Ms Lucy Karuga used to face pressure from her milk suppliers who always demanded to be paid immediately they made deliveries to her dairy company. This is despite entering into an agreement with them that she would pay them a month or so after deliveries.

Ms Karuga who is the managing director of Eldoville Dairy, entered into a deal to pay her suppliers later after deliveries because she knows too well that cash flow can sometimes be a problem for a firm like hers. Besides, she has to wait herself for between one and three months to get paid by retail chains who sell her milk products.

Ms Karuga had to find a solution to this. And that is how Umati Capital came to her rescue.

DAILY SURVIVAL

“When you deal with smallholder farmers, you are actually dealing with people who belong to the bottom of the pyramid and availability of money almost in real-time is critical to their daily survival,” she said.

“What happened is that Umati met out farmers and explained how they were going to make their payments in a more convenient arrangement.”
Ms Karuga said the farmers accepted the proposal because it was an opportunity for them to convert their milk into money quickly.

The Nairobi-based Eldoville dairy started to organise the farmers based in Nyandarua in groups to enable Umati Capital to come on board.

Umati pays farmers who want cash instantly through M-Pesa immediately after delivering milk to Eldoville. Umati would then pursue Eldoville later for the payment made to the farmers.

Before the advent of this arrangement, some farmers would sell their milk to any willing buyer and payment could be delayed for as long as four months. In some instances, some farmers would not receive payment at all.

Such situations forced the farmers to turn to brokers who bought their milk at poor prices. The only advantage is that farmers got the meagre pay immediately.

Such an arrangement however, distorts the supply chain, with processors at times being left at the mercy of brokers.

With the coming in of Umati, farmers now get fair prices for their deliveries. They can decide to ask for payment immediately or wait for it to accumulate for sometime.

Ms Karuga said suppliers who want money quickly just call Umati Capital and after a proper identification they are paid. Eldoville provides Umati with supplier’s details such as the amount milk delivered.

“As processors, this gives us credibility with our suppliers as they are paid at their convenience,” Ms Karuga said.
Getting paid promptly also enables farmers to buy feeds and hence increase productivity.

 Launched in 2012, Umati Capital, a non-bank financial institution, has cut a niche by providing quick cash to suppliers. The firm focuses on agri-business supply chains, retail value chains and fast-moving consumer goods.

MINIMISE RISKS

It works with an insurer to minimise risks.

“Bridging the gap between money that is expected and the money paid out within 48 hours has created a win-win situation for the suppliers and their client. We take the risk on the receivable due by working with an insurer,” says Mr Ivan Mbowa, a director at Umati Capital.

 Sometimes disputes arise when the client fails to pay the credit provider as agreed. Mr Mbowa however says the firm resolves such disputes amicably.