Farmers seeking government-backed loans could soon deal with a single State institution under fresh reforms that aim to end lending by three agricultural agencies and tighten the management of public funds.
The proposal is contained in the Crops Laws (Amendment) Bill, 2026, which has been tabled in the National Assembly by Majority Leader Kimani Ichung'wah. The Bill seeks to take away lending powers from the Kenya Agricultural and Livestock Research Organisation (Kalro), the Tea Board of Kenya and the Kenya Sugar Board as the government moves to streamline agricultural financing.
If Parliament approves the changes, all State-backed agricultural loans will be handled by the planned Kenya Agribusiness Development Corporation (Kadco) Limited.
The institution is being formed through the merger of the Agricultural Finance Corporation (AFC) and the Commodities Fund, which have for years been the government's main providers of credit to farmers.
"This Bill removes those mandates and ensures 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," Ichung'wah says in the statement of objects and reasons of the Bill.
The proposed law will amend existing legislation by removing provisions that allow the three agencies to establish and operate loan programmes for farmers and other players in the agricultural sector.
Traditionally, the Agricultural Finance Corporation has financed a wide range of farming activities, while the Commodities Fund has focused on providing loans to scheduled crop value chains, including coffee, sugar and coconut.
The merger of the two institutions into Kadco is part of wider government reforms aimed at cutting duplication among State corporations and improving the delivery of services.
Although they have been involved in lending, Kalro, the Tea Board of Kenya and the Kenya Sugar Board were mainly created to regulate, promote and support the growth of their respective sectors.
Kalro is responsible for carrying out agricultural research and developing new crop and livestock technologies. The Tea Board regulates and promotes the tea industry, while the Kenya Sugar Board oversees the sugar sector through licensing, policy implementation and industry development.
The government believes placing agricultural lending under one institution will strengthen accountability, make it easier for farmers to access financing and ensure public resources are used more effectively to support production and value addition.
The Kenya Sugar Board currently manages a loan programme through the Commodities Fund using the Sugar Development Fund, which is financed through the Sugar Development Levy.
The levy is charged on both locally produced and imported sugar. Local millers are required to pay four percent of the ex-factory price of sugar by the 10th day of the month after production. Imported sugar also attracts a four percent levy based on the cost, insurance and freight value under the East African Community Common External Tariff.
Cost, insurance and freight refers to the charges paid by a seller to cover the cost of goods, insurance and transport while cargo is on its way to the buyer.
Recovering loans issued through the Sugar Development Fund has remained a challenge. Official records show borrowers had defaulted on about Sh3.7 billion by 2024.
To address the problem, the government has tightened the conditions for accessing loans from the fund, a move expected to slow the release of fresh credit.
Individual sugarcane farmers applying for loans under the Sugar Development Fund will now undergo stricter checks on their credit history as part of efforts to reduce defaults.
The Agricultural Finance Corporation currently lends to farmers at a fixed interest rate of 10 percent, making it one of the main sources of affordable financing for small-scale and medium-scale farmers.
The Bill is part of a broader plan to reorganise State corporations by assigning specific responsibilities to specialised institutions.
Once established, Kadco will become the government's main agricultural development finance institution, offering loans to farmers, cooperatives, agribusinesses and processors across different agricultural value chains.
The government says bringing agricultural lending under one institution will improve supervision of public lending, reduce overlap among agencies and ensure funds are used more efficiently to boost agricultural production and value addition.