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Financing Smallholder Coffee Farmers In Kenya

COFFEE DEVELOPMENT FUND. Financing Smallholder Coffee Farmers In Kenya. Presented by Mr. Patrick Nyaga, Managing Trustee, CoDF during the International Forum on the Social and Solidarity Economy (FIESS), Montreal, Canada, October 17 - 20, 2011.

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Financing Smallholder Coffee Farmers In Kenya

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  1. COFFEE DEVELOPMENT FUND Financing Smallholder Coffee Farmers In Kenya Presented by Mr. Patrick Nyaga, Managing Trustee, CoDF during the International Forum on the Social and Solidarity Economy (FIESS), Montreal, Canada, October 17 - 20, 2011

  2. Kenya’s Coffee Sector Profile Coffee is one of the most important cash crops in Kenya generating annual revenues of up to $ USD 100 Million. It is estimated that 6 million Kenyans are employed directly or indirectly in the coffee industry. The total production potential is 130,000 MT per annum. This is in comparison to current production levels of 50,000 MT. Although Kenya coffee global market share is small; at 1%, the quality of coffee is highly rated in the world market thus highly demanded by Roasters who mainly use it for blending other coffee varieties.

  3. The total area under coffee is estimated at 160,000 hectares. Two thirds of all cultivation (113,333 hectares) is handled by low yield, resource poor smallholder farmers with an average yield rate ranging from 0.2 – 0.7 tons/ha.

  4. BACKGROUND • Coffee Development Fund is a state corporation under the Ministry of Agriculture in Kenya. • The Fund was officially established by the Government in May 2006 as a financing vehicle for revitalizing the coffee sub-sector after years of low production trends.

  5. CoDF’s mandate is to provide sustainable, affordable credit and advances to coffee farmers for farm inputs, farming operations and income stabilisation. • Bulk of farmers receiving loans are smallholders organized in cooperatives

  6. BUSINESS FINANCING COFFEE FARMERS COFFEE DEVELOPMENT FUND-FACT SHEET SMALL HOLDER FARMERS/ESTATE FARMERS/COOPERATIVE SOCIETIES CLIENTS SERVICES/MANDATE PROVIDING ACCESSIBLE, AFFORDABLE CREDIT AND FINANCIAL SOLUTIONS TO THE COFFEE SECTOR FUND SIZE $USD 13 MILLION IMPACT 61,245 COFFEE FARMERS ELIGIBILITY COFFEE FARMERS WITH A PRODUCTION RANGE BETWEEN 0.5 - 3 KG OF CHERRY/TREE

  7. CURRENT FUNDING STATUS Public 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’ Only one commercial bank provides targeted financing to coffee farmers. The sub-sector is need of approximately US $ 125 Million to meet its credit demand.

  8. FINANCING APPROACH Value chain Financing approach

  9. VALUE CHAIN FINANCING IN COFFEE • Different value chain segments require different types of financing. • Smallholders populate the lower end of the value chain segment (Production). in Kenya. • The production segment attracts the greatest credit need. Currently the Coffee Development Fund directs most of its credit towards this segment.

  10. FINANCING CHALLENGES & INTERVENTIONS

  11. FINANCING CHALLENGES & INTERVENTIONS

  12. FUTURE OUTLOOK • Increased demand for coffee in the global market presents an opportunity for smallholder coffee farmers to intensify efforts in production.

  13. Increased consumer awareness on environmental issues is likely to generate demand for financing into sustainability Programmes such as Fair-trade and Rainforest Alliance. Farmers are diversifying into speciality coffees given the growing demand in the market THANK YOU

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