut 15,7 because of tradeliabilieties (-4,4) and otherliabilities (-1,2).

  5. The Importers– LiberomondoCase study Actually the totalamount of operatingnet working capital isnot 5,2 millionseurosbut 3,6 because of tradeliabilieties (-1,2) and otherliabilities (-0,4).

  6. The Importers From these cases it can be concluded that in % of revenues the financial needs of an importer are 50-60% for Operating Net Working Capital; in particular 6% for producers’ pre-financing, 35-40% for inventories and 10-20% for trade receivables / payables. Regarding the seasonal trend of financial needs, the period with the greatest demand is in general December and January due to the receivables: a significant volume of sales is related to Christmas presents with following payments by worldshops; also producers’ pre-payments increase due to the new round of orders for many products. Operating Net Working Capital increases in December by 10-15% compared to June.

  7. The worldshops The worldshops’ Invested Capital consist mainly of tangible assets in the shops (furnishings and other facilities), inventories, receivables to customers (e.g. for extra-shop sales with traditional operators or for public funding of school activities or other cultural activities) and by liquidity needs. This need is reduced by the debt with suppliers, consisting mainly of importers

  8. The Worldshops–Bottega Solidale Case study Actually the total amount of operating net working capital is not 896 thousand euros but 443 because of trade liabilieties (-118) and other liabilities (-335).

  9. The worldshops Considering the 2011 balance sheets of 70 Italian worldshops (mainly cooperatives) the financial needs are around 55% of the revenues; in particular the Operating Net Working Capital is 25% of revenues and Fixed Assets 30%. The sources are equity for 30% and debt for 70%. Regarding the seasonal trend of financial needs, the period with the greatest demand is in October before the Christmas sales and the minimum demand is at the end of the year. It’s important to improve activities in spring-summer (e.g. worldshops in touristic areas; financed events and educational activities) to reduce the seasonal fluctuation.

  10. Finance sources – The experience of italianworldshops BottegaSolidaledoes not distribute dividends on capital (it is a non-profit organization) but gives to its members an average interest of 2.5% for their loans. Likewise, the cooperative receives no dividends to its share in the CTM Altromercatoconsortium but a 5.5% interest on the loan. The CTM Altromercato consortium collect from BottegaSolidaleand other seventy members cooperative a total of € 16 million, where € 4 million are share capital (up to now, as said, without recognition of dividends) and € 12 million are remuneratedloan capital. These resources are used by the consortium for the producers pre-financing and for a good part of the requirements for its operation (warehouse, credits, etc..). The cooperatives that are CTM Altromercato consortium’s members collect from their members (individuals and corporations) about € 25 million.

  11. Finance sources – Case study Bottega Solidale/Altromercato • By June 30th of 2013 La Bottega Solidale cooperative was financed by its members with: • € 500.000 of social capital (1.164 members) • € 915.000 of social loan (about 150 members) • La Bottega Solidale was using these financial ressources (€ 1.415.000 total) in this way: • € 930.000 to its operation • € 485.000 to sustain the social economy network, especially with capital (€ 125.000) and with loans for CTM Altromercato consortium

  12. Finance sources – Case study Bottega Solidale/Altromercato Since about 20 years, the Italian Fair Trade cooperatives have been engaged in a project of social lending. Currently about 70 organizations collect from their members about € 25 million and finance the consortium Altromercato with € 12 million of loan and € 4 million of share capital. The project has served in order to promote collection of loans and share capital by cooperatives aimed to support their needs and those of the consortium, including the pre-financing of producers. The consortium recognizes cooperatives a spread (around 3% currently) useful for supporting the promotion of the collection.

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