Kenya bans use of tea farmers’ funds as loan collateral in major KTDA reforms 

KENYA – Kenya has banned the use of tea farmers’ funds as collateral for bank loans, a move aimed at protecting growers from financial risk and curbing alleged profiteering by factory managers. 

The decision forms part of wide-ranging reforms at the Kenya Tea Development Agency (KTDA), which represents more than 680,000 smallholder tea farmers. Agriculture Principal Secretary Paul Ronoh said the measure was critical to shielding farmers from financial exploitation and restoring confidence in the sector. 

Under the reforms, KTDA has been directed to close multiple factory bank accounts and operate a single general account to improve transparency and traceability of funds. The government has also launched lifestyle audits targeting both current and former tea factory directors following allegations of mismanagement and looting of farmers’ money. 

“Each factory will have its own account, and similarly, if it has sold in dollars, the factory directors themselves will know the exact exchange rate. We will also know the exact amount spent on operational costs,” Ronoh said.  

“Now, in this forensic audit, we will audit the current directors as well as the others. If we find you, you will look for a cell to hide in and wait for your file there.” 

The reforms also include the phasing out of the decades-old inter-factory loan programme as KTDA shifts to commercial loans from banks. The move follows revelations that factories in the West Rift region had borrowed about Kes 14 billion (US$108.5 million) from factories in the East Rift over the years, with much of the amount remaining unpaid. 

Last year, Ronoh directed the Tea Board of Kenya to audit the inter-factory loans to ensure full accountability. The loans were originally designed to meet short-term financial needs and ease cash flow challenges for factories serving small-scale tea growers. 

“KTDA is in the process of phasing out the inter-factory loan mode, and the reconciliation of previously borrowed funds is ongoing and nearing completion to ensure full accountability,” the agency said in a statement. 

The borrowed funds were largely used to finance operational costs such as electricity, machine maintenance, and to bridge gaps in annual bonus payments to farmers where factories faced liquidity constraints. 

The reforms come amid growing frustration among farmers over declining bonus payments, particularly last year. KTDA attributed the lower payouts to global market dynamics and currency movements. 

According to the agency, while the Kenyan shilling averaged about Kes 144 to the US dollar in 2024 (US$0.0069 per shilling), it strengthened to about Kes 129 to the dollar in 2025 (US$0.0078 per shilling). This reduced local returns even as international tea prices remained stable. 

“The drop in earnings is mainly attributed to international market conditions and currency exchange movements that were less favourable compared to last year,” KTDA said. “While understandably disappointing to many, this year’s final payout is a direct reflection of the global trading conditions beyond KTDA’s control.” 

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