KENYA – Greenland Fedha, a fully owned subsidiary of Kenya Tea Development Agency (KTDA), has announced that tea growers have received Sh7.5 billion (US$60m) in loans in six months after the microfinance cut its interest rate to eight percent in December 2021, saving farmers Sh500 million during the period.
Growers have been getting loans from microfinance at interest rates of up to 21 percent, which is higher than the 12 percent that commercial banks charge.
The high interests have seen farmers and the government raise concern, questioning how growers can be charged immoderate rates when borrowing money from their entity.
The move was a relief to more than 225,000 tea growers who borrow from the microfinance. Greenland Fedha uses farmers’ green leaves as collateral to issue loans.
“With such a relief to growers, we have increased the volume of lending and, in the process, saved for the farmer Sh500 million, which we would have collected as interest. The money is now being retained by the tea grower, and this is the right way of supporting them,” said Greenland Fedha chairman Chege Kirundi.
Mr. Kirundi added that the lender is digitally enabled, and growers apply, receive, and repay their loans through their mobile wallets. He noted that farmers have realized that the system is convenient and cheap.
Mr. Kirundi pointed out that out of 650,000 growers as its customers, not everyone has borrowed, and the lender is trying to enrich and extend its services to all of them. They are also encouraging farmers to venture into additional viable income-generating activities such as livestock, poultry, and avocado farming.
KTDA Board chairman David Ichoho said together with the KTDA Foundation, the agency rolled out a comprehensive financial literacy program to empower farmers on how to manage and grow their income, not just from tea, but from other ventures.
Recently, the agency, which is owned by more than 600,000 small-holder tea farmers, disbursed Kshs 5.5 billion (US$44.5m) as payment to their smallholder tea farmers for the December 2022 green leaf deliveries, inclusive of mini-bonuses for the half-year ending December 31st, 2022.
Out of the amount, 2.7 billion (US$21.7m) is the payment concerning mini bonuses for the factories whose directors passed resolutions to pay mini bonuses to their farmers, while the balance of Kshs 2.8 billion (US$22.6m) will go towards paying farmers for the December green leaf delivered to factories.
The company has also invested in procuring 13 orthodox tea processing machines for allied factories to meet the burgeoning demand for orthodox tea, which will in turn reflect a better payout to its farmers.