By Fredrique Achieng’ and Jolene Njambi
The newly formed Coffee Cherry Advance Revolving Fund has opened to applications from smallholders for advance pay-outs on their future coffee sales, with the first credits expected to begin from August 2020.
Coffee has long been Kenya’s third largest agricultrual export, after tea and horticulture. However, in March 2019, the US Department of Agriculture attache in Nairobi revealed that Kenyan coffee production in 2019-2020 had dropped to 650,000 bags, which was the lowest production in over 50 years.
This was partially due to the fact that a farmer in Kenya is likely to receive only a fifth of the sale price for their coffee if they sell their produce through a cooperative, according to Nation complex. These reduced earnings have seen farmers turn away from coffee, leading to reduced production.
The Sh3bn revolving fund has thus been set up to encourage more coffee farming, especially by Kenya’s smallholders, across an estimated 700,000 coffee farmers, who have been hindered by the high costs of production, and limited access to finance and to the coffee exchange trading market.
The aim is to encourage farmers into registered channels, regularise pricing at a fair level, and stimulate farmers’ coffee production by providing up-front funding for their input and production costs.
“Any smallholder farmer whom as an individual wants to benefit from the cherry fund must first apply through a co-operative society, the money will then be dispatched in the same way,” said Mutahi Kahiga, Nyeri County Governor. “This will enable transparency, security and monitoring the production and payment of funds.”
“In the past we have produced 140,000 metric tonnes of coffee, and we can do this once again, if only we assure farmers that they will get a fair price for their produce,” said Hamisi Boga, the Principal Secretary of the State Department for Agricultural Research in the Ministry of Agriculture, Livestock, Fisheries and Irrigation.
The government is also planning to rehabilitate 500 factories across 31 coffee-growing counties and distribute planting materials to farmers to further help turn around the sub sector.
To qualify for the revolving fund pay outs, farmers must be registered members of an accredited coffee co-operative society or affiliated to the New Kenya Planters Co-operative Union (New KPCU).
They need to submit an application for the credits using Form 1A for a co-operative society member and Form 1B for KPCU affiliate members, given at the end of the gazette notice for the fund, which is available here. They must also provide proof of membership of either a co-operative or of the KPCU, and bank account details for the disbursement of funds.
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The application must then be submitted to the Ministry of Agriculture offices or to the local agricultural officer in the farmer’s area.
The fund’s board then evaluates the application and gives a response to each farmer within 14 days. If an application is rejected, the reasons are given and a farmer can resubmit their application on fulfilling the board’s requirements.
Successful applicants will get payment based on the size of their previous coffee harvests, which determines the size of the farm and expected size of future crops. The credit is then calculated in three parts.
For each kg, the farmer will get:
- 40 per cent of the average price per kg at the coffee exchange at the time of the credit, and
- 40 per cent of the payment per kg they received the previous year from their co-operative or other buyer.
The farmer can then repay the credit directly, or wait until they sell the crop from the year ahead and the credit will be deducted from their sales income at that point.
Additionally, each coffee advance will attract an administration cost of three per cent of the amount advanced to the farmer.