Coffee millers and marketing agents will be barred from lending directly to charge farmers interest if MPs approve changes to a Bill.
The National Assembly’s Agriculture Committee has proposed changes to the Coffee Bill, 2020 that originated from the Senate to make it an offence for a miller or agent to lend to farmers on interest.
Those who contravene the ban will have their licences revoked or suspended.
“A coffee miller or marketing agent shall not lend to farmers on interest. Any miller or marketing agent convicted of an offence under…shall have his or her licence revoked or suspended for such duration as the Cabinet Secretary may, by regulations, determine,” Silas Tiren, who chairs the committee said in proposed amendments to the Coffee Bill, 2020.
The committee has further proposed that the interest rate on borrowing by factory management against growers’ assets held in trust by the factories and co-operative societies be capped at five percent per annum.
“A factory or society shall not contract any loans or advances…except with the support of a resolution in an Annual General Meeting passed by a majority of the growers to that effect,” the committee said.
The Bill stipulates that any factory or society that contravenes the law commits an offence and any loans so borrowed shall be statutorily converted into personal loans of the officials of the offending factory or society.
“Nothing in this section shall be interpreted as prohibiting coffee farmers from directly borrowing money from banks or any government established funds against their deliveries of cherry, parchment and clean coffee,” an addition to the Bill states.
The weekly coffee prices at the auction have been oscillating helped by an increase in the value of Kenya’s top-grade produce.
Nairobi Coffee Exchange in February said the price increased to Sh35,700 from Sh34,917 in the previous sale for a 50 kilogramme bag, marking the first time that the value of the commodity has rebounded in the last two months.
The rally in value was boosted by an increase in quality beans in the latest auction and a stable international price in the global market.
The auction had been receiving high-quality coffee, boosting prices.