Tea farmers borrowing increase by 35 percent on lower interest rates

A farmer plucking tea

A farmer plucking tea. Kenya Tea Development Agency's total payment to farmers was Sh62.89 billion compared to Sh44.15 billion realized last year which is a 42 per cent increase.

Photo credit: File | Nation Media Group

Tea farmers affiliated to the Kenya Tea Development Agency (KTDA) borrowed Sh6.8bn up from Sh5.1bn at the backdrop of tea reforms, registering a 35 per cent growth for the period between June and December last year.

The loans from Greenland Fedha, a subsidiary of the tea agency, attributed this growth to the reforms that saw the interest rate to loans reduced from 21 percent to eight percent in a move aimed to ensure that small scale tea farmers and others who join the microfinance institution have access to affordable credit in order to boost their farming and ease existing debt pressures.

"The reforms have greatly contributed to this as well as good and affordable credit offered to the tea farmers of CBR plus one for six months period unlike the previous year where it was only for two months November and December 2021," said Greenland Fedha director Dickson Waitueka.

During the period, payment of loans improved by 1.26 percent from 5.46 percent in June to 4.2 percent on performing loans ratio.

"We have employed a strategy to bring this down by ensuring applying strong business rules where customers borrow on their payment capability guided by their productivity," said Mr Waitueka, noting that the growth of the loan book has contributed to the drop in this ratio.

Greenland Fedha uses farmers' green leaf as collateral to issues loans. Previously, the fund was inaccessible to a majority of farmers distributed across the 57 tea factories affiliated to KTDA due to high interest rate.

It collects repayment to the loan facilities through check-off system while payments who have taken loans when paying bonuses leading to zero cases of defaulters.

According to Mr Waitueka, a total of 264, 173 borrowed monies from the microfinance noting that they project the numbers to double by the end of this financial year.