The Nairobi Coffee Exchange

The Nairobi Coffee Exchange (NCE): The Price Discovery Hub
The NCE is a non-profit organization that serves as the sole central coffee auctioneer in Kenya, where between 85% and 95% of Kenyan coffee is traded.

1. Core Function: Transparent Price Discovery

• Weekly Auction: The NCE holds weekly auctions where clean, milled coffee (the green beans) is offered for sale.
• The Trading Floor: Licensed buyers (international roasters and exporters) physically or digitally bid on lots of coffee, which are identified by grade (e.g., AA, AB) and a description of their quality characteristics.
• Quality Assessment: Before the auction, samples of each coffee lot are made available in a dedicated sample room, allowing buyers to inspect and “cup” (taste) the coffee to establish its quality, which directly influences the price they are willing to pay.

1. The New Regulatory Framework: CMA Oversight
   
   Historically, the NCE was regulated by the Coffee Directorate. However, to enhance transparency and streamline operations, recent reforms have introduced a powerful new regulatory layer:
   Old Regulator New Regulator Key Legislation
   Coffee Directorate (under AFA) Capital Markets Authority (CMA) Capital Markets (Coffee Exchange) Regulations, 2020
   The Capital Markets Authority (CMA) is now charged with overseeing the NCE, a move that treats coffee as a tradable commodity on par with other financial instruments. This provides greater integrity and market confidence. Key Policy Reforms and Innovations (2020–Present)
   The coffee sector reforms have fundamentally changed the way business is conducted at the NCE, directly addressing historical issues of non-transparency and delayed payments:
   • <h4>✅ Direct Settlement System (DSS)</h4>The Game Changer: This is the most crucial financial reform. It ensures that proceeds from the auction sale bypass multiple intermediaries (such as banks or cooperative managers) and are deposited directly into the accounts of the marketing agent, miller, and, most importantly, the farmer through the cooperative.Goal: The DSS dramatically reduces payment delays and minimizes the risk of funds being misappropriated by players along the value chain.<h4>✅ New Broker Licensing</h4>The CMA now licenses coffee brokers (the entities that sell the coffee at the NCE). Only licensed brokers can trade coffee on behalf of farmers or cooperatives.Impact: This professionalization and regulation ensure that only financially sound and compliant firms handle the sale of the farmers’ product. The New KPCU (as discussed earlier) is one of these licensed brokers.<h4>✅ Online and Globalized Trading</h4>The NCE has transitioned to a modern, web-based trading platform. This allows international buyers to participate in the auction remotely, opening up the market to a wider pool of global demand.Impact: Increased competition among buyers is expected to drive up the final prices paid to farmers.
   The policy shift is clear: the government is utilizing capital market regulation to inject transparency and efficiency into the core of the Kenyan coffee trade, aiming to ensure the farmer receives the maximum benefit from the renowned quality of their produce.

By Kenya Coffee School and Barista Mtaani