Greater autonomy in store for Kenya's farmers: new initiatives that give farmers access to warehouse facilities are rebalancing negotiating power back in their favour.

Author:Kamadi, Geoffrey

Catherine Maina is a typical small-scale farmer in Kenya in many ways. A mother of two, Maina cultivates maize on her two-acre plot of land. Some of her produce is consumed domestically while the rest is sold in the nearby village of Wamuini, in Trans Nzoia County, around 400km northwest of Nairobi.

The margins are low, though Maina gets by. But until recently, one shortcoming that cut even further into her modest profits came down to the simple problem of storage. Like many other small-scale farmers, Maina's lack of facilities to store her produce meant that she was often forced to sell her maize at throwaway prices or risk losing it completely.

However, Maina is now part of a growing band of smallholder farmers using a new grain trading system that allows them access to storage facilities. This way, they do not have to sell immediately after harvest, which means that they can potentially hold out for better prices.

"I now harvest nearly twice what I used to get from my two-acre plot," says Maina, who now makes a profit of around 50,000 shillings ($500) each season. Previously around 900kg of her harvest would go to waste but now that figure is at just 45kg.

How it works

The so-called Warehouse Receipt System (WRS) that Maina uses relies on the cooperation between warehouse operators, a financial institution and a regulator. In Maina's case, Chase Bank Kenya has partnered with the Eastern Africa Grain Council (EAGC), which regulates and promotes the system.

The initiative works by allowing farmers to store their goods but also get immediate access to money even as they await a buyer for the produce. The way it works is that farmers take their grain to a village aggregation centre, where it is tested for moisture content before grading and transportation to the warehouse. The farmer is issued with a receipt.

This document can then be used to access short-term credit from the bank, which can advance a loan of up to 65% of the prevailing market value of the stored grain to the farmer. Once a buyer for the stored produce is found, the purchase is made through the bank, which hands this payment on to the farmer, minus the loan, a 1% monthly interest on the loan and the warehouse operator's fees.

Chase Bank began financing farmers under this system in January 2014. And since then, the programme has grown rapidly, with the bank approving 140m shillings ($i.5m) of warehouse receipt loans from August to October 2014.

"This is almost twice what we...

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