East Africa Community (EAC) Coffee Business Forum in Mombasa, Kenya
by Gathuo Ngoroje
Relationship Management and Origination - Kenya
Working Capital Associates
During the recent East Africa Community (EAC) Coffee Business Forum in Mombasa, Kenya, featring East Africa's best and leading coffee producers, input providers, farmers, tasters and buyers - it emerged that East Africa's coffee is superior, but faces major stumbling blocks.
The good news is that the coffee sector in general is growing and benefits are cascading down to the grower level. For example, a recent trend for specialty-coffee has allowed smaller players to directly sell to buyers in what are called 'Micro-Lots'. The demand allows for smaller exporters to enjoy greater price margin (premium) by making sales directly while buyers are able to track and trace their coffee to the farm level attracting premium margins for themselves in foreign specialty coffee markets.
Data from research conducted by the International Trade Centre, showed that over 70% of coffee growers/sellers in East Africa require funding and greater regulatory support in order to navigate and compete in world coffee markets bearing in mind uncharted market conditions.
Andrew Darling- Head of Structuring and Operations at Working Capital Associates, speaking in plenary at the Forum, described how innovative trade financing solutions can inject much needed liquidity into the coffee supply chains. "A majority of the banking players in the region rely on collateralised financing, only accessible by large players, locking out all SME exporters from the region from much needed capital to scale up operations. It is important to match supply chain events to financing, allowing SME exporters in the region to access capital for operations without any fixed collateral pledged".
While over 50% of GDP in East Africa is generated from Agriculture, only 3% or less of banking assets are pegged to the agriculture sector creating a structural funding gap.
Innovative and sustainable (private sector led) financing solutions are the key to setting the industry up for success.