Low interest rates and improved governance systems have significantly boosted the uptake of loans by coffee farmers in Kenya, with the Coffee Cherry Advance Revolving Fund seeing substantial growth in borrowing. According to Timothy Mirugi, the Managing Director of the New Kenya Planters Cooperative Union (New KPCU), the ongoing reforms in the coffee sector have made it easier for farmers to access these funds, leading to a notable increase in loan applications.
As of December 2024, nearly half a million small-scale farmers have borrowed a total of Kshs 7 billion from the fund, which is administered by New KPCU. The loans, which are offered at a low interest rate of 3%, have been taken by farmers from 27 of the 32 counties in Kenya that grow coffee. The loans have seen a significant increase from Kshs 1.1 billion in November 2023 to Kshs 6.7 billion by December 2024, marking an over 500% increase.
The highest number of loans have been taken by farmers in the Mount Kenya region, with counties such as Nyeri, Kirinyaga, Kiambu, Murang’a, and Embu among the top beneficiaries. Nyeri County alone, with 82,927 farmers, borrowed Kshs 943.4 million, while Kirinyaga County, with 99,258 farmers, borrowed Kshs 845.6 million. Other counties like Kiambu, Murang’a, Embu, Meru, and Tharaka Nithi also saw significant borrowing, collectively totaling Kshs 2.2 billion.
Kericho, Bungoma, and Trans Nzoia counties have also seen increased borrowing, with Kericho alone borrowing Kshs 624.5 million from 32,258 farmers. The overall increase in loan uptake can be attributed to several factors, including reduced paperwork, heightened awareness among farmers, and improvements in coffee prices at the Nairobi Coffee Exchange (NCE).
The reforms, which include the reduction of paperwork and the introduction of the Direct Settlement System (DSS), have simplified the loan application process, making it faster and more efficient. Farmers no longer need to provide the extensive documentation required by traditional financial institutions, and the loans are processed much more quickly sometimes within 72 hours, compared to the previous 5 to 14 days. This efficiency has motivated farmers to borrow more to meet their financial needs, such as paying school fees, buying farm inputs, and investing in infrastructure development.
The Coffee Cherry Advance Revolving Fund was initially set up in March 2019 with Kshs 3 billion under the leadership of former President Uhuru Kenyatta to revitalize the struggling coffee sector. The current administration added Kshs 4 billion to the fund in December 2023, and in November 2024, the National Treasury released Kshs 750 million to further support the fund. The introduction of the Direct Payments System (DSS) in August 2023 has also been a game-changer. This system ensures that payments are made directly to farmers and other stakeholders in the coffee sector, such as millers and marketing agents. It has greatly improved loan recovery, with the default rate standing at zero.
Mirugi also highlighted that the reforms have encouraged new coffee growers in non-traditional coffee-growing regions such as Trans Nzoia, Uasin Gishu, Nandi, Migori, Nyamira, Baringo, and Kisii. These areas, which were not traditionally known for coffee farming, have seen an increase in coffee cultivation, signaling a rise in national coffee production. This shift is expected to significantly boost the country’s coffee output over the next few years, with projections aiming for a production of over 150,000 metric tonnes by 2027, up from the current range of 40,000 to 50,000 metric tonnes.
In the 2024/25 coffee year, which began in October, 81,745 farmers have already borrowed Kshs 1.182 billion. Kirinyaga County again led in borrowing, with 27,368 farmers taking out Kshs 267 million, followed by Kiambu and Machakos counties, which borrowed Kshs 194 million and Kshs 170 million, respectively.
Overall, the reforms in the coffee sector, combined with favorable financial terms and an efficient disbursement system, have played a pivotal role in increasing the uptake of loans among coffee farmers. With these continued improvements, the future of Kenya’s coffee sector looks promising, with increased production and enhanced livelihoods for farmers across the country.
