managing trustee, commodities development fundiaco-oiac.org/sites/default/files/docspage/... ·...
TRANSCRIPT
Presented byMrs. NANCY C. CHERUIYOT ,
Managing Trustee, COMMODITIES DEVELOPMENT FUND
• Coffee is one of the most important cash crops in Kenyagenerating annual revenues of up to $ USD 100 Million.
• It is estimated that 6 million Kenyans are employeddirectly or indirectly in the coffee industry.
• The total production potential is 130,000 MT per annum.This is in comparison to current production levels of50,000 MT.
• Although Kenya coffee global market share is small; at1%, the quality of coffee is highly rated in the worldmarket thus highly demanded by Roasters who mainlyuse it for blending other coffee varieties.
•The total area under coffee is estimated at 109,795 hectares.•Two thirds of all cultivation (73,196 hectares) is handled bylow yield, resource poor smallholder farmers with an averageyield rate ranging from 0.2 – 0.7 tons/ha.
Source: Coffee Board of Kenya, Ministry of Agriculture (2009)
60%
40%
Approximately 600,000
smallholders
organized in
cooperative societies
Approximately 3,000
large, small/medium
private estate farmers
Illustration of National Coffee Production: Coffee
Estate Farmers Versus Smallholder Coffee Producers
The smallholders produce 40% of the crop while
Estate plantations produce the remaining
60%.
Commodities Fund is a state corporation under theMinistry of Agriculture in Kenya.
The Fund was established by theGovernment in 2006 as a Coffee
Development Fund to specificallyfinance the coffee sub-sector
after years of low Production trends.
On 1st august 2014, the coffee development Fundbecame Commodities Fund with additional mandate tofinance additional commodities including; Sugar, Tea,Horticultural Crops, Sisal, Cotton, Cereals And Tubers,Coconuts and all Nuts and Pyrethrum
• Commodity Fund’s mandate is to provide sustainable,affordable credit and advances farmers for farm inputs,farming operations and income stabilisation.
• Bulk of farmers receiving loans are smallholdersorganized in cooperatives
BUSINESS
CLIENTS
SERVICES
/MANDAT
E
SPECIFIC
TO
COFFEE
IMPACT
ELIGIBILI
TY
FINANCING FARMERS
SMALL HOLDER FARMERS/ESTATE FARMERS/COOPERATIVE SOCIETIES
PROVIDING ACCESSIBLE, AFFORDABLE CREDIT AND FINANCIAL SOLUTIONS TO THE COMMODITY SECTOR
$USD 23.5 MILLION
78,000 COFFEE FARMERS +400,000 OTHERS
COFFEE FARMERS WITH A PRODUCTION RANGE BETWEEN 0.5 - 3 KG OF CHERRY/TREE
FUND
SIZE$USD 235 MILLION
• Government of Kenya financing through Coffee
Development Fund largely remain the main source of
coffee financing.
• The sub sector is less attractive to private investors
due to long turnover periods and a client base
considered ‘high risk’
• One commercial bank which previously targeted
financing to coffee farmers has recently stopped.
• The sub-sector is need of approximately US $ 100
Million to meet its credit demand.
Direct lending
Direct to Individual farmers
Directly to societies, women
groups, youth groups and companies
Intermediary approach
Wholesale
Conduit approach
• Different value chain segments requiredifferent types of financing.
• Smallholders populate the lower end of thevalue chain segment (Production) in Kenya.
• The production segment attracts the greatestcredit need. Currently the Commodities Funddirects 60 % of its credit towards thissegment.
• The interest on loans is highly subsidized andranges between 5% and 10%
FINANCING SEGMENTVALUE SECHAIN
APPROACH
CREDIT LINES
AACTIVITIES
Financing Challenges Interventions Undertaken
Dispersed and remote location of coffee farmers presents a challenge in credit delivery.
Formation of lending partnerships with 26 rural-based financial institutions.
Lack of adequate collateral. Adopt social collateral (group lending) to make credit easily accessible to deserving coffee farmers.
High cost of production due to high cost of inputs
The Fund continues to facilitate bulk acquisition of inputs among cooperatives to minimize costs of production to growers.
Governance issues among cooperatives Work closely with other sector players to build capacity for improved governance of cooperatives.
Financing Challenges Interventions Undertaken
Unpredictable weather patterns affecting coffee production, leads to losses in potential revenue which is likely to affect loan repayments.
Training farmers to incorporate climate change management in coffee farming.Financing irrigation infrastructure, rain water collection in the farm and at factory levels
Lack of a social support system which in the past encouraged farmers to remain in coffee production e.g. cherry advance to meet farmers’ daily needs as the farmer awaits payment in six months.
Offer cherry advances to smallholders as an incentive to remain in coffee production.
Delays in coffee payments leads to multiple borrowing among smallholders increasing the level of indebtedness.
Developed an M-Banking service to facilitate convenient, cost-effective and a faster mode of payment.
Poor quality coffee attract poor prices and hence less income for the farm
Cooperate Governances challenges in FCS leads to mismanagement of funds
Use of obsolete technologies in coffee processing
Poor Agricultural practices
Increased demand for coffee inthe global market presents anopportunity for smallholdercoffee farmers to intensify effortsin production.
However, measures need to beput place to ensure sustainabilityof goodquality and sufficient quantitiesproduction.
Competition from real estate development in farms bordering the city of Nairobi and other towns in the Central Region
• Mobilize Expansion of coffee farming to non traditional coffee regions to repalce those taken by real estate
OLD COFFEE TREES• Replacing old trees
and old varieties of coffee with new improved varieties.
Poor Quality of coffee
-Improved primary
processing through use
of current processing
technologies and
machineries and
storage.
-Training on good post-
harvest handling and
storing
Strong farmer groups is key in financing
the coffee sector effectively and
efficiently
The repayments of loans by farmers
depends on application of GAP. The fund
must get involved in ensuring that GAP is
followed by their beneficiaries.
Advancing loans to Farmers who are
financially illiterate is doomed to fail
Capacity building in areas of corporate governance to ensure better management of farmer resources
Establish linkages with other bodies working with coffee such as regulatory and research bodies leads to better results in financing.
In general a holistic approach in development of coffee is paramount
Successful Value Chain Financing requires incorporation of• Capacity Building
• Collaborations
• Sufficient Monitoring and Evaluation
• Birds view/ sectoral approach of the whole value chain