Kenya’s coffee exports are booming again, but margins aren’t. Across Nairobi, Thika, and Nyeri, exporters are reporting the same frustrating patterns: they sell at a profit, yet settle at a loss. The core of the problem lies in the disconnect between the secured sale price and the final financial settlement between KES and USD. By the time the transaction moves through the complex chain of logistics, currency conversion, and final settlement, they ultimately incur an unexpected and often significant loss.
Why do traditional settlement processes not work anymore?
The traditional process of settling payments is a long route rooted in compliance and leads to a "profit-to-loss paradox" driven by several interconnected factors like:
Unforeseen operational costs
The cost of transport, warehousing, port handling fees, and export levies often escalate between the point of sale and shipment, costs that are frequently passed on to the exporter or deducted from the gross sale amount.
Credit and payment delays
Delayed payments from international buyers, combined with local financing costs and interest on working capital, further strain the exporter's liquidity, turning a theoretically profitable sale into a cash-flow drain.
Inefficiencies in the auction system
While the Nairobi Coffee Exchange (NCE) aims to provide transparency, the structure and fees associated with the auction process can reduce the net return to the exporter before the beans even leave the country.
Volatile FX rates
Kenyan shilling (KES) has been stable for 12+ months now, yet the instability against major trading currencies like the US dollar (USD) or the Euro (EUR) is a long standing concern. Coffee exporters dealing with USD-denominated prices and receiving the converted KES payment are often exposed to adverse currency movements that wipe out the anticipated profit.
Today, most Kenyan exporters are still settling payments where it goes through 4+ layers of transactions. If you are exporting to Europe, US, or the middle east, your settlement probably looks like this:
Conversion at each step adds to the cost and the delay in this long chain leads to exposure to malicious actors and risk along with 2-6% loss before the money even hits your account. This chain is not designed for an African exporter, but for the banks. Every break in the chain drains value, and by the time the funds reach you, your projected profit doesn’t match your final settlement.
The power of single-currency settlement
In a single-currency settlement you settle your entire trade lifecycle from invoice to farmer payout in one currency, avoiding long conversion chains. You partner with a platform that can minimise the spoilage and maximise profit.
This shift simplifies complex financial operations, enhances transparency, and significantly reduces costs associated with multi-currency conversions and foreign exchange risk.
The core principle is elegantly simple: all monetary transactions, from the initial sales invoice to the final payout to the farmer or local supplier, are executed within a single account. This eliminates the need for multiple, sequential currency conversions across the trade cycle, which traditionally introduces complexity, delay, and fees at every step.
Benefits of the single-currency framework
Avoidance of long conversion chains
The most significant benefit is reducing the costly process of converting funds multiple times. A platform with multi-currency wallets (NGN, KES, ZAR, etc.) can allow exporters to bill and get paid in local currencies, avoiding costly double conversions.
Reduced FX risk exposure
By settling the entire cycle in one currency, the exporter’s exposure to adverse foreign exchange fluctuations is consolidated and minimized. This makes hedging strategies simpler, more effective, and cheaper to execute.
Increased transparency and faster settlements
Having a single currency anchor point makes all financial flows easier to track, reconcile, and audit. The faster settlement and lower fees also mean more money stays in the community, funding the sustainable practices in the coffee industry.
Lower transaction costs
Eliminating intermediary bank fees and conversion spreads on multiple legs of the transaction directly translates into higher profit margins for the exporter and potentially better prices for the producers.
How it works
The biggest risk for exporters is the change in the KES/USD rate that wipes out an entire season's profit margin. Verto understands this critical challenge and provides a comprehensive suite of financial tools specifically designed to empower coffee exporters to manage and mitigate foreign exchange (FX) risk effectively. Verto offers an all-in-one account that simplifies and secures your international trade finances, integrating essential tools into a seamless platform and can connect with 37.9 million one-month active M-Pesa users.
Consolidate your international payments and FX management with Verto, save 1.5-2.6% per shipment and hold different currencies in one account in a click. Learn more and sign up today!
Share this article
