Business Daily (Nairobi)
Dennis Odunga
27 May 2011
Farmers in the North Rift who owe loans to the Agricultural Finance Corporation have complained over heavy penalties charged on defaulters, arguing that the charges were making it harder for them to service their debts.
The farmers’ representatives, Mr Raymond Kimeli, Mr Jonathan Chumba and Mr Kipkorir Menjo, said the corporation was imposing charges such as transport costs for officials who go to remind them about their debts, further piling up on their debt.
“For every visit, we part with Sh3,000 which is referred to as foreclosure fee and yet officials from AFC don’t just visit one farmer in a day,” said Mr Kimeli, a farmer from Moiben, Eldoret East District, displaying such a letter from AFC.
The more than 200 farmers said they were at risk of losing land used as collateral for the loans. They are charged a 10 per cent interest rate per annum for the principle amount plus other penalties in case of default.
The group said they had written to the AFC’s management and the Ministry of Agriculture seeking their intervention on the matter.
AFC chairman Hesborn Mariwa said the corporation would address the complaints of farmers who had difficulties servicing their loans, but they were required to make official requests for assistance.
“Each case is usually handled on its own merit. We don’t allow arbitrary sale of our clients’ properties. Unfortunately, not all farmers come forward to explain their concerns,” said Mr Mariwa.
He said the corporation was working towards reducing the foreclosure fee incurred to access farmers who have defaulted.
“The Sh3,000 not only caters for transport charges, it also includes legal costs as the process of reminding a defaulter about non-compliance to agreed terms of servicing a loan includes a lawyer,” said Mr Mariwa.
The farmers said the most affected are those who bore the brunt of the 2007/08 post election violence, further compounded by the adverse weather patterns that led to a poor harvest in 2008.
“We are still grappling with repaying those loans and our efforts to have the loans waived due to crop failure have not worked. The interest rates have continued to increase yet some of us were forced to turn our farms into animal grazing fields due to crop failure,” said Mr Kimeli.
The farmers appealed to the minister for Agriculture Sally Kosgei to intervene and save them from suffering acute losses, which they said would affect the country’s efforts towards improving food security.
They said the corporation should let them repay only the principle amount if the loans cannot be waived, as the accruing interest rates and penalties have turned out to be a burden to most of the farmers who are still struggling with increased cost of farm inputs.
Double repayment
The farmers further said the government should come up with a maximum amount for repayment of loans to spare the farmers the agony of parting with more than double the principle amount.
“There should be a ceiling. A farmer who took a loan of Sh400,000 has paid up to Sh600,000 but still AFC claims some more money from him due to uncontrolled interest rates and foreclosure fee. The additional charges will leave some farmers more desperate,” said Mr Menjo.
The farmers expressed fears that their land risked being auctioned, with some disclosing that they had moved to court to protect their land after they could not raise the required amounts within the stipulated time frame.
The AFC chairman said writing off loans was not the best practice given that the funds are supposed to benefit other applicants and appealed to farmers to prioritise servicing their loans in accordance with the agreed terms .
“Writing off of loans is not a solution to financial woes affecting farmers,” said the chairman.
AllAfrica – All the Time
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Agri-Finance Corp, Farmers Embroiled in Loan Repayment Battle