KENYA – The non-deposit-taking microfinance institution in Kenya, fully owned by Kenya Tea Development Agency (KTDA) is reported to have defaulted on terms of a Sh1.3 billion (US$10.4m) loan from the Dutch development bank FMO, making the loan to be classified as a current liability that is to be payable within 12 months.

The specific terms breached by Greenland Fedha were not disclosed by KTDA in its latest annual report covering the year ending June 2022.

“Additionally, as of June 30, 2022, Greenland Fedha Limited, a subsidiary of Kenya Tea Development Agency Holdings Limited, was in breach of certain FMO loan covenants. As such, the entire borrowing of Sh1.3 billion was classified as a current liability,” the agency says in the report.

Greenland Fedha has been taking loans from development finance institutions such as FMO as well as local lenders to meet the growing demand for financing among farmers.

The value of loans disbursed by the KTDA’s lending arm grew to Sh2.75 billion in the three months to February this year, nearly double the amount lent in five months between July and November last year on the back of low-interest rates.

The breach of the loan repayment terms came along after Greenland Fedha’s earnings were hurt by the slashing of its interest rates from highs of 21 percent to eight percent effective November 2021.

“It recorded revenues of Sh720 million compared to Sh1.01 billion [in the prior year], a drop of 29 percent,” KTDA said of Greenland Fedha’s performance.

The volume of outstanding loan contracts has increased to 265,698 from 177,809, according to Business Daily. The loans are normally recovered through a deduction from the sales of tea leaves that farmers make.

The low-interest rates are part of the reforms in the tea sector the government put forward after farmers and stakeholders raised concern, questioning how growers can be charged exorbitant rates when borrowing money from their own related companies.

KTDA says easy access to affordable credit for their tea farmers remains the key objective of the company and is also encouraging farmers to venture into additional viable income-generating activities such as livestock, poultry, and avocado farming.

Greenland Fedha is banking on the mobile banking platform Pesa Ulipo to reach farmers quickly and effectively.

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