NAIROBI, Kenya — The government has banned the use of tea farmers’ funds as collateral for bank loans, unveiling far-reaching reforms at the Kenya Tea Development Agency (KTDA) aimed at protecting smallholder growers from financial risk and curbing long-standing allegations of mismanagement.
The decision, announced by Agriculture Principal Secretary Paul Ronoh, forms part of a broader restructuring of KTDA’s financial systems, which oversee more than 680,000 smallholder tea farmers across the country.
Ronoh said the reforms are intended to shield farmers from exploitation by factory managers and restore transparency and confidence in the tea sector, which remains Kenya’s largest agricultural foreign-exchange earner.
“We have stopped the practice of using farmers’ money as collateral. That money belongs to the farmer, not managers or directors,” Ronoh said, warning that those found culpable of abuse would face legal consequences.
Under the new measures, KTDA has been ordered to close multiple factory bank accounts and instead operate through a single general account, a move the government says will make it easier to track revenues, expenditures, and foreign exchange transactions.
Each factory will retain a clearly defined operational account, particularly where sales are conducted in foreign currency, to ensure that directors and farmers know the exact exchange rates applied and the true operational costs incurred.
Ronoh also announced the launch of lifestyle and forensic audits targeting both current and former tea factory directors amid allegations of looting and misappropriation of farmers’ funds.
“This forensic audit will cover current directors as well as former ones. If we find wrongdoing, there will be no hiding,” he said.
A major pillar of the reforms is the phasing out of the inter-factory loan programme, a system that has existed for decades and allowed cash-rich factories to lend money to struggling ones. The move follows revelations that factories in the West Rift region borrowed about Sh14 billion from their counterparts in the East Rift, with a significant portion remaining unpaid.
Last year, Ronoh directed the Tea Board of Kenya to audit the inter-factory loans to establish accountability and reconcile outstanding balances.
KTDA said the reconciliation process is ongoing and nearing completion.
“KTDA is in the process of phasing out the inter-factory loan mode, and the reconciliation of previously borrowed funds is ongoing to ensure full accountability,” the agency said in a statement.
The loans were originally intended to meet short-term cash flow needs, including electricity bills, machine maintenance, and bridging gaps in annual bonus payments when factories faced liquidity challenges.
However, the programme has increasingly drawn criticism from farmers and policymakers, who argue it created opaque financial relationships and exposed farmers’ earnings to risk without their consent.
The reforms come against a backdrop of growing frustration among tea farmers over declining bonus payouts, particularly last year.
KTDA has attributed the lower earnings to global market dynamics and currency movements, noting that while the shilling averaged Sh144 to the dollar in 2024, it strengthened to around Sh129 in 2025, reducing local returns even as international tea prices remained relatively 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 previously.
The government insists the reforms are necessary to align KTDA operations with principles of public accountability, fiduciary responsibility, and farmer ownership, while insulating growers from financial decisions made without their informed participation.
