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Dairy value chain/Kenya - Farmers contracted by Brookside set to benefit from loans deal

30 August 2015

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. Banks are now competing in developing products targeting raw milk suppliers contracted to large-scale processors. According to Brookside's director of milk procurement, credit agreement had resulted in more farmers signing a contract with the firm and has become a popular empowerment tool for farmers to access loans to develop their herds. 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. Milk supply statements which are issued to farmers every month, act in the same way as pay slips do for salaried workers during negotiations 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. 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.


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