The Nairobi Coffee Exchange (NCE) has tapped the Co-operative Bank of Kenya to provide a settlement platform on which trading will be conducted.
The lender will offer the Direct Settlement System (DSS) technology that facilitates payment of coffee growers’ proceeds as well as the recovery of other commitments the producer owes service providers.
At the beginning of April, NCE invited commercial banks to express interest in the payment system ahead of the April 30 deadline to implement the scheme aimed at compensation of farmers within two days.
“The Nairobi Coffee Exchange has appointed, and Capital Markets approved the Direct Settlement System which will lead to speedy and transparent clearing and settlement of the coffee sale proceeds to the coffee farmers. This will help improve the accountability and governance of our cooperative societies,” said Co-operatives Principal Secretary Patrick Kilemi in a speech on Wednesday.
He was speaking at a forum to train coffee brokers, traders, warehousemen, farmers and other service providers on the workings of DSS at Safari Park Hotel.
A "direct settlement system" is a receipts and disbursements facility provided by a commercial bank.
This is happening in preparation for the launch of coffee trading at NCE by the newly-licensed traders.
Co-op Bank, which is majority-owned by the cooperative societies, has strong ties to the agricultural sector.
“The entry of farmer-owned coffee brokerage companies on the NCE trading floor is one of the most significant milestones in the coffee reforms journey that the government is executing,” said the head of Agriculture Business at Co-operative Bank Esther Kairuki.
Eleven coffee co-operative unions have been licensed to sell coffee directly at the NCE and overseas in what is aimed at eliminating the need for middlemen.
Five other unions will be licensed before the end of August leading to a total of 16 representing coffee farmers across the growing zones.
The CMA has been entrenched as the Regulator of the Nairobi Coffee Exchange, with the expectation that they will oversee a transparent and efficient price discovery process.