The New Kenya Planters Co-operative Union (New KPCU) has successfully advanced KSh 5 billion in loans to 371,242 farmers through the Coffee Cherry Advance Fund, according to a recent report. The fund, designed to boost Kenya’s coffee sector, has seen a significant increase in loan disbursements, marking a 354.5 percent growth since mid-November 2023. This surge in borrowing reflects the growing confidence among farmers in the system and the attractiveness of the loan terms offered by the New KPCU.
The Coffee Cherry Advance Fund was initially established with a KSh 3 billion revolving fund announced by former President Uhuru Kenyatta during the 124th Session of the International Coffee Organisation (ICO) at Kenyatta International Convention Centre, Nairobi in March 2019. The fund aimed to revive Kenya’s struggling coffee sector by providing farmers with access to affordable credit. Recognizing the success and potential of the initiative, the Kenya Kwanza Government further boosted the fund with an additional KSh 4 billion in December 2023. This increase in capital was intended to accelerate the recovery of coffee farming, which was once a leading foreign exchange earner for the country.
Timothy Mirugi, the Managing Director of New KPCU, attributed the rapid uptake of the fund to several key factors. One of the primary reasons for the increase in loan disbursements is the low-interest rates offered by the fund, which makes borrowing more accessible and attractive to farmers. Additionally, the fund’s improved governance and disbursement systems have made the process more efficient and transparent, further encouraging farmers to participate.
“The increase in loan advancement has also been prompted by the lack of collateral apart from coffee and cherry required, and no cumbersome paperwork like the financial institutions as long as you are proved to be a coffee farmer who is producing coffee in Kenya,” Mirugi stated in a phone interview. The simplified borrowing process, combined with the absence of traditional collateral requirements, has made the fund particularly appealing to smallholder farmers who may have been excluded from formal financial systems.
Another significant factor contributing to the increased loan advancements is the quick disbursement process. Loans are processed and disbursed efficiently through the Co-op Bank-managed Direct Settlement System (DSS), which ensures that farmers receive payments directly and promptly after their coffee is sold. Since the beginning of the 2023/24 coffee year in October 2023, KSh 1.5 billion has been received through the DSS, allowing farmers to receive payments immediately after sales, bypassing intermediaries.
The report highlights that counties from the Mount Kenya region have been the largest beneficiaries of the fund, with seven counties borrowing a total of KSh 2.9 billion, accounting for 58 percent of the total disbursement. Nyeri County topped the list with 70,660 coffee growers borrowing KSh 701.1 million, followed closely by Kirinyaga, where 70,353 farmers borrowed KSh 566.7 million. Other counties in the region, including Kiambu, Murang’a, Embu, Meru, and Tharaka Nithi, also saw substantial disbursements.
Emerging coffee counties such as Trans Nzoia, Uasin Gishu, Nandi, Migori, Nyamira, Baringo, and Kisii have also benefited from the fund, with 19,963 farmers receiving KSh 582.7 million.
In the week of July 29 to August 5, 2024, New KPCU disbursed KSh 69.1 million to 5,370 beneficiaries across 14 counties. The highest disbursement during this period was in Machakos County, where 4,915 coffee farmers received KSh 45.9 million. Notably, Mukuyuni Farmers’ Co-operative Society in Machakos saw 879 farmers benefit from a cherry advance of KSh 13.8 million, with loans disbursed at a rate of KSh 40 per kilogram of cherry.
The continued success of the Coffee Cherry Advance Fund underscores the critical role that financial support plays in revitalizing Kenya’s coffee industry. The increased access to affordable credit is empowering farmers across the country, contributing to the sector’s recovery and ensuring that coffee remains a vital part of Kenya’s economy.
