By Kimuri Mwangi
Low interest rates and improved governance disbursement systems have encouraged coffee farmers to increase borrowing from the Coffee Cherry Advance Revolving Fund. This is according to the New KPCU Managing Director Timothy Mirugi who says the ongoing reforms in the coffee sector has made it easy for farmers to access the funds hence the increased uptake.
The reforms being spearheaded b by the National Government and the counties, have seen close to half a million small scale farmers borrow Kshs 7 billion from the Coffee cherry advance revolving fund at three per cent.
497,221 farmers as at the end of last week had borrowed from the fund administered by the New Kenya Planters Cooperative Union (New KPCU). The farmers are from 27 counties out of the 32 counties that grow coffee in the country.
Seven counties from Mount Kenya had borrowed Kshs 4 billion of the total amount accounting to 59.7 per cent as of December 19, 2024. The loans advanced to farmers have increased to Kshs 6.7 billion compared to Kshs 1.1 billion advanced as of Nov 14, 2023, accounting to an over 500 per cent increase.
82,927 Nyeri County coffee farmers led by borrowing Kshs 943.4 million followed by Kirinyaga with 99, 258 farmers benefiting with Kshs 845.6 million. Kiambu, Murang’a, Embu, Meru, and Tharaka Nithi counties farmers totalling to 129,501 borrowed Kshs 820.6m, Kshs 579.2m, Kshs449.9m, Kshs 319m and Kshs 46.7 million respectively.
Kericho County with 32,258 farmers borrowed Kshs 624.5million, Bungoma County Kshs 414m and Trans Nzoia county farmers with Kshs 319.2m completing the list of top beneficiaries.
According to the Coffee Directorate of the Agriculture Food Authority (AFA), there are 800,000 coffee farmers in Kenya.
The New KPCU Managing Director names three factors which have contributed to this increase being reduction in paperwork, awareness by the Government and improvement in prices at the Nairobi Coffee Exchange (NCE). The Capital Markets Authority (CMA) has so far licensed 16 coffee brokers to trade at the NCE, with most of the brokerage firms owned by small scale farmers.
“The increase in loan advancement has been prompted by lack of collateral conditionality apart from coffee and cherry required, no cumbersome paperwork like the financial institutions if you are proved to be a coffee farmer who is producing coffee in Kenya. Further introduction of the Direct Settlement System (DSS) as a payment system has motivated farmers’ morale,’ said Mirugi. “Today, it takes less than 72 hours after applying for the loan unlike before where it could take 5 to 14 days combined with a huge paperwork. We can confirm that the ongoing reforms have immensely contributed to transparency and thus promoting farmers to borrow to meet their daily financial obligations like paying school fees, buying farm inputs and funding their infrastructure development.”
Former President Uhuru Kenyatta created a Kshs 3 billion cherry advance revolving fund in March 2019 in a bid to help the ailing coffee sub sector. The current regime in December 2023 added Kshs 4 billion to the fund. Last month, the National Treasury released to the New KPCU Kshs 750 million as part of this financial year’s allocation.
Payments for all coffee is done through the Direct Payments System (DSS) from which direct payments are made to all those who have offered a service: millers, marketing agents, coffee factories, estate accounts, and individual farmers. It was launched in August 2023 and the Cooperative Bank of Kenya appointed as the implementing agency. Mirugi says the system has assisted in loan recovery and stands at zero default.
The DSS was recommended by Professor Joseph Kieyah led National Task Force on Coffee Sub-Sector Reforms established in 2016 by former President Uhuru Kenyatta.
Mirugi opines that the revolving fund has encouraged the new coffee growers in non-traditional coffee growing areas like Trans Nzoia, Uasin Gishu, Nandi, Migori, Nyamira, Baringo and Kisii. “We have witnessed an increase in coffee bushes in parts of Rift Valley, Western and Nyanza region, an indication that national coffee production will increase greatly in the next three years,” he added.
Since the beginning of the 2024/25 coffee year in October, 81,745 farmers have borrowed Kshs 1.182 billion. Kirinyaga County led in the last three months as 27,368 farmers borrowed Kshs 267 million followed by Kiambu County (Kshs 194 million) and Machakos County (Kshs 170m) and Embu County (Kshs 112.3m).
Coffee production in the country currently alternates between 40,000 and 50,000 metric tonnes, but the Government has guaranteed to fast track more reforms to boost output to over 150,000 metric tonnes by 2027.
