The government is on the verge of losing Sh3.7 billion as sugarcane farmers refuse to repay loans issued to them, while local politicians ran a campaign that the loans were written off, the Auditor-General has warned.
Through the Commodities Fund- which is mandated with providing affordable loans to farmers for improvement, farm inputs, and operations- the government issued loans to growers through two co-operatives and a sugar miller.
The Kisumu Sugar Belt Co-operative Union owes the Fund Sh134.3 million while the Muhoroni Multipurpose Co-operative Union and the Muhoroni Sugar Company Sh 88.8 million and Sh3.47 billion, respectively.
“Most of the outstanding loans given to farmers were given as social grants with no securities and as such, recovery of these loans by the out-grower companies from the farmers has become almost impossible over the years,” Auditor-General Nancy Gathungu notes in a report on Commodities Fund.
Ms Gathungu notes that with politicians sustaining a narrative that the government has written off the loans issued without security, the farmers are adamant about repaying them and are now delivering sugarcane to other millers to avoid being deducted.
“Political utterances have created conflicts between the sugarcane farmers and the saccos as well as the fund. Farmers are capitalising on utterances made to the effect that the outstanding loans have been written off by the Government of Kenya. Hence, they refuse to pay or find ways of evading loan recoveries by delivering their canes to other milling factories that have no loan commitments with them,” the report notes.
Kisumu Sugar Belt Co-operative Union is made up of 80 active co-operative societies while Muhoroni Multipurpose Co-operative Union consists of 15 active co-operative societies. The audit notes that the two unions are in operation and are actively involved with farmers.
“However, they have been defaulting on loan repayment to their respective unions which in turn has caused the unions to default on Fund’s (Commodities Fund) loans,” the audit notes.
