Sh6.8bn Coffee waiver to be paid directly to farmers

The government, in a surprising move, announced that the Sh6.8 billion debt waiver for coffee farmers will be paid directly into their bank accounts, leaving lenders in battle to recover their money.

Public Service, Performance, and Delivery Management Cabinet Secretary Moses Kuria made the announcement on Saturday, stating that it is now up to the lenders to find ways to collect the outstanding debts from farmers.

"Good news for coffee farmers. The Sh6.8 billion debt waiver approved by Cabinet last week will be paid directly to farmers' accounts. It is up to the lenders to subsequently look for the farmers to pay up through a Paybill or whatever means," Kuria said.

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He emphasized, "The government is not a debt collector. Going forward, farmers will only receive loans from the Cherry Advance Fund."

Previously, the Cabinet had instructed coffee cooperatives, SACCOs, and other creditors to submit a list of indebted farmers and the corresponding documentation for verification to facilitate payment.

This directive was issued following the Cabinet meeting on June 11, chaired by President William Ruto at State House, where the Sh6.8 billion debt waiver was approved to alleviate the historical debt burdens of coffee farmers.

"The meeting sanctioned the write-off of historical debts amounting to Sh6.8 billion owed by coffee farmers nationwide," stated a dispatch from State House. Creditors were given seven days to submit their lists and supporting documents to the Ministry for Cooperatives for verification and processing.

However, Kuria's new directive has thrown coffee cooperatives, SACCOs, and other lenders into disarray. These entities now face the challenge of collecting debts directly from farmers, who will continue to receive future loans only from the Coffee Cherry Advance Revolving Fund (CCARF).

The CCARF, established to provide affordable and sustainable advances to smallholder coffee farmers, is designed to benefit those with up to 20 acres of coffee land. National Treasury CS Njuguna Ndung'u, unveiling the 2024-25 Budget estimates, proposed an additional Sh2 billion allocation to the CCARF, adding to the Sh4 billion already allocated in the current fiscal year ending June 30.

Farmers accessing the CCARF can receive advance payments capped at 40 percent of prevailing average sales at the Coffee Exchange or 40 percent of the payment rate by their cooperative society.

Additionally, they are eligible for payments of Sh40 per kg of P1 cherry, Sh20 per kg of P2 cherry, and Sh10 per kg of P3 cherry from the previous year's crop. Importantly, the CCARF funds do not accrue interest, with farmers only incurring a one-off 3 percent administrative fee.

The New Kenya Planters Cooperative Union (KPCU) has been tasked with managing and administering the fund as per the Public Finance Management Act (Coffee Cherry Advance Revolving Fund) Regulations 2020.

As lenders grapple with the new directive, the government's decision has sparked a debate on the best approach to support farmers while ensuring financial institutions can recover their loans. Stakeholders in the agricultural and financial sectors will closely watch the outcome of this policy shift.