The government has started the process of pumping Sh6.7 billion into the coffee farmers' bailout plan, amid a stern warning against sharing of false information and any misuse of the funds.
This comes after the Cooperatives and Micro, Small and Medium Enterprises Development Ministry’s Cabinet Memo was approved to support the farmers repay owed debts.
During sensitisation meetings on the Coffee Cherry Advance Revolving Fund meetings held last year, farmers requested Cabinet Secretary Simon Chelugui to find a way to waive debts that were burdening the cooperatives and farmers, to “a point of making coffee farming not worthwhile.”
The Cabinet Memo that has since been approved includes other support to coffee farmers like improvement of coffee seedlings and repayment of old Kenya Planters Cooperative Union (KPCU) debts.
Emerging coffee-growing areas will also get processing equipment to improve the quality of coffee marketed from those regions, with the current waiver being applicable across all the 33 coffee-growing regions.
CS Chelugui last week said the government will form a multi-agency validation team to analyse the submitted claims from cooperative societies and prepare a report to the National Treasury, for the release of funds.
“The objective of the debt waiver is to relieve coffee farmers’ burden on outstanding loans and advances given to coffee cooperative societies by financial institutions and other lenders,” he said.
The bailout comes with a stern warning against embezzlement of the funds, with Cabinet emphasising on prosecution of those found culpable of giving false information and misuse of the funds.
“The exercise calls for honesty and openness on the part of the cooperative leaders and their creditors while preparing the debts and avoiding exaggeration,” Chelugui said.
He spoke during a creditors sensitisation aimed at updating them on the progress of the bailout and execution plan.
Parameters to be followed by the validation team will ensure among others, that the loans in question were processed through cooperative societies and not individual walk-in members.
The loan must have been fixed and approved by members in a duly convened general meeting, and the Commissioner for Cooperative Development must have approved borrowing.
There must be a list of benefitting members in case of advances to members as loans or farm inputs or for cooperative society infrastructure or operating overheads.
For all loans given, there must be proof that the farmers’ coffee was given as collateral (coffee hypothecation) for recovery from sale proceeds.
Loans will also be considered outside the previous debt waiver, meaning those cooperatives that benefitted from the previous waiver, any debt incurred during that period will not be considered.
The watershed for considering loans will be September 30, 2023 hence any waiver claim after this debt must be submitted separately, with any dishonesty or attempted fraud leading to prosecution.
Meanwhile, the government continues to implement reforms in the sector, the CS said, guided by the Coffee Policy 2023, Coffee Bill 2023, and the Cooperatives Bill 2023.
Some of the successful reforms so far include the restructuring of the Nairobi Coffee Exchange which has enabled coffee cooperative unions to participate in the auction.
So far, 15 Cooperative unions have been licensed and participate on the weekly trading floor of the auction.
The Direct Settlement System (DSS) by the Co-operative Bank has helped address delayed payments to farmers, the CS said.
Coop Bank was picked as the DSS service provider following a competitive bidding process that had nine financial institutions submit their bids.
Coffee market users, which include brokers, traders, warehousemen, coffee farmers and other service providers, were trained on the workings of DSS.
There have also been reforms on the licensing regime with various regulators dealing with specific licenses, like AFA licensing coffee dealers, county governments licensing millers, while the Capital Markets Authority licenses marketers at the NCE.
The Cherry Advance Revolving Fund has also been advanced to the Sh6.7 billion, from Sh2.7 billion, to enable increased payment to farmers from Sh20 per kilo to Sh80 per kilo; and modernisation of New KPCU as a miller and marketer of last resort.
Dwindling coffee production, delayed payment to farmers, bureaucracy in accessing coffee funds, huge debts and cartels preying on farmers’ produce and proceeds, were some of the reasons for the government-led reforms being led by Deputy President Rigathi Gachagua.