The government plans to strip three agricultural parastatals of their lending powers, and instead consolidate State-backed financing for farmers under a single institution to curb misuse of public funds.
A Bill introduced in the National Assembly by Majority Leader Kimani Ichung’wah proposes to remove lending functions from the Kenya Agricultural and Livestock Research Organisation (Kalro), the Tea Board of Kenya and the Kenya Sugar Board (KSB).
If passed, the Crops Laws (Amendment) Bill, 2026 will channel all agricultural lending through the planned Kenya Agribusiness Development Corporation (KADCO) Limited, which is being created through the merger of the Agricultural Finance Corporation (AFC) and the Commodities Fund, the two State agencies that have traditionally provided agricultural credit.
“This Bill removes those mandates and ensures that the relevant funds under the Sugar Act are channelled to KADCO for lending, completing the alignment of existing agricultural laws with the new institutional framework,” Mr Ichung’wah says in the Bill’s statement of objects and reasons.
The proposed changes will remove provisions in existing laws that empower the three agencies to establish and manage lending schemes for farmers and other players in their respective value chains.
Traditionally, agricultural lending in Kenya has been undertaken by the AFC, which financed a broad range of farming activities, and the Commodities Fund, which specialised in lending to scheduled crop value chains such as coffee, sugar and coconut.
The government has been consolidating the two institutions into KADCO as part of wider reforms aimed at reducing duplication among State corporations.
The AFC, Kalro and KSB were established primarily to regulate, promote and support the development of their respective agricultural sectors, with lending forming only one of several functions.
Kalro is responsible for agricultural research and the development of new crop and livestock technologies, while the Tea Board oversees regulation and promotion of the tea industry. The Kenya Sugar Board regulates the sugar sub-sector, including licensing, industry development and policy implementation.
Policymakers argue that concentrating lending under one institution will improve accountability, enhance access to finance and ensure public funds are deployed more efficiently in supporting agricultural production and value addition.
KSB currently runs a loans scheme through the Commodities Funds using the Sugar Development Fund(SDF), which is seeded through the Sugar Development Levy (SDL). The SDL is charged on both imported and locally produced sugar.
Every local miller pays four percent of the ex-factory price of the produce by the 10th day of the month immediately following the month when the sugar is manufactured. SDL is also payable at four percent on the cost, insurance, and freight (CIF) value of each consignment of imported sugar falling under the East African Community, Common External Tariff. CIF is an international shipping agreement that represents the charges paid by a seller to cover the costs, insurance, and freight of a buyer’s order while the cargo is in transit.
Repayment of loans through the SDL has, however, been challenging over the years, with official records indicating that borrowers had by 2024 defaulted on an estimated Sh3.7 billion. To curb the bad loans, the State has shaken up credit terms under the SDF—a development that is likely to slow down disbursements.
For example, individual sugarcane farmers tapping credit from the SDF face tougher scrutiny of their credit records as the State moves to tame runaway loan defaults running into billions of shillings.
The AFC currently issues loans to farmers at a fixed interest rate of 10 percent, making its facilities a key financing channel for small-scale and medium-scale agricultural producers.
The Bill is part of a broader government push to streamline the operations of State corporations by assigning specialised functions to dedicated agencies. By centralising agricultural lending under KADCO, the State hopes to create a single institution responsible for administering agricultural credit, improving oversight of public lending programmes and reducing fragmentation across multiple agencies.
KADCO is expected to serve as the government’s principal agricultural development finance institution, providing loans to farmers, cooperatives, agribusinesses and processors across various value chains.
Policymakers argue that concentrating lending under one institution will improve accountability, enhance access to finance and ensure public funds are deployed more efficiently in supporting agricultural production and value addition.
