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Value chain financing
WPS mission is to empower people by mobilizing financial resources and increase access to financial services for improvement and strengthening of the economic and social well-being of stakeholders. This being the case, WPS has committed itself to providing products and services that cater to the needs of the people within its areas of operation.
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Coffee Rehabilitation Loan
WPS in partnership with the government brings to its members, through the Coffee Development fund, The Coffee Rehabilitation Loan
This is a medium term credit facility provided by the Coffee Development Fund (Codf) to the coffee growers through Intermediaries or directly for the purpose of rehabilitating coffee trees. The facility is aimed at the trees with productivity of at least 1.0 Kg of cherry per annum; where improved production requires relatively more effort in terms of crop husbandry.
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Coffee Rehabilitation Loan
WPS in partnership with the government brings to its members, through the Coffee Development fund, The Coffee Rehabilitation Loan
This is a medium term credit facility provided by the Coffee Development Fund (CoDF) to the coffee growers through Intermediaries or directly for the purpose of rehabilitating coffee trees. The facility is aimed at the trees with productivity of at least 1.0 Kg of cherry per annum; where improved production requires relatively more effort in terms of crop husbandry. The loan will be available for 3 crop cycles (approximately 36 months). Coffee Rehabilitation Loan is the 2nd product that CoDF is rolling out after the Advances product which targeted the coffee tree with productivity of at least 2 Kg of cherry per annum. The Advances product covered one crop cycle.
Terms of the Coffee Rehabilitation Loan
Purpose
The purpose of this loan is to rehabilitate the coffee trees whose production has since declined mainly due to failure to observe good agricultural practices (GAP) through a 3 years sustained support in the provision of farm inputs and financing of the requisite farming operations.
Activities Funded
The coffee rehabilitation loan facility will be used for the following activities:-
- Coffee Pruning: Light and heavy pruning including change of cycle;
- Coffee Farm Rehabilitation: Weed control, application of fertilizers, pests and diseases control; and
- Cherry picking.
Duration
Credit will be available over a period of 3 crop cycles or approximately 36 months with 12 months grace period before commencement of repayment.
Amounts
Credit available per coffee tree will be Kes.50, Kes.60 and Kes.70 for the 1st, 2nd and 3rd year respectively.
Rate of Interest
The rate of interest chargeable will be 10 per cent per annum charged on a declining balance.
Eligibility for the Coffee Rehabilitation Loan
- Coffee Growers Under Co-operative Societies: The target will be the small holder coffee farmers with a minimum of 100 coffee trees.
- Estate Coffee Growers: The focus will be on the small to medium coffee estate growers. Large scale growers may be treated on a case by case basis directly by the Fund.
- Compliance with CoDF’s Credit Policy: To simplify access to credit by coffee farmers, CoDF has formulated relatively simple guidelines (lending instruments) to be followed by the Intermediaries when processing loan requests. This is explained further below.
Modalities of Disbursement
- Through Intermediaries or Direct Disbursement: The Fund will disburse the proceeds of the coffee rehabilitation loans to the coffee growers through the appointed Intermediaries. On exceptional cases the Fund may opt to disburse directly to the beneficiary.
- Structured Supervised Credit (SSC)
Under structured supervised credit arrangement, funds are disbursed on request as per the prevailing requirement by the farmer in line with the coffee calendar of activities. In addition, the coffee farmers undertake to adopt:
- Group guarantees as security as has been the case under the Advances product, strict adherence to CoDF’s credit administration policy and regulations as formulated from time to time including accurate execution of the lending instruments. The groups will constitute between five (5) and ten (10) with respect to Coffee Co-operative Societies and at least five (5) as regards estate farmers.
- Centralized procurement of farm inputs through the primary coffee cooperative society or estate. Application of inputs as per recommendations of Coffee Research Foundation after sample soils analysis.
- Good agricultural practices (GAP) including joint spraying and application of fertilizers.
Security
The group lending methodology that has been adopted by CoDF has been successful and sustainable in many parts of the developing world by microfinance institutions in an effort to improve credit outreach. The success of such credit methodologies rely on peer pressure that provides some form of social collateral. Where such arrangement is not workable, for purposes of credit administration by the CoDF, tangible collateral need to be legally executed. Security for the loans may in such cases include: crop hypothecation, charge over property, guarantees from reputable parties but at the discretion of CoDF or other arrangement acceptable to CoDF. Under these circumstances the borrower will bear the cost of security documentation.