Co-op Bank given nod to continue paying coffee farmers through DSS
Nairobi Coffee Exchange has put on hold plans to introduce its own direct payment models pending guidance from regulatory authorities
Coffee farmers will continue to be paid through the Direct Settlement System (DSS), a banking facility operated by Co-op Bank, which facilitates the clearing and settlement of payments directly between buyers and sellers, bypassing intermediaries.
This is after the Nairobi Coffee Exchange (NCE) put on hold plans to introduce its own direct payment models pending guidance from regulatory authorities.
In a letter to Co-op Bank Managing Director and CEO Dr Gideon Muriuki, NCE Acting CEO Symon Mburia said: “Please note that implementation of the directive to transition to direct farmer payment has been put on hold pending further guidance from the relevant regulatory authorities.”
The DSS, which has been in operation since August 2023, ensures that coffee farmers receive their payments directly and promptly after a sale without going through their cooperative societies.
However, 20 per cent of the payments are deducted and sent to cooperatives for management, while the remaining 80 per cent goes directly to farmers.
The award-winning facility has been acclaimed for revolutioning coffee settlement processes at the NCE, streamlining transactions and boosting transparency and thus market confidence.
It won Co-op Bank the banking sector gong at the 2024 CIO100 Awards for settling Sh30 billion in coffee sales at the time, defeating numerous competing projects submitted for the contest by banks across Africa.
In the same year, the DSS also saw the lender declared the winner of the IMPACT Awards’ ‘Innovation/invention of the year.’
The platform supports payouts in US dollars allowing farmers to maximise earnings. Its ability to deliver real-time data analytics also allows farmers and other key players within the value chain to make informed decisions, optimise production and enhance cashflow management.
According to Co-op Bank, the platform has helped to reduce payment turnaround for farmers from two months to five days, leading to improved financial stability for nearly a million farmers with judges saying it has the potential of being extended to other crops such as rice, cotton and potatoes.
However, some farmers have opposed the prompt payments while cooperatives, among others, fear losing money owed to them, including levies charged to growers, and have been seeking amendments.
But speaking in Tigania West recently, Cooperatives and MSMEs Development Cabinet Secretary Wycliffe Oparanya defended the platform, telling farmers and cooperatives opposed to it to take up the matter with their MPs.
