- Expected to save them from price fluctuations, insulating them from middlemen who pay far below market price.
- At least three per cent of the loan given will be deducted as administrative charges. The amount will not attract interest.
Image: REUTERS
Coffee farmers, who had threatened to uproot their bushes over low prices, now can access a state loan equivalent to their annual earnings to help with their periodic financial needs.
The Cherry Advance Fund is a welcome departure from the former arrangement whereby farmers were forced to wait to be paid for delivered coffee.
It will also save them from price fluctuation and cut out middlemen who pay them far below the fair market price.
On Wednesday the National Treasury published regulations to govern the Sh3 billion Coffee Cherry Revolving Fund.
According to the regulations, farmers will access the "salary advance" in three folds.
Part of the funds will be advanced as 40 per cent of the prevailing sales prices at the coffee exchange, with the farmer receiving a further Sh20 per kilogramme of delivered coffee beans.
The rest will arise from 40 per cent of the payment rate to members by a cooperative society for the immediate past crop year.
For instance, a farmer with a capacity to deliver 3,000kgs of berries a year is eligible for an advance of Sh300,000 through the fund holding prices at a constant Sh100 per kg across the board.
At least three per cent of the loan will be deducted as administrative charges. No interest will be charged.
The coffee advance will be a first charge on the applicant’s sale proceeds. Agents will be appointed for recovery. However, the beneficiary may repay the advance through alternative sources of income.
The regulations say an applicant should apply in writing for the coffee advance. He or she must be a Kenyan citizen, a member of a registered coffee co-operative society and should be affiliated to New Kenya Planters Cooperative Union (KPCU).
The law has established the KPCU board, will manage the fund with the Treasury. It will appoint a substantive administrator to run daily operations.
The administrator will prepare estimates of annual revenue and expenditure relating to its obligations and operational expenses and submit it to the board.
The CS Treasury appointee will also prepare quarterly financial and non-financial reports.
The National Assembly will make necessary appropriations for the fund through the budget while grants and donations will be add-ons to the fund’s capitalisation.
Implementation of the Cherry Advance Fund follows by days President Uhuru Kenyatta's directive that farmers be well compensated.
In mid last year, Uhuru had called for the establishment of the fund after coffee farmers and leaders, especially in his Mount Kenya backyard, complained of exploitation. They had threatened to uproot coffee trees.
For many years the region has been the biggest contributor to Kenya's total production, which has been dwindling.
According to the Kenya National Bureau of Statistics, production has slumped to an average of 50,000 metric tonnes compared to at least 140,000 metric tonnes in the 1980s.
In May last year, the US Department of Agriculture said Kenyan coffee production in 2019-20 is likely to drop to a 50–year low of 650,000 bags.
The US agency said low prices make it difficult for farmers to take care of their crops and fend off pests and disease.
It also cited poor governance of Kenya's marketing cooperatives and a marketing structure that forces farmers to personally shoulder a large amount of risk .
(Edited by V. Graham)