Kenyan tea farmers to benefit from loan to boost yields

By Chris Mgidu
Thousands of Kenyan small-scale tea farmers will benefit from a major financial support to enable them improve productivity.
   The Bank of Africa-Kenya is seeking to anchor Kenya's tea industry through Chai Loan, an innovative credit facility that is expected to scale up farmers' productivity.


   The Bank's MD Kwame Ahadzi said the loan is expected to play a part in boosting tea production by providing financing to farmers, in addition to collaborating with private tea processors to help support their out-growers.
   Ahadzi said 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 the tea growers and enable them to improve their livelihoods and make a much more significant contribution to the economy," Ahadzi Nairobi on June 13.
   Light rainfall conditions experienced in Kenya's tea growing areas boosted tea production in March, doubling to 33.3 million kg compared to 17.8 million kg in the same period in 2012.
   According to the Tea Board of Kenya (TBK), a similar production was recorded across the sub-sectors, with tea output within smallholder sub-sector increasing from 11.2 million kg to 18.7 million kg.
   Higher production was largely attributed to scattered light rainfall conditions experienced in tea growing areas during the second half of the month owing to the gradual onset of the March-May long rain season as opposed to severe hot and dry weather conditions experienced in March last year.
   The East African nation produces black tea mainly for export to the Middle East and Europe with key markets being Pakistan, Egypt, Britain and Afghanistan in that order.
   Ahadzi said the loan facility seeks to address financing challenges in the tea farming value chain, is targeted to the needs of the farmers.
   "The Chai Loan will provide short-term financing to both small-scale and large-scale tea farmers, to support farming operations critical to increased yields and revenues," he said.
   According to the recently released Economic Survey 2013, tea production last year stood at 369,400 tonnes, compared to 377,900 tonnes in 2011.
   The crop earned the country 1.5 billion US dollars in 2012, making tea one of Kenya's foremost foreign exchange earners.
   Although Kenya is ranked third in annual tea production after China and India, she has the highest productivity (yield per hectare) compared to other major tea growing regions worldwide.
   This is attributable to deployment of appropriate research and development technologies in the production value chain as spearheaded by the Tea Research Foundation of Kenya (TRFK).
   Under the Chai Loan, tea farmers can access between 235 dollars and 5,880 dollars on an unsecured basis, and between 5,880 dollars and 588,000 dollars on a secured basis. 
   "These short loans are repayable at a rate of two per cent per month, making the Chai Loan's proposition one of the most competitive in the banking sector," Ahadzi said.
   He noted that the repayment is flexible -- monthly, periodically, or upon payment of annual bonus -- but within 12 months of disbursement.
   The new product comes weeks after the Bank of Africa-Kenya signed a 25 million dollars loan agreement with Dutch Development Bank, FMO, to support its lending business.  (Xinhua)

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