Storm brews over new tea growers’ financier by KTDA

The government is in tight corner over the registration of Greenland Fedha Limited, a subsidiary microfinance institution by Kenya Tea Development Agency, which is viewed as threat to rural tea savings and credit societies.

Finance minister Uhuru Kenyatta, whose office registered the outfit, last week refused to comment on the matter even as his Co-operative Development and Marketing counterpart Joseph Nyagah maintained that he was opposed to the microfinance seen as spelling doom to 52 rural tea Saccos. “I do not want to comment on that right now, and will do so after consultations,” said Mr Kenyatta.

Offer credit

Greenland Fedha Limited is a non-deposit taking microfinance institution formed to offer credit input to farmers. However, the source of the Sh160 million capital is also raising concern with Mr Nyagah saying the money could be farmers’ deductions which should have been paid as dividends. The tea agency, however, says the funds were internally generated.

While registration of the microfinance is within the law, players in the Sacco movement say it has exposed loopholes that can be exploited by dominant institutions to disadvantage other operators. Kenya Union of Savings and Credit Co-operatives managing director Carilus Ademba said they had fowarded their complaints to Mr Nyagah and were waiting for communication over the issue.

“We had a discussion with the Minister for Co-operative and left it to him to resolve the matter at policy level with the Finance minister,” he said last week. Mr Ademba said the implication of the move by KTDA would be to kill rural tea Saccos if allowed to operate. “The threat is big; it’s very delicate when you have a body like KTDA competing with the rural Saccos. It requires lobbying,” he said.

Experts say that the government might have to formulate a policy to wriggle out of the problem. Mr Peter Kegode, an agribusiness expert, said the situation was an indication of the need for the government to open up the issues of policy to more public scrutiny. “The MFI strategy is part of KTDA’s restructuring agenda. However, it shows a serious oversight on their part not to create a buy-in strategy with the existing stakeholders. It could be futile,” said Mr Kegode.

In September, Kussco said the microfinance should be deregistered because it posed a threat to rural Saccos which depend on farmers’ deductions by the agency through the check-off system. Other organisations that have added their voices of protest are Kenya Rural Savings and Credit Societies Union (Kerussu) and the Kenya Union of Small Scale Tea Owners Association (Kusstoa).

Mr Ademba said 80 per cent of farmers were in the 52 tea saccos that hold Sh8 billion in deposits and Sh3 billion in share capital. The Saccos, he said, had loaned farmers about Sh7 billion whose repayment would be in jeopardy were the new microfinance to continue existing.

Facing problems

Kussco said Greenland was offering farmers credit disregarding their obligations to tea Saccos which could overburden them with loans with the likely result of abandoning tea growing. The umbrella organisation said Saccos had started experiencing problems with officers withholding deduction forms and delaying remittances to them. “The success of savings and credit facilities to farmers is attributed to the fact that they are paid by KTDA check-off system,” said Mr Ademba.

The tea agency was also accused of luring farmers by offering to buy out their loans and issuing to them fresh ones without any savings. “There is every likelihood that co-operative sector will witness heavy loan delinquency emanating from KTDA move,” he said. KTDA managing director, Lerioka Tiampati, in an earlier interview, defended the MFI saying there were 100,000 tea farmers who had no bank accounts and who stood to benefit from the institution.

Cope better

He said the MFI would strengthen the Saccos, while enabling KTDA to diversify and cope better with the changing international market. However, other stakeholders refute the claims and see it as spelling a death knell for Saccos. “Some of these tactics are aimed at discouraging the co-operative model of Saccos. It threatens to kill the co-operative spirit among the tea farmers,” said Kussco.