AFC on the spot for issuing Sh45m loans on fake titles

The Agricultural Finance Corporation (AFC) is on the spot for issuing loans against fake title deeds to a company and 13 customers, risking losing over Sh45 million.

AFC, a State-owned Development Financial Institution (DFI) mandated to assist in the development of agriculture and related industries loaning farmers and entities in the sector, is accused of failing to apply due diligence in the disbursement of funds, in what has put its internal controls and lending framework into question.

The Auditor-General’s report on the corporation for the year to June 2021 observes that some Sh22.66 million AFC lent out to some 13 farmers in Kapsabet may not be recovered, since they used fraudulent title deeds as security and disappeared after getting the money.

Recovering money

“Information available indicates that the corporation advanced the amount against various collaterals in form of title deeds, which appeared fraudulent. The corporation filed seven cases in court against the fraudsters and judgment was entered in favour of the corporation. However, the corporation had not executed the warrants issued as of June 30, 2021,” the Auditor-General states.

It adds that internal correspondences at AFC as late as January 20 this year had reviewed the loan amounts advanced to the farmers down to Sh11.18 million.

“The circumstances under which the previously reported balance had been reduced from Sh22.66 million by Sh11.4785 million were unclear and no explanation was provided for audit review.”

And while the report notes that the Ethics and Anti-Corruption Commission took over the matter for investigations, AFC has already indicated giving up recovering the money.

“The corporation asserts that it employed its internal machinery through the regional and the branch offices to carry out an investigation on the traceability of the fraudsters.

Presently, the execution of the said warrants is not possible due to their expiry. The corporation finds itself in a difficult position of applying for fresh warrants as it cannot trace the persons against whom they are supposed to be executed,” AFC stated, adding that it has provided for the cases as bad and doubtful debts in its accounts.

Sh20 million loan

The Auditor-General also accuses the corporation of disbursing a Sh20 million loan to a company that used a fake title, whose real owner is the Kenya Agricultural and Livestock Research Organisation.

“The Corporation approved and disbursed a loan amounting to Sh20 million on August 21, 2018, to a company for the establishment of 380 acres of sugarcane whose security was a parcel of land in Naivasha.

 The outstanding balance as of June 30, 2020, stood at Sh22.99 million with total arrears of Sh2,992,080,” the Auditor-General states.

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