Farmers steer clear of coffee loan fund amid sector issues

Maurice Makhanu who farms coffee in Bungoma County. [Benjamin Sakwa, Standard]

When the national government came up with the idea of creating the Sh3 billion Coffee Cherry Advance Revolving fund (CCARF) farmers were hopeful their fortunes would change after years of neglect.

Of the amount capitalised in 2019, only Sh68 million has so far has been loaned out to farmers country-wide even though it attracts only a 3 per cent interest rate per annum.

Of the amount loaned out, according to New Kenya Planters Co-operative Union (NKPCU) Managing Director Timothy Mirugi, Sh20 million went to farmers under the Othaya Coffee Co-operative Society which has over 10,000 farmers under 14 factories.

The rest of CCARF fund is still intact in the accounts of the NKPCU, begging the question of why the money that was supposed to cure some of the challenges that had bedeviled the sector was still lying idle in the bank.

On one hand, farmers claim the Sh20 advance payment per kilogramme of what farmers have delivered is too little and that the Government should increase it to Sh50 per kilo.

Othaya farmers chairman, Gathua Nderitu said the main challenge facing farmers is low productivity.

This is despite the fact that Sh20 advance is pegged on volumes of output that act as collateral for the loan.

“Out of the 10,000 members, over 5,000 have applied for the fund but the amounts they can be advanced is limited by the CCARF conditions which require that this be guaranteed against produce already delivered,” Nderitu stated.

He said 14 factories affiliated with the society produced 1.7 million kilogrammes for the year 2020/21 compared to 2.5 kilogrammes for the last season.

 “The destabilisation in the industry has led to sharp drop of production from 129,000 metric tonnes in 1987/88 crop year to below 50,000 metric tonnes to date,” said Nderitu.

According to Kenya Coffee Directorate, farmers across the country produced 36,873 metric tonnes of coffee which earned a total of Sh17.4 billion in the season of 2019/2020.

“Production in Kenya was forecast to reach 39,000 metric tonnes in 2019/ 2020 but it decreased by 18 per cent. It dropped from 44,990 metric tonnes in 2018/19 to 36,873 tonnes,” a report by the Kenya Coffee Directorate said.

A drop in coffee production within Mt Kenya counties of Murang’a, Kiambu, Nyeri and Meru has been attributed to real estate development that is taking up more land.

“Unless drastic changes to address production are put in place, the ability to borrow from CCARF will continue to diminish unless the amounts that can be loaned are increased,” Nderitu explained.

Under the CCARF conditions, borrowing for the cherry advance is capped at Sh20 per kilogramme delivered to primary co-operative societies.

Gikanda Farmers’ Co-operative Chairman John Ngure said an increase in the limit of what can be borrowed will ensure farmers manage to cultivate their farms after picking season is over and hence boost production.

 “Some are still flocking to the banks and Saccos with intentions of borrowing thus frustrating the government’s effort to revive the ailing sub-sector,” the chairman added.

Gikanda produced 1.8 kilogrammes in 2019/2020 of cherry compared to 1.7 last season and despite a slight improvement, there was a need to boost production.

 “Production is still a big problem and continues to limit the advance uptake,” Ngure explained.

He said many farmers believe they can only borrow through co-operatives and not individually.  

“The Sh20 given based on the cherry or parchment delivered is very little to cater for school fees, inputs, among other needs. It should be increased to Sh50,” said the chairman.

Ngure said societies are still borrowing from banks and Saccos to meet operational costs at the factory level since CCARF does not cater for the same.

James Ngari, a farmer at Kagocho Factory under the Gikanda Society said the complexity and bulkiness process of filing the application forms is also discouraging many from accessing the loan.

The State, Ngari noted, should set up an easy and efficient system that will speed up the application process.

“New KPCU should consider digitising the system to enable farmers to receive the money directly and minimise the paperwork,” Ngari explained.

Mirugi said access to the advance was based on cherry or parchment delivered to the society to ensure farmers are able to pay back the loans and for the scheme to be a revolving fund.

“The only way to ensure farmers get access to more advance would be to boost production,” the MD explained.  

He said the disbursement of CCARF was governed by a regulatory framework that does not cater for anything else other than Cherry Advance to finance harvesting labour and input costs.

“The Fund framework does not cater for societies’ operational costs so they still have to borrow elsewhere,” he said.

Mirugi claims some co-operative officials are deliberately refusing to enlighten farmers on the need to borrow the money which has a low-interest rate of three per cent.

“There is a lot of resistance from some officials who at times refuse even do endorse the forms or forward to KPCU,” the MD stated.

He said KPCU was in the process of automating the whole process of accessing the fund to enable farmers to access the money on their phones.

“We already proposed some amendments to CCARF act to widen its component to address issues like providing picking an initial farm preparation advance,” Mirugi explained.

He revealed KPCU had also proposed for the amount to be loaned to farmers to be increased from Sh20 to Sh35. New KPCU, he observed had embarked on a sensitisation campaign and had increased the number of field officers to educate farmers on how to access the fund.

New KPCU Chairman Henry Kinyua said that farmers are reluctant to borrow the money due to a lack of sufficient sensitisation after public meetings were suspended due to the Covid-19 pandemic.

“Initial court cases, lack of cooperation by leaders of coffee cooperatives, misunderstanding that farmers must be milling under the New KPCU, and low production are also some of the challenges hampering the low uptake of the fund,” Kinyua said.