Tea farmers will start accessing cheap loans from a microfinance fully owned by the Kenya Tea Development Agency (KTDA) from December this year.
Agriculture Cabinet Secretary, Peter Munya, has said the KTDA subsidiary, Greenland Fedha Limited, will start offering small scale tea growers loans at 8 percent.
The new loan interest rate, he noted, will help farmers boost their production and ensure they have more returns from their cash crop. Greenland Fedha Limited has been giving loans to tea farmers at an interest rate of 21 percent.
The high interest rate is said to be one of factors which has caused small scale tea farmers to earn less returns as a big chunk of their earnings were consumed by their debts.
Big part of the bonus paid to tea farmers is said to be taken to recover accrued loans, with Munya saying the interest rates in future will be lowered to 5 percent.
“Farmers have been accruing debts and one of the reasons is the high interest rates. With the ongoing reforms in the tea sector, one is to lower interest rates,” he said.
Greenland Fedha Limited is owned by farmers, thus it should ensure farmers get cheap credit facilities, added the CS, when he met farmers at Githambo Tea Factory in Murang’a.
Munya’s sentiments were echoed by KTDA National Chairman, Mr. David Ichoho, who said the name of Greenland Fedha Limited is set to be changed to make farmers feel associated in the microfinance.
He said the low interest rates will affect tea growers against high interest rates charged by microfinance and other financial institutions.
“Farmers have been subjected to huge debts and by lowering the interest rates to the microfinance which is fully owned by KTDA, it will enable tea growers to source cheap loans from the financial institution,” said Ichoho who accompanied Munya to visit three tea factories in Murang’a County.
Meanwhile, the CS stated that the Kenya Tea Board is currently recruiting firms which will carry out forensic audits of KTDA holdings, its subsidiary companies and smallholder tea factories.
“To establish any malpractices like fraud or embezzlement of funds by previous KTDA boards, the newly elected boards will undertake forensic audits on financial and operational performance of KTDA holds and its subsidiary companies for the last 10 years,” said Munya, adding that several audit firms will be tasked to carry out the exercise so as to take a short period of time.
“The audit will assist in sealing operational loopholes contributing to wastage and inefficiencies, hence reducing operational costs and enhancing returns to the tea growers,” he further observed.
At the same time, Munya encouraged KTDA to diversify to orthodox teas whose returns are much higher than black tea.
“Towards this end, we have agreed KTDA will install 10 orthodox processing lines across 10 factories in tea growing regions. This is aimed at increasing farmers’ returns. Even the factories which process orthodox tea have earned more bonuses this year,” added the CS.
Speaking at the same function, the Chairman of Kenya tea sector lobby, Irungu Nyakera, lauded the reforms being implemented in the sector.
Nyakera observed that despite the minimal tea bonus being paid currently, from next year farmers will get a boom bonus after the reforms are fully implemented.
“Despite getting minimal tea bonus, farmers have also enjoyed increased tea prices and they have also received dividends twice this year. Next year we hope the bonus will be even higher than previous times,” he added.