Muchiri Gitonga
8 November 2005
Nairobi — It is pay time for tea growers, but they won't be smiling any time soon.
Micro-finance institutions in tea-growing areas have been teeming with small-scale tea farmers since last week, after the Kenya Tea development Agency released the second payment, popularly known as a bonus.
Most of the farmers are, however, coming out of the banks with long faces and little, if any, cash in their pockets. Their earnings were gobbled down by credits from their banks.
Also, this year's bonus has been very poor - thanks to a strong shilling which affected tea exports. Exchanging at Sh73 two months ago, the US dollar hit its lowest mark in recent years. This affected local exports especially tea, coffee and cut flowers.
A woman was last week reported to have collapsed inside a bank in Othaya town, after she was told her account had nothing.
She had visited the bank earlier, and after negotiations with the managers, it had been agreed that only Sh10,000 would be recovered from her Sh23,800 bonus.
Many farmers have been over-borrowing and they only receive a payslip for the bonus payment, as their earnings go towards servicing the loans.
The most affected are tea farmers, whose monthly production has of late been affected by unpredictable weather patterns.
For instance, farmers in Nyeri district received a total of Sh798.4 million for the 60 million kilogrammes from the five tea factories. Those from Gathuthi factory were the highest paid at Sh17 per kilo while at Sh11.35 per kilo, Ragati registered the lowest bonus payment in the district.
Many small-scale tea farmers in Central Kenya have been trapped in a vicious cycle of debts from the micro-finance institutions. The strength of the Shilling has worsened their situation by reducing their final payments.
Take the case of 61-year-old Herman Nderitu from Gatumbiro village in Tetu. In November last year, he had borrowed Sh42,000 from Nyeri Tea Growers' and Community Savings and Credit Society to buy a dairy cow. He was supposed to repay using this year's bonus at 15 percent interest.
When he went to the bank on Wednesday last week, he discovered that the bonus for the 2,150kgs of green tea he had delivered throughout the was Sh30,000. The farmers still had a huge deficit to repay the loan.
"I'll have to borrow again to repay the old loan and get some money to keep me going," the farmer told the Nation. His three youngest sons are in colleges, and he has to borrow money from financial institutions to educate them.
Most of these institutions recover their loans from the bonus. Gone are the days when the release of tea bonuses would spawn various economic activities in urban centres within tea growing areas. Bars would then fill to the brim.
It is now a different story as farmers' incomes are not matching the readily available credit from microfinance institutions. Apart from loans from the financial institutions, they have many debts from individual traders.
The institutions give credit to the farmers on the strength of their respective monthly earnings from commodities such as milk, tea or coffee.
Central Provincial Commissioner, Mr Peter Raburu, says that misuse of the readily available loans from the micro finance institutions could now turn out to be a curse for the region's Sh8.5 billion tea industry.
He told a recent regional agricultural workshop that many families in the province were now bearing the impact of loans taken unilaterally by male house heads who do not use it for the intended purpose.
The institutions have made it easy for peasants to access credit easily. All farmers need to do is talk to their bank managers and walk out with a loan, even without planning on how to repay it.
Mr Raburu says some careless men borrow money to finance their drinking habits, instead of using it to enhance tea farming or other economic activities.
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