Theme: Innovations in Addressing Rural Finance Challenges in Africa INSTITUTIONAL INTRODUCTION COFFEE DEVELOPMENT FUND BY GEORGE O. OOKO MANAGING TRUSTEE KENYA AT THE afraca EAST AFRICA SUB-REGIONAL WORKSHOP

Theme: Innovations in Addressing Rural Finance Challenges in Africa LEGAL STATUS AND MANDATE Coffee Development Fund (CoDF) is a state corporation under the Ministry of Agriculture. The Fund was officially launched by the Government of Kenya in May CoDF’s mandate is to provide sustainable, affordable credit and advances to coffee farmers for farm inputs, farming operations and price stabilization.

Theme: Innovations in Addressing Rural Finance Challenges in Africa VISION A vibrant, sustainable and profitable coffee industry

Theme: Innovations in Addressing Rural Finance Challenges in Africa MISSION To accelerate production of high quality coffee and improved farmer earnings, by providing accessible affordable credit and financial solutions to the coffee sector

Theme: Innovations in Addressing Rural Finance Challenges in Africa MANagement of the fund  Ten-member of Board of Trustees comprising:  Six independent members with expertise in coffee and finance matters. These are appointed by the Minister for Agriculture;  Three people representing the permanent secretaries from the ministries of Finance, Agriculture and Co-operative Development and Marketing;  Managing Trustee (CEO), as Secretary to the Board.

Theme: Innovations in Addressing Rural Finance Challenges in Africa MANagement of the fund The Fund is headed by a Managing Trustee assisted by the following:  Credit and Commercial Department  Credit and Commercial Manager  Three Credit Officers  Finance and Administration  Finance and Administration Manager  ICT Officer  Accountant and Accounts Assistant  Internal Audit  Internal Auditor  Public Relations  Public Relations Officer

Theme: Innovations in Addressing Rural Finance Challenges in Africa MANagement of the fund The staff of Coffee Development Fund have been newly recruited, a majority of whom have come from the private sector. Included in the staff are members recruited from the co-operatives and agricultural sectors. The Fund has a total work force of 18 highly qualified staff members.

Theme: Innovations in Addressing Rural Finance Challenges in Africa CODF OBJECTIVES The Fund will implement the following strategic objectives to realize its mandate: Secure adequate financial resources to support the coffee industry by growing the loan portfolio to Kshs.5B from ; Use a portfolio approach to harness and expertly manage public resources and development partner funds; Model credit and financial solutions along the coffee value chain; Strive towards obtaining operational self-sufficiency by improving its financial stability and sustainability, so that there are enough funds generated to meet the operational costs.

Theme: Innovations in Addressing Rural Finance Challenges in Africa CODF OBJECTIVES Cont’: Develop appropriate information and communications technology (ICT) and financial management systems to support business processes and operations; Build and operate a business model which supports individual and institutional growth, protects core values and delivers benefits to the customers; Communicate and promote its vision, mission and mandate to all stakeholders.

Theme: Innovations in Addressing Rural Finance Challenges in Africa CoDF products The Fund currently has two loan products: Advances Coffee Rehabilitation Loan We started by focussing on coffee farmers already in production with an aim of tackling low productivity so as to provide small scale farmers with an avenue to increase their yield per tree. We are in the process of developing products that will cater for all categories of coffee farmers.

Theme: Innovations in Addressing Rural Finance Challenges in Africa Codf products Advances: Advances are short term loans granted to coffee farmers by the Fund either for farm inputs or farming operations and are repayable within the coffee crop season. Interest Rate: 10% per annum calculated on a declining balance basis. Activities Funded:1. Farm Inputs 2. Labour

Theme: Innovations in Addressing Rural Finance Challenges in Africa Codf products Coffee Rehabilitation Loan: The purpose of this loan is to rehabilitate the coffee trees whose production has 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. 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. Interest Rate: 10% per annum calculated on a declining balance. Activities Funded: 1.Coffee Pruning: light and heavy pruning, including change of cycle 2.Coffee Farm Rehabilitation: application of fertilizers, pest control 3.Cherry Picking

Theme: Innovations in Addressing Rural Finance Challenges in Africa SOURCES OF FUNDS Comprises monies provided by:  Government;  Development Partners;  Interests on Loans and Advances;

Theme: Innovations in Addressing Rural Finance Challenges in Africa ACHIEVEMENTS Lobbying for financial allocation by Government of Kenya (GoK) for disbursement to coffee farmers as follows: Financial Year US$ 2005/ , / ,470, / ,352, / ,029,411 (Budget) Development of Coffee Development Fund organizational structure and staff recruitment; Development and rolling out of two credit packages namely: Advances or Crop Advance Coffee Rehabilitation Loan Disbursement of US$ 5,882, to 40,000 coffee farmers as loan.

Theme: Innovations in Addressing Rural Finance Challenges in Africa CHALLENGES High demand for credit facilities; Governance and capacity issues in coffee co- operatives; Legacy issues on previous coffee credit schemes; Uncoordinated multiple sources of finance; Indebtedness of the coffee institutions and the coffee growers;

Theme: Innovations in Addressing Rural Finance Challenges in Africa CHALLENGES Non-performing loans with the coffee farmers, coffee co-operative societies and other coffee institutions; Low coffee production and productivity per tree; High cost of production due to high cost of inputs and inappropriate procurement system; Delay in milling, marketing and payment of sales proceeds.

Theme: Innovations in Addressing Rural Finance Challenges in Africa AREAS OF INNOVATION IN ADDRESSING RURAL FINANCE CHALLENGES We have innovatively used the following in our operations: The Fund has adopted the intermediary approach meaning our farmers are served right where they are by our intermediaries, mainly rural-based SACCOs, reducing our need to have branches county-wide; The Fund uses group lending as a form of social collateral. Groups of 5-10 farmers guarantee one another, supervise and advice each other on good agricultural practices.

Theme: Innovations in Addressing Rural Finance Challenges in Africa END