By Gerald Andae
In Summary
When the VAT Act came into effect last year,
Jonathan Biwott was a worried man as he had been caught unawares by the
sudden increase in cost of animal feeds. Mr Biwott, a dairy farmer in
Uasin Gishu County, found it difficult to acquire feeds for his animals
in the middle of the month, a move that affected his production.
The high cost was also coupled with the delayed
payment of farmers’ dues by milk processors, currently resulting from
huge stocks of unsold long life products.
It was thus with relief that Mr Biwott welcomed
the launch of Kilimo Advance, a financial service that enables farmers
to access advance payment instead of waiting for their dues at the end
of the month. Mr Biwott’s hopes in the business were rekindled as he
could access the mid-month payment to acquire inputs.
Rafiki Microfinance partnered with New KCC and
Mobipay, a local technology company, to provide the advance payments to
milk suppliers.
“This is a short term credit facility advanced
over a 60-day period to a milk supplier, either an individual or a
group, against confirmed quantities of milk delivered and accepted at
the New KCC,” says Daniel Mavindu, CEO, Rafiki Microfinance Bank
Limited.
The service, Mr Mavindu says, has accommodated the
specific needs of the milk suppliers who wanted to access their
payments faster than the milk processors were able to pay. Farmers are
able to access quick cash, which they use in acquiring farm inputs to
improve their yields.
“I am now in position to buy feeds in the middle
of the month, a move that has seen me maintain high production of milk,”
says Mr Biwott.
Boosting production
“This innovative idea has seen farmers maintain
high yields through proper feeding of their animals as they access cash
mid-month to purchase the input such as feeds to boost their
production,” says Mr Biwott.
Kilimo Advance has also helped in curbing milk
hawking, which has seen the processors lose out a significant share of
the milk delivered as farmers sought quick cash.
The Kenya Dairy Board, the sector regulator, has
been against milk hawking noting that the commodity sold by vendors does
not meet the required standards of hygiene as a result of poor
handling.
Rafiki Microfinance has to date advanced more than Sh1 billion to the farmers who supply milk to New KCC.
To lock in supply, processors have been forced to
create incentives for their raw milk suppliers, such as providing input
on credit or through partnerships with suppliers, providing advance
payment schemes through partner financial institutions among other value
added services that help create loyalty.
Among the constraints hindering development of the
otherwise high potential sector that contributes three to four per cent
of the country’s GDP is lack of access to financial solutions that are
tailor-made to the needs of the dairy industry.
Most banks do not have appropriate products and
services for the dairy industry whereas on the demand side, the
borrowing capacity of farmers and businesses is low due to the focus by
banks on collateral rather than on cash flow-based lending
No comments:
Post a Comment