It will be easier for tea farmers to access credit after the Kenya Tea Development Agency (KTDA) lowered the interest rates on loans issued by its microfinance arm, Greenland Fedha, from 21% to 8%.
The KTDA says the decision announced yesterday takes effect immediately and aims to ensure that more small-scale farmers have access to the credit they badly need to boost agriculture and ease existing debt pressures.
âDuring our agitation for reforms in the tea sector, we expressed our concern that credit to farmers was too expensive, making it inaccessible. The burden of existing debt is a great threat to the empowerment of farmers and, therefore, unsustainable, âsaid the chairman of KTDA Holdings. David Ichoho.
Over 225,000 tea farmers, who are members of Greenland Fedha, as well as others who will join the microfinance institution, will now obtain loans at lower cost, reducing the pressure many farmers place on loan repayment. .
Farmers associated with KTDA but not members of Greenland Fedha wishing to benefit from the loans will first need to register as members, the company’s board said.
Loan repayment periods range from one month, but are determined by the farmer’s repayment capacity and productivity as judged by his product supply history.
Greenland Fedha uses the farmers’ green leaf as collateral to issue loans and high interest rates have kept many people from enjoying their produce, the board said. He added that the model of relying on the productivity of farmers to decide the amount of loans from the institution will continue.
The institution collects the repayment of the loan facilities through a levy system while paying the farmers who have taken out loans when paying the premiums, which has not led to any default. Mr. Ichoho said the KTDA is in talks with partners and other financiers to access cheaper credit to ensure it continues to lend at low interest rates.
The 62 percent cut in interest paid by small farmers is the latest change introduced by the new KTDA board, which came after the old board was ousted in June.
The new board has pledged to implement some of the changes farmers urged when they complained about low tea prices and premiums, as well as huge debts that left a lot of trouble to meet. their financial obligations.
Other changes are increasing the monthly tea prices from 16 shillings per kilogram to 21 shillings and the establishment of a minimum reserve price at the auction which has increased prices by more than 50 percent since July. .