No More Endless Bailouts, Kagwe Warns Cooperatives as Government Clears Sector Debts

Agriculture Cabinet Secretary Mutahi Kagwe has issued a stern warning to farmer cooperative societies with a habit of taking up loans without clear repayment plans, stating that the government will not continue writing off debts that do little to benefit farmers. The CS said stricter accountability measures have been put in place across all agriculture value chains, with the aim of ending the era of repeated government bailouts.

While confirming that the government is in the process of writing off debts in the coffee, tea, and sugarcane subsectors, Kagwe emphasised that such interventions are not sustainable and cannot continue indefinitely.

“I think it is important for us to appreciate that the government does not have infinite money for write-offs when we do not even know or you cannot audit what that money was spent on,” the CS said.

He explained that the state is unable to plan for debts because they are endless, and a government cannot budget for losses. He argued that the only way to deal with the problem is to eliminate the concept of debt write-off altogether.

Coffee sector loans taken without farmer knowledge

The CS cited examples in the coffee subsector, where many factory directors borrowed loans beyond their capacity to repay and without the knowledge of farmers. Kagwe lamented that the situation was so bad that directors also lacked business plans and accountability mechanisms, leaving factories financially crippled.

While reassuring coffee farmers that the government would settle their Sh6.8 billion debt, Kagwe said the enactment of the Coffee Act 2026 will address some of the fiscal management challenges that have long plagued the sector.

He told farmers that the new law proposes the formation of a Coffee Board, whose responsibilities will include auditing the purpose of any loan, establishing who the beneficiaries are, and determining how the cooperative will repay the loan before granting approval for borrowing on behalf of farmers.

“We will also not allow people to commit innocent farmers to repay loans taken up in their name. We must know the purpose of the loan, and once the project for which the loan was taken up is complete, the beneficiaries who are the farmers must be invited to approve the project. Therefore let us agree, the government will not allow you to take a loan without a repayment plan,” Kagwe said.

Weak governance blamed for sector woes

The CS also raised concerns over weak governance in cooperatives, noting that poor leadership is to blame for the endless woes that have bedevilled the sector. He pointed out that many cooperative officials have borrowed recklessly without considering how the debt would be repaid, leaving farmers to bear the burden.

To reverse that reputation, Kagwe urged farmers to demand better management and transparency from their officials.

“It is critical and I am appealing to Kenyans who are members of cooperatives to first raise the quality of leadership they have within the cooperatives. Cooperative governance issues must be addressed so that the factories, which are business organisations, do not render themselves into debt,” he said.

New era of accountability ahead

The government’s message to cooperatives is clear. Bailouts will not be a recurring lifeline. Any future borrowing must be justified, audited, and tied to a realistic repayment plan approved by the very farmers who will ultimately foot the bill.

For farmers, the CS’s remarks serve as both a reassurance and a call to action. The government will clear existing debts, but going forward, cooperative members must take responsibility for the leadership they elect and the loans taken in their name.

With the Coffee Act 2026 set to introduce stricter oversight and the same principles expected to extend to tea and sugarcane cooperatives, the days of unchecked borrowing and endless bailouts appear to be numbered. Whether cooperative leaders will adapt to the new reality remains an open question.