Fairtrade has become a familiar trademark for most consumers in the developed world and represents an option for the buyer to purchase a product that has been certified to follow the ethical standards of ”fair” trade. This branding has received much critique over the last years concerning Fairtrade's ability to improve the lives of small producers in the developing world. This thesis derives from the theories developed within New Institutional Economics (NIE), which emphasizes the understanding of institutions development as a key factor for analyzing long-term economic growth. By constructing an analytical framework of institutional change this thesis theoretically analyses the impact of Fairtrade’s policies on local credit markets. It concludes that the impact of Fairtrade is highly dependent on the initial conditions and could both increase and lower the incentives of changing the institutional framework
