A local milk processing firm has entered into partnership with financial institutions to give credit to dairy farmers.
Brookside Dairy has reached a deal with over 15 banks and co-operative societies.
In the agreement, farmers contracted by the processor will access loans using milk delivery statements as collateral.
The move comes amidst a renewed focus by commercial banks on the lucrative dairy industry in their bid to grow revenue.
Banks are now competing in developing products targeting raw milk suppliers contracted to large-scale processors.
Brookside’s director of milk procurement, Mr John Gethi said the credit agreement had resulted in more farmers signing a contract with the firm.
RECOVER LOANS
Under the deal, the financial institutions, which serve as pay points for Brookside’s contracted farmers, recover the loans from pay-outs made by the processor to the farmers.
“The credit arrangement has become a popular empowerment tool for our farmers. We came up with the facility to enable dairy farmers to access loans to develop their herds,” Mr Gethi said.
“Our milk supply statements, which are issued to farmers every month, act in the same way pay slips do for salaried workers during negotiation for personal loans. The banks use them to determine creditworthiness of individual farmers.”
Some of the financial institutions already involved in the deal are Commercial Bank of Africa, Equity Bank, Family Bank, Kenya Commercial Bank, K-Rep, Co-operative Bank and more than 10 co-operative societies.
The arrangement also seeks to deepen financial inclusion among dairy farmers who have largely been kept out of mainstream banking.
TRANSFORM DAIRY INDUSTRY
Brookside hopes to use the initiative to transform the dairy industry from largely a subsistence undertaking to a viable commercial enterprise.
“As part of reforms in the industry, Brookside will pioneer programmes that make dairy a reliable income earner for smallholder farmers, who form the bulk of raw milk suppliers in the country. Dairy is key in the economic transformation of rural households,” Mr Gethi said.
The Ruiru-based processor currently has 160,000 farmers supplying milk. The number rose after the firm made its latest acquisition, Buzeki Dairy, the makers of Molo Milk and Kilifi Gold.
The one Sh1.1 billion acquisition last year followed three others. These were Ilara in 2007, and Delamere and SpinKnit, the makers of Tuzo milk brand.