The government exploited new rules on deposit insurance for trust accounts in commercial banks to unlock Sh2.65 billion refunds to tea farmers affiliated with the Kenya Tea Development Agency (KTDA) that had been locked up in two fallen banks for nine years, it has been revealed.
Insiders revealed that the payments, which were publicly announced by President William Ruto on September 11, 2025, at State House, Nairobi, followed a series of behind-the-scenes interventions, including a legal opinion by the Attorney-General’s office, which cleared the payments under new rules that came into effect in July.
The Nation has established that the interventions by State House and the AG’s office enabled the payouts that triggered murmurs in some quarters.
The State exploited the Kenya Deposit Insurance (Trust Accounts) guidelines (2025), which came into effect in July this year, to unlock cash for the KTDA-affiliated farmers.
According to the guidelines, insurance covers funds deposited in trust accounts held in banks. A trust account is a pooled account that holds funds on behalf of more than one depositor, provided that such funds shall be placed with an institution licensed by the Central Bank as trust property and that is a member of the Corporation.
The Kenya Deposit Insurance Corporation (KDIC) pays out trust account payments to beneficiaries only when the financial institution is placed under liquidation by the Central Bank of Kenya, and payments are limited to the current coverage limit of Sh500,000 per depositor, not per trust account.
A farmer picking tea.
Photo credit: File | Nation Media Group
The KDIC confirmed that the payments were made under the Kenya Deposit Insurance (Trust Accounts) guidelines (2025).
“We have what we call trust accounts. When a depositor opens an account. You indicate in your bank records that the money I’m depositing here is under my trustee account. I’m holding it on behalf of these people. The bank opens an account that shows you are not the only one,” KDIC CEO Hellen Chepkwony told the Nation .
“KTDA is an agency. It holds money in trust for farmers. In that KTDA account, there were approximately 591,923 farmers who had money. We have the list of the farmers who had money and the amounts. So what we did was to recognise each one of them as the ultimate beneficiary of that money.”
The KDIC boss said that the KTDA payment was not an isolated case, as other depositors with balances of up to Sh500,000 have been compensated in full, bringing the total compensation to about 90 percent.
“The Attorney-General (AG) gave the opinion that we should pay because they (KTDA) have a trust deed; they were the trustee, and therefore you should have known that this was not a one-depositor,” she says.
“So anybody who had lodged that they were trustees and that they were depositing on behalf of their (clients) was paid. It is only KTDA who had not lodged as a trustee, and it was huge because 591,923 farmers are not a joke.”
KTDA had Sh1.9 billion deposits at Chase Bank by the time it was placed under receivership in April 2016, and by the time Imperial Bank was put under receivership in October 2015, KTDA had in its fixed deposit account Sh2.9 billion. The deposits were to mature later in the year.
In 2020, it was reported that KTDA recovered Sh1.7 billion of the deposits it had in the two lenders.
“We were paying 54 factories, which constituted about 591,923 farmers. This is money for the deposit insurance. It is not the money for the Imperial Bank. This is money from KDIC because our job is to protect depositors. Imperial Bank does not have that kind of money. For us, we are paying protected deposits with the money which has to come from the fund,” says Chepkwony.
(KDIC) increased the value of protected deposits to Sh500,000 from Sh100,000 starting from July 1, 2020, in recognition of the decline in real value over time to depositors, and plans are underway to further revise this figure upwards.
“You know all those (depositors) that had lodged their claims, including even KTDA, had already been paid the Sh500,000 but they came and said wait a minute, we are not alone, we were not the ones. We were representing farmers, about 591,923 of them, and that is why they went and made a trip to the President,” says Chepkwony.
“So we went into their records to show that they had a trust deed with the bank showing that they were the trustee for the farmers. That is why it took us almost nine years or so to pay.”
