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KTDA freezes inter-factory loans as government orders audit in 71 factories
Over the years, several tea factories in the West of Rift region have taken Sh14 billion loans from those in the East of Rift, but have not repaid them.
The Kenya Tea Development Agency (KTDA) is phasing out an inter-factory loan programme that has been in existence for decades, in favour of commercial loans offered by banks.
It comes against the backdrop of revelation that factories in the West of Rift region have taken loans from those in the East of Rift to the tune of Sh14 billion over the years, which had not been repaid.
The position has also been taken after the Principal Secretary for Agriculture, Dr Paul Kipronoh Ronoh, directed the Tea Board of Kenya (TBK), the tea industry regulator, to undertake audits on loans taken by KTDA factories.
The model was adopted to address short-term financial needs and ease the burden of the 700,000 small-scale tea growers supplying their produce to KTDA factories, from effects of short and long-term commercial loans to finance operations.
As a result, each of the 71 factories will from mid-November have access to commercial loans from financial institutions.
“KTDA is in the process of phasing out the inter-factory loan mode and the reconciliation of previously borrowed funds is ongoing and nearing completion to ensure full accountability,” KTDA said in a statement.
The agency allows the inter-factory loans to finance operation costs, especially electricity costs, maintenance and repairs of machines and to cover shortfall in the annual bonus payment to farmers by factories that have cash flow challenges.
“Beginning mid this month (November), factories will be able to access financing directly from commercial banks at an interest rate of six percent, a step that will enhance financial independence and strengthen stability across the tea sector,” KTDA Board members stated.
KTDA Board Vice Chairman Omweno Ombasa led the zonal directors – Samson Mosonik Menjo, Vincent Arisi, Francis Wanjau and Philip Langat – in welcoming the calls for an audit of the loans portfolio in the factories, but added that the cost should not be passed on to the small-scale growers supplying their green leaf to the agency.
“As KTDA Board members, we want to emphasise that we have nothing to hide and we welcome any lawful audit processes that promote transparency and accountability. But the cost of such an audit should not be borne by farmers. Those calling for an audit should meet the associated expenses” the directors stated.
Last week, KTDA directors from the East of Rift led by Board Chairman Chege Kirundi said there was a need to embrace “innovation, improve efficiency, and strengthen the resilience of the tea sector so as to increase income to farmers”.
Mr Gabriel Kagombe, the Gatundu South MP, claimed that factories in the West of Rift owed those from the East of Rift over Sh14 billion in loans.
“The loans were advanced by the East of Rift factories to those in the West of Rift to boost their operational capacities, pay bonuses and other financial demands. That is because factories in the Eastern region are doing well with farmers adopting high quality plucking of green leaf” he said.
PS Ronoh has come under attack from a section of stakeholders for ordering the Tea Board to conduct an audit loans taken by KTDA factories.
He directed the Tea Board to establish the total amount borrowed by individual KTDA factories, how the loans were used, the terms and conditions under which the loans were acquired, and the current outstanding loans balances for each factory.
“The findings of this audit will enable the Ministry to evaluate the financial sustainability of the factories and appropriate operational measures aimed at addressing the challenges currently facing the tea sub sector,” Dr Ronoh said in the memo dated October 22, 2025 addressed to the Tea Board CEO Willy Mutai.
The PS directed the Tea Board of Kenya to hand in the audit report within 14 days.
But the PS has come under a scathing attack by stakeholders, who accuse him of overstepping his mandate and seeking to police a private entity: issuing directives without consultation; and introducing politics in the industry.
“The PS (Dr Ronoh) has issued an illegal directive to moribund Tea Board of Kenya (TBK) to conduct an audit over a private company (KTDA), which, much as it has its accountability challenges, is far much better than some government institutions,” Nakuru based advocate Bernhard Kipkoech Ngetich said.
The KTDA directors have also called for an end to the increasing politicisation of the tea sector challenges, as this has a negative impact on marketing of Kenya’s tea in the global market.
“The tea industry thrives on professionalism, cooperation and stability and not on political contestation. We urge leaders to approach the matters with sobriety, consultation, and respect for institutional structures,” the Board said.
“Political interference (in the sector) only breeds confusion, drives away investors, and undermines market confidence, ultimately hurting the farmers we seek to serve.”
