Co-operatives face new threats as banks target milk farmers

{mosimage}Banks and microfinance lenders jostling to loan money to milk farmers are threatening the traditional role of dairy cooperative societies.

As improved production and growing markets bolster the dairy industry, money lending institutions have been tailoring packages to lure farmers. Mr John Munga, the chairman of  Gaturi Kamacharia Dairy Farmers Society in Murang’a, one of the country’s large dairy societies, said that while the race for loans could greatly improve the dairy sector, farmers should be wary of over-borrowing.

“Such competition is almost killing other cash crops and farmers must borrow wisely,” Mr Munga said. “They should learn from what happened to tea farmers who are now enslaved by the finance institutions.” He warned that behind the attractive packages could be hidden charges. “We encourage banking institutions to support farmers to ensure that there are no hidden charges,” he added.

A variety of loans are now accessible to  individual farmers, as well as cooperative societies and their members, who deliver milk to recognised dealers.
Mr Munga said borrowers can be loaned an equivalent a week’s milk sales. As a result, more farmers have invested in dairy farming. In Murang’a district, where milk production has improved from less than 1,500 kilogrammes in January last year to 6,000 kilogrammes this year, farmers are advised to focus on raising the  quality of their milk.

“Farmers must embrace modern technology to improve on quality and quantity,” said district development officer S Humaiya. “This will guarantee them better returns.”

The financial institutions offer farmers as little as Sh1,000, based on their milk deliveries. Most only require a national identity card and proof of deliveries to a recognised agent, though some larger banks ask for proof that the society or farmer has had a bank account somewhere for at least six months. Mr Munga said many farmers were opting for bank loans.

Other farmers use the loans to buy farm inputs, machinery or to develop  their operations. But Mr Munga said the co-operative society was working on ways to compete with the banks. “It is a free market,” he said.

“We can’t allow any institution to exploit dairy farmers,” he said.