KTDA ends inter-factory loan system, shifts to bank financing as audit ordered
KTDA to replace decades-old internal loans with commercial bank financing amid government-ordered audit.
KENYA – The Kenya Tea Development Agency (KTDA) has announced plans to phase out its long-standing inter-factory loan arrangement, transitioning to commercial loans from banking institutions.
The decision follows the disclosure that factories in the West of Rift region have accumulated loans worth Kes 14 billion from factories in the East of Rift that remain unpaid.
The move also comes after Agriculture Principal Secretary Dr. Paul Kipronoh Ronoh instructed the Tea Board of Kenya (TBK) to carry out audits on loans issued among KTDA-managed factories.
The inter-factory loan model had been implemented to assist factories in managing short-term expenses and cushioning the 700,000 smallholder tea farmers who supply green leaf to KTDA factories from the financial strain of commercial borrowing.
Beginning mid-November, each of KTDA’s 71 factories will gain access to commercial credit facilities. According to KTDA, the reconciliation of funds previously borrowed internally is nearing completion to ensure accountability. Factories will now be able to access financing directly from commercial banks at an interest rate of six percent.
The internal loan structure historically supported operational expenses, including electricity bills, equipment maintenance, repairs, and addressing cash flow shortfalls for annual bonus payments to farmers. KTDA stated that the transition to bank-based funding will promote financial independence and enhance sector stability.
KTDA Board Vice Chairman Omweno Ombasa, accompanied by zonal directors Samson Mosonik Menjo, Vincent Arisi, Francis Wanjau, and Philip Langat, welcomed the audit directive but stressed that the cost of the process should not be transferred to smallholder growers.
“As KTDA Board members, we have nothing to hide and support any lawful audit that promotes transparency and accountability. However, the cost of such an exercise should not be borne by farmers,” the directors said.
Earlier, KTDA directors from the East of Rift — led by Board Chair Chege Kirundi — called for efficiency and sector resilience to raise farmer earnings.
Gatundu South MP Gabriel Kagombe claimed that factories in the West of Rift owe over Kes 14 billion to those in the East, stating that loans were extended to support operations, bonus payouts, and other financial obligations due to varying performance levels between regions.
PS Ronoh’s directive has drawn criticism from some stakeholders, but he insists the audit will determine the total loan amounts, usage, acquisition terms, and outstanding balances for each factory.
According to him, the findings will help the Ministry of Agriculture assess factory financial stability and develop measures to strengthen the tea sub-sector.
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