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
Government of Kenya in May 2006.
 CoDF’s
by
the
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 2008-2012;
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
2005/2006
2006/2007
2007/2008
2008/2009
-
US$
73,530
1,470,588
7,352,941
11,029,411 (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$ 5,882,353.00 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 cooperatives;

Legacy issues
schemes;

Uncoordinated multiple sources of finance;

Indebtedness of the coffee institutions and the
coffee growers;
on
previous
coffee
Theme: Innovations in Addressing Rural Finance Challenges in Africa
credit
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
Theme: Innovations in Addressing Rural Finance Challenges in Africa