The Co-operative Bank has scored another first in Kenya’s banking sector after bagging the deal to handle payment of billions for the Nairobi Coffee Exchange (NEC).
In the new deal, Co-op Bank will offer the Direct Settlement System (DSS) technology. This technology facilitates payment of coffee growers’ proceeds as well as the recovery of other commitments the producer owes service providers.
“The Nairobi Coffee Exchange has appointed, and Capital Markets approved the Direct Settlement System which will lead to speedy and transparent clearing and settlement of the coffee sale proceeds to the coffee farmers,” Co-operatives Principal Secretary Patrick Kilemi said.
He pointed out that the new system will help improve the accountability and governance of our cooperative societies.
“Coop Bank systems were ready, beating the other banks in the first selection to offer the DSS services,” said Kilemi.
Co-op bank was selected as the DSS service provider following a competitive bidding process undertaken by NCE and approved by CMA that saw nine financial institutions submit their bids.
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“The entry of farmer-owned coffee brokerage companies on the NCE trading floor is one of the most significant milestones in the coffee reforms journey that the government is executing,” said the head of Agriculture Business at Co-operative Bank Esther Kairuki.
Currently, the coffee sector employs more than 700,000 farmers and another five million Kenyans.
However, the industry has been on a downward trend with complaints over low incomes due to a dysfunctional system that appears to be unfavourable to the farmers.
National Treasury gazetted the Capital Markets (Coffee Exchange), Regulations 2020, on April 3, 2020 which brought the NCE and its members under the regulatory oversight of CMA.
Under this arrangement, players offering coffee for sale at NCE will be brokers, and once dealers buy the commodity, they are supposed to deposit the proceeds into the DSS from where all players will be paid from the facility.
