advertisement
Economy

High interest rate pain as farmer faces Sh339m repayment

Justice Antony Ombwayo of the Eldoret High Court. PHOTO | FILE
Justice Antony Ombwayo of the Eldoret High Court. PHOTO | FILE 

A High Court sitting in Eldoret has ordered a farmer to pay the Agricultural Finance Corporation (AFC) more than 30 times the money she borrowed for a period of 10 years.

Mrs Mary Juster Chepleting will have to pay Sh339,275,195 that the AFC is demanding on the Sh10 million loan she took in 1996 after the court dismissed her bid to restrain the financial institution.

The ruling is a major highlight of the agony that defaulters faced long before the recent introduction of regulatory controls.

Two weeks ago, President Uhuru Kenyatta signed into law a Bill capping maximum chargeable interest rates at four per cent above Central Bank Rate.

This is an additional consumer protection to the in duplum rule which restricts maximum interest accrued on defaulted loans to the same level as the amount borrowed.

advertisement

It was introduced in Kenya in 2007 to give reprieve to borrowers struggling under the weight of loan repayments.

But Justice Antony Ombwayo ruled that in Mrs Chepleting’s case she had failed to demonstrate ever repaying even a single cent of the outstanding balance.

“The act of issuing cheques that bounced was in bad faith and not acceptable for a person who requires the court to exercise its discretion to his (sic) favour.” “Moreover, the amount loaned was drawn from the Treasury 20 years ago and therefore failure to repay the said amount is a great loss of public funds,” ruled judge Ombwayo.

According to court papers Mrs Chepleting had taken the loan to buy and develop her 305-acre Eldoret land. She argued that AFC’s claim was not only unconscionable, but also illegal.

She maintained that a substantial part of the loan had been repaid even as Legacy Auctioneering Service served her with the notification of sale and advertised the land for sale in March last year

The AFC filed a replying affidavit stating that on June 5, 1996, the farmer applied for and received the agricultural loan for land purchase and development.

The first portion (Sh7,800, 000) was for purchase of land, Sh1, 720, 00 for buying tractor and Sh580, 000 for farm implements. The sum was to be repaid in full with interest at the rate of 20 per cent per annum within 10 years.

Also on March 14, 1997, she applied for and received a further Sh5,893, 950 which similarly attracted a 20 per cent annual interest and was to be paid in full within three years.

In the course of the dispute a suit between the parties was filed in Kisumu High in 2006, but was dismissed for prosecution mishaps and therefore no issue was determined.

advertisement