Cooperative Bank of Kenya will from this April bankroll coffee farmers unions; in order to decrease the time it takes for coffee farmers to receive payment, from the current six month to a monthly basis. The initiative, currently being piloted in Meru County will increase the lucrativeness of the sector which has seen a massive farmer exodus despite Kenyan coffee being the most valued beverage for its rich flavour.
“We are piloting the programme in Meru before roll out in other coffee growing regions. Paying farmers part of their earnings on a monthly basis should help minimise the pain they go through with the current delays, said Grenville Kiplimo Melli, Head of the Coffee Directorate.
Under current conditions, farmers have to wait for up to 6 months to receive payments, this has enticed some of them to start hawking their coffee cherries to middlemen who pay low prices but offer cash which is much needed. As a result, millers from the respective cooperative societies are struggling with low volumes.
The prompt payment initiative had been proposed last year at a national level by a task force formed by President Kenyatta to look into transforming the coffee sector. However the proposal was thwarted by High Court Judge Justice Odunga, ruling against it on the basis that the regulations were unlawful and would hurt industry players by creating uncertainty.
Farmer cooperatives had voiced their concern that the move would hurt the unions, if they are forced to make immediate payment with no deductions on farmers who had loans. However, under the current pilot programme, the unions won’t have to foot the bill themselves.
Cooperative Bank will finance the cooperatives unions to pay farmers part of their dues on a monthly basis; with county governments acting as guarantors on the promise that, the bank recovers its amounts from the proceeds of the coffee sales. Farmers will also receive additional final payments after their produce is sold at the auction.
Kenya’s coffee sector has been grappling with low volumes after farmers moved to other crops due to low earnings, it accounts for a paltry 0.5 percent of the global coffee output. Hopefully, the introduction of supply chain financing to improve farmers earnings will go a long way in reviving the promising sector.