Coffee cherry fund loans to match farmers’ earnings


Coffee cherry fund loans to match farmers’ earnings
Coffee berries dangle off a coffee bush Image taken on August 17,2019. COURTESY | CITIZEN DIGITAL

In Summary

  • Part of the funds will be advanced as 40 percent of the prevailing sales prices at the coffee exchange with the farmer receiving a further Ksh.20 per kilogram of delivered coffee beans.
  • Theoretically, a farmer with sales amounting to Ksh.500, 000 in a single crop year and from the delivery of 5,000 kilograms of berries has access to an equivalent sum in credit through the cherry fund  holding prices at a constant Ksh.100 per kg across the board.
  • It however remains to be seen whether Parliament will make enough appropriations to the fund in upcoming budgets as the current order on funding sits at a lesser sum proposed at Ksh.3 billion.

Coffee farmers will get to borrow as much as they earn annually as the government moves to make operational the proposed coffee cherry revolving fund.

According to disclosures made in the 2019 Coffee Cherry Advance Revolving Fund regulations, published by the National Treasury on Wednesday, the fund will be advanced on a three tier payment rate.

Part of the funds will be advanced as 40 percent of the prevailing sales prices at the coffee exchange with the farmer receiving a further Ksh.20 per kilogram of delivered coffee beans.

The remainder of the funds are set to arise from 40 percent of the payment rate to members by a cooperative society for the immediate past crop year.

The freshly incorporated board of the Kenya Planters Cooperative Union (KPCU) is expected to oversight the fund flanked by the National Treasury which is to appoint a substantive administrator to run the funds’ daily operations.

Coffee farmers will be required to apply for the fund’s support in writing and must be members of a registered coffee cooperative society while small holder coffee estates must prove their affiliation to the KPCU.

The fund is expected to recover disbursed funds as first charge items to farmers sale proceeds from even as the regulations allows for the deployment of alternative sources of payment.

Additionally, the fund is obligated to shed off three percent from each amount advanced to the farmer to stand in for administrative costs.

The National Assembly is expected to make necessary appropriations for the fund through the budget while grants and donations make for add-ons to the fund’s capitalization.

Theoretically, a farmer with sales amounting to Ksh.500, 000 in a single crop year and from the delivery of 5,000 kilograms of berries has access to an equivalent sum in credit through the cherry fund  holding prices at a constant Ksh.100 per kg across the board.

The implementation of the cherry advance fund follows directives by President Uhuru Kenyatta on July 1, 2019 as he sort to alleviate funding pressures to farmers.

Realized funds are expected to represent working capital to farmers, providing relief to erratic price fluctuations and adverse weather effects.

Advance support to the sector comes against a sharp slump in production which has averaged 50,000 metric tonnes (MT) in the last five years from a greater 130,000 MT in the 80’s.

It however remains to be seen whether Parliament will make enough appropriations to the fund in upcoming budgets as the current order on funding sits at a lesser sum proposed at Ksh.3 billion.

In 2018, coffee sales totalling to 36,830 MT were priced at an average Ksh.348.24 per kilo according to data from the Coffee Directorate taking cumulative earnings to Ksh.12.8 billion which provides a rough guidance to optimal appropriations to the cherry evolving fund.

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Story By Kepha Muiruri
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