Individuals responsible for the Sh163 million debt incurred by Rumukia Farmers Cooperative Society will be investigated and punished.
Agriculture CS Peter Munya said those to face the law will include borrowers and lenders. Taifa Sacco Society Limited is owed the money by Rumukia FCS and at one time threatened to auction its assets.
Rumukia, which has eight affiliate coffee factories in Mukurwe-ini, borrowed the money in 2015. It has a membership of more than 8,500 farmers and produces an average of four million kilogrammes of cherry a year.
“We are investigating those involved with a view to taking action against both the borrowers and lenders of the loan,” Munya said.
He was addressing coffee farmers in Mukurwe-ini in Nyeri on Saturday. The CS was on a three-day tour of Nyeri county from Friday and attended public-participation forums on the draft Coffee Bill, 2020.
Munya said the government will not allow sale of assets belonging to the farmers’ society to pay the loan.
"If the Sacco will have to auction anything to recover their money, then it should auction assets of those who borrowed the money,” he said.
He told Taifa to declare the money a bad loan and not to force farmers to pay it. He wondered how the factory management and the Sacco arrived at such a huge loan.
“Whoever gave out the loan, that is your problem because lenders must also behave responsibly. That is now bad debt,” Munya said, adding there must have been a conspiracy by some people to benefit.
Last year, Rumukia escaped the auctioneers’ hammer following the intervention of the national and county governments. The two entities got into negotiations and signed an agreement that was witnessed by Nyeri Governor Mutahi Kahiga in his office.
The agreement saw the loan repayment restructured into a period of six years and an interest of Sh21 million accrued waived. Farmers were, therefore, to pay a total of Sh142.
"Rumukia is in a very delicate situation as they have to balance and ensure farmers are paid at the best rate possible and at the same time service the loan,” Kahiga said.
The agreement was signed by the representatives of the two societies, led by chairmen Paul Chiera of Rumukia and James Giting’a of Taifa Sacco. Chiera told the media that he was not in office when the money was borrowed.
On the draft law, Munya said it prohibits societies from using their assets as security for loans. Instead, they will use coffee as collateral.
The CS also said no lender will be allowed to give money to coffee cooperatives at more than five per cent interest.
"Loans have been used to oppress farmers and that is why the draft Coffee Bill has prohibited millers and marketers from lending loans,” he said.
He said societies that want loans should apply for the cherry advance loan at three per cent interest or the Commodity Fund, which has been lending at an interest rate of five per cent.
Munya questioned why cooperatives have to borrow loans at the rate of 13, 15 or even 17 per cent while there are low interest loans.
