The untold story of small tea farmers: Some bad news in the 'bonus' month

It's hailed as one of the few remaining profitable ventures for small-scale farmers.

Every year around this time, it gets into the ritual of "bonus" announcements for over 650,000 farmers.

Impressive rates, colourful presentations, inspiring graphs and charts, a world-class model for peasant tea farmers, it is hailed as.

Only that this is half a story told mostly through deception of a debt-driven economy.

That is what a Tea Board of Kenya (TBK) report on the smallholder tea subsector six months status as at December 31, 2025 said.

The report, published in March but only made public this week, paints a picture of a subsector headed into an abyss even as directors elected by farmers go on a spending spree mostly on borrowed resources.

It said most of the second payment "bonus" was based on borrowed funds and, more alarmingly, some of that debt was taken through questionable disclosures.

"There was deliberate overvaluation of closing stock which is used as a guarantee to secure the commodity loans by tea factories. This led to

overpayment of the second payment and over-borrowing by tea factories," said the report.

The 650,000 smallholder tea farmers with 71 factories produce 52 per cent of Kenya's tea.

The rest come from 42 independent tea producers, 26 factories in plantations under multinational corporations, and the state-owned Nyayo Tea Zones with two factories.

The Ministry of Agriculture ordered the audit last October following an outcry over low bonus rates announced for the production between July 1, 2024 to June 30, 2025.

Although agitation by farmers, especially in the West of the Rift Valley tea belt, over low 'bonus' had inspired the calling of the audit, the report indeed calls for sobriety in payments guided by available resources, saying an existing vicious cycle of borrowing had led to high indebtedness which may affect the going concern of (some of) the tea factories.

"Going forward, second payment of green leaf should be based on actual performance and funds available rather than borrowings and overstating stocks value in order to show higher performance," concluded the report.

The outcry last year was after 'bonus' payments decreased from a high average of Sh59.23 in 2024 to Sh53 per kilo in 2025 for farmers in Embu County, and from a low average of Sh17 to Sh10.25 per kilo for farmers in Trans Nzoia County in the same period.

The TBK report put the total debt level of the 71 factories at Sh34,046,240,625.05, broken down into Commodity Financing of over Sh30.3 billion, Asset-Based Financing (Sh2.6 billion) and  Term Loan/New Project Financing of just over Sh1 billion.

Blank cheque

TBK auditors found that during the six-month period ending December 31, 2025, KTDA MS acquired Sh30.5 billion commodity loans on behalf of 55 tea factories to finance their 'bonus' payments.

"However, the total amount of loan required by the 55 tea factories to finance the declared second payment for 2024/25, Greenleaf payment for the month of September, 2025 and to settle all inter-factory loan balances as at October 31, 2025 was Sh25.3 billion.

It was therefore not clear why the additional amount of Sh5.2 billion was borrowed," the report said. 

Mogogosiek factory borrowed 2892 percent while Kapset took 1696 percent more than they needed.

The TBK report found that money borrowed for one purpose was used for another, including payment of employee sacco deductions, microfinance institution loans, historical land acquisition, and fertilizer debt.

"Twenty-Nine (29) factories borrowed more funds than they required to finance their second payment. Out of these factories,  27 were from the West Block and two from the East Block," noted the report.

Factories in the East Tea Block borrowed commodity loans of Sh6.5 billion to finance their bonus payment requirement of Sh22.1 billion, with only nine factories entirely using their resources to pay farmers.

The nine factories are Chinga, Gathuthi, Iriaini and Girugi in Nyeri, Githambo in Murang'a, Mununga in Kirinyaga and Kinoro, Keigoi and Imenti in Meru.

"The second payment requirement for factories in the West Tea Block was Sh6.4 billion. However, the factories there borrowed Sh24 billion to finance the second payment and other obligations," noted the report.

It added that Kiru Tea Factory was allocated a commodity loan amounting to Sh53,993,060, though the factory was not in the second payment loan requirement list prepared by KTDA to it's various lenders.

The rationale behind the borrowing is that by the time the factories declared the bonus, some tea stocks for the year ending June 30 are still unsold.

But while debt is taken against remaining stocks, the audit found that many factories grossly overstated the value of their tea.

For example, in the period under review,  Litien factory valued it's unsold stocks at Sh811 per kilo, 220 percent more than the real value of 253 percent.

Chebut factory gave a value of Sh614.31 against a real value of Sh242.30 - a 153.5 percent overvaluation.

Inflated tea values let factories borrow more than their stocks could ever repay. When the tea sold for less, the loans were left uncovered.

The TBK report also noted that the extra debts taken by some of the factories appear to have been used to pay off old internal debts as the KTDA moved to end a practice where liquid factories used to lend to struggling cases.

This practice, called interfactory borrowing (IFB), which was ended last year by the board then headed by Murang'a director, the Nairobi-based lawyer Chege Kirundi saw Sh12.3 billion in loans between factories converted into bank loans.

The Tea Board, while calling for a rethink of this policy, noted that the interest arising from the IFB is now being paid out to banks and external lenders rather than being retained in the KTDA family.

The report noted that KTDA presented 50 resolutions of the various factories authorizing the borrowing for bonus payments but that 33 of of those resolutions did not indicate the amounts to be borrowed, which was irregular.

There was also borrowing exceeding board approvals for seven factories.

The board of Mogogosiek factory which also comprises satellite factories at Boito and Kobel, approved a Sh3.025 billion loan, but Sh3.357 billion - over Sh331 million more was taken.

Litien factory board approved a Sh1.558 billion loan but got Sh1.849 billion while the board of Tegat approved a Sh1.05 billion loan but got Sh1.26 billion.

Other factories that we allocated more loans than their boards approved were indicated as  Kapkoros Group, Kapset/Rorok, Chebut and Mudete.

The TBK recommended that the KTDA Ms be held responsible for loss arising from penalties on loans, given that it is responsible for management of the tea factories financial affairs, including the debt portfolio.

It also recommended for a loan policy for tea factories to guide on how debt should be authorized, acquired, utilised, and administered.

The Tea Board also urges the KTDA to formally seek government support in repayment of commodity loans, given that most of them were given to make payments to tea farmers between 2021 and 2025.