America lifted sanctions on Iran and Sudan in 2016 and 2015 respectively, an action that allowed Kenyan banks to start transacting money with the two countries, coming as a relief to tea traders who had money stuck in the country.
Commercial banks are, however, still reluctant to transact with them.
Tea traders could continue facing delays in payment for exports to Iran and Sudan as local banks tread carefully in dealing with the countries previously under US trade embargoes.
Co-op Bank #ticker:COOP CEO Gideon Muriuki told the Business Daily that the lender is not keen on establishing a presence in Sudan despite being part of a recent delegation to the country.
America lifted sanctions on Iran and Sudan in 2016 and 2015 respectively, an action that allowed Kenyan banks to start transacting money with the two countries, coming as a relief to tea traders who had money stuck in the country.
Following the lifting of the sanctions, the Central Bank of Kenya appointed Co-op Bank to transact business with Iranian lenders to facilitate payment, especially for tea traders.
In October last year, Iranian buyers owed local exporters Sh120 million as they faced difficulties in remitting funds.
“It is true that we are supposed to support tea traders in countries that were faced with sanctions but in doing this we ensure full compliance with local and global financial regulations governing international trade,” said Mr Muriuki.
Last month, Co-op Bank was part of the team that accompanied officials from the Tea Directorate on a Sudan visit.
“Our role was largely a fact finding mission to help us better understand the tea market in Sudan. We are not eager to open banking operations in the Sudan,” he said.
The move implies that tea traders could continue experiencing late payment on their consignments for lack of proper mechanisms for buyers to remit funds.
“Tea is there and the market too, but the decision by banks might hurt some trade deals,” admitted Agriculture and Food Authority (AFA) director-general Alfred Busolo.
Mr Busolo said that the reticence of local banks implies that buyers will have difficulties in transmitting funds given that no lender is willing to transact with them.
The buyers argue that exporters need to open accounts with banks that allow transaction with Iran, mainly in the United Arab Emirates, for them to get their payments.
Kenya is targeting Iran as one of the major buyers of its tea and has since the lifting of the sanctions tried to promote the produce. Iran gets the bulk of its tea from India and Sri-Lanka, with Kenya supplying about 20 million kilos of the 120 million kilos that Iran imports annually.
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