Coffee unions now want the directive to have farmers payment directly credited into their bank accounts pushed to next year, to allow further consultations and streamlining of systems.
The entities through their umbrella body-National Coffee Cooperative Union (NACCU) have cited gaps which could expose both farmers and co-operatives to losses, if the new mode is rushed.
They said overall, they support the government initiated reforms in the coffee sector.
In a directive dated April 17, 2025 issued by the Co-operatives, Micro, Small and Medium Enterprises (MSME) Development Ministry, all coffee sales proceeds from the Nairobi Coffee Exchange are to be paid directly to farmers’ individual bank accounts, bypassing co-operative societies starting July this year.
NACCU has however pointed to existing coffee debts owned by farmers, coffee societies and unions saying they be major problem if the directive is implemented without proper structures in place.
Currently, farmers owe societies and SACCOs, while societies and Unions have debt obligations to SACCOs and other financial institutions.
“If the directive is effected in July 2025, the sector risks sitting on high non-performing debt unless the anticipated coffee debt write off is guaranteed and effected,” NACCU chairman Francis Ngone, said in a letter to Co-operatives CS Wycliffe Oparanya, seen by the Star.
The coffee unions’ umbrella body has also raised concerns over data incompleteness saying many cooperatives are yet to complete the process of cleaning and verifying farmer records such as bank details, ID numbers and contact information.
There is also low account ownership where a significant number of farmers, particularly in rural and marginalized areas, do not yet have bank or SACCO accounts.
“It is imperative that our small holders who have long been affiliated to the SACCOs, be encouraged to have their pay points at SACCOs of their choice, to ensure that we safeguard our co-operative ecosystem and strengthen this critical sector that you lead,” NACCU have told the CS.
Another concern is limited financial literacy among farmers with the national body saying the transition to direct payments requires that farmers be adequately trained in financial management, budgeting and digital banking areas, where there is currently a significant gap.
Lack of clarity on the frequency of farmer payments and US dollar to shilling conversion has also being cited as a challenge alongside the new distribution of coffee marketing levies.
Under the new plan, the government seeks to introduced new levies in the coffee trading chain which are one per cent chargeable by coffee brokers, Capital Markets Authority (0.2%), Nairobi Coffee Exchange (0.3%) and 0.3 per cent for the Direct Settlement System (DSS).
Previously, coffee brokers charged a flat fee of 1.8 per cent, which now appears to have been redistributed among multiple institutions.
“While we recognise the importance of regulatory and institutional support, we note that coffee unions now own brokerage companies and they will be impacted by a reduction of the 0.8 per cent. It is not clear how the brokers will be compensated for this loss,” Ngone said.
According to NACCU, the re-distribution model need to appreciate the role of each service provider and compensate them fairly, even as it notes that there been insufficient consultation and clarity on how the funds collected by these institutions directly benefit the farmer.
It has called for a “win-win situation” without minimising the role of each stakeholder.
“In light of the above, we respectfully request a one-year extension, up to June 2026, for the implementation of the directive requiring direct payments to farmers’ individual bank accounts. This extension will enable cooperatives to complete data cleanup, facilitate the opening of bank and SACCO accounts for all farmers, and enhance financial literacy,” said Ngone.
A review of the current levy structure, he said, will ensure that it does not erode farmer income and that proceeds are transparently managed to support farmer-facing services, with stakeholder engagement in the rollout of these reforms to ensure that cooperative societies, farmers, and all players are aligned for sustainable implementation.
“We must also safeguard the DSS platform to ensure that it is not politicised by vested interests and parties. We reiterate our full support for reforms that are inclusive, transparent, and farmer-centred and we remain committed to working collaboratively with the Ministry and all stakeholders to ensure the success of Kenya’s coffee subsector revival,” he said.
Over the past few years, the coffee sector has witnessed renewed energy, policy direction and institutional support that have positively impacted coffee farming and cooperative operations.
These include the Cherry Advance Revolving Fund which was advanced to Sh6.7 billion last year from Sh2.7 billion, enabling increased payment to farmers from Sh20 per kilo to Sh80 per kilo.
In August 2023, government also introduced the DSS System that is run through the Co-operative Bank which has since helped address delayed payments to farmers, according to the ministry.
