A new loan product targeting tea farmers in the country has been launched by regional financier Bank of Africa-Kenya.
Dubbed chai loan, the bank seeks to provide short term financing to both small-scale and large-scale tea farmers, to support their production.
In addition to providing financing to farmers, the new product will contribute towards boosting tea production by collaborating with private processors to help support their out-growers.
Managing Director of Bank of Africa-Kenya, Kwame Ahadzi, said the new chai loan will address financing challenges in the tea farming value chain.
"Growing of tea is an important economic activity for Kenya that is driven mainly by small-scale farmers who face challenges in accessing support to improve their productivity. This is the reason why we have introduced the chai loan product to support tea growers and enable them to improve their livelihoods and make a much more significant contribution to the economy," Ahadzi added.
Kenya is a major tea producer, ranked third globally. According to the recently released Economic Survey 2013, 369,400 tonnes of tea were produced last year, compared to 377,900 tonnes in 2011. The crop earned the country Sh127.1 billion in 2012, making tea one of Kenya's foremost foreign exchange earners.
Through the new credit line, tea farmers can access between Sh20,000 and Sh500,000 unsecured funds, and between Sh500,000 and Sh5 million on a secured basis. These short loans are repayable at a rate of two per cent per month. The repayment is to be done within 12 months of disbursement.
The new product comes weeks after the bank signed a Sh2 billion (US$25 million) loan agreement with Dutch Development Bank, FMO to support its lending business.