Thika Coffee Miller Loses Sh32 Million Court Claim in Landmark Coffee Debt Dispute

A Kenyan High Court has dismissed a Sh32.6 million claim by Thika Coffee Mills against Buchana Coffee Growers Cooperative Society, ruling that the company’s lending arrangement effectively trapped farmers in a cycle of debt through what the judge described as harsh, unconscionable, and oppressive loan terms.

The ruling is one of the most significant recent court decisions touching on Kenya’s coffee sector and comes as the government continues auditing historical debts owed by coffee cooperative societies as part of wider reforms aimed at protecting farmers.

The Dispute Began with a Crop Financing Agreement

The case dates back to June 2014, when Buchana Coffee Growers Cooperative Society appointed Thika Coffee Mills as its exclusive miller, crop developer, and marketing agent.

Under the three-year agreement, the miller advanced the cooperative approximately Sh11.9 million at an annual interest rate of 18 percent. Repayment was to be deducted directly from proceeds generated through coffee sales, while the company also held a lien over all coffee delivered by the cooperative until the debt was cleared.

Later, Thika Coffee Mills accused the cooperative of breaching the agreement after delivering coffee to another processor instead of using the miller as agreed. The company argued that this deprived it of the security backing the loan and sought to recover more than Sh32 million, including accumulated interest.

Farmers Argued They Were Trapped in Debt

The cooperative denied owing the amount claimed and argued that the lending arrangement was fundamentally unfair.

According to the farmers, Thika Coffee Mills occupied three influential positions simultaneously as lender, miller, and marketing agent. This allowed the company to control coffee deliveries, coffee sales, loan recoveries, and farmers’ cash flow.

The cooperative further argued that loans intended to support production were recovered much faster than agreed, forcing the society to borrow repeatedly to continue operating. In their view, the structure created a continuous borrowing cycle rather than helping farmers improve production.

Court Criticizes the Lending Model

After reviewing the evidence, the High Court agreed that the arrangement placed excessive control in the hands of the miller.

The judge noted that Thika Coffee Mills’ combined roles as financier, miller, and marketer effectively gave it control over nearly every stage of the coffee value chain.

Evidence presented during the case showed that the company had advanced approximately Sh72 million (through multiple loans) while recovering nearly Sh70 million. The court concluded that pursuing an additional Sh32.6 million was disproportionate because the lender had already recovered substantially all of the money it had advanced.

The judge also questioned the commercial fairness of charging 18 percent annual interest in a coffee sector where farmers generally receive income only after annual harvests.

In one of the ruling’s strongest observations, the court stated that the loan structure appeared designed to keep the cooperative “perpetually indebted” rather than helping farmers become financially stable.

Both Sides Lost Part of Their Cases

Although Thika Coffee Mills failed in its attempt to recover the Sh32.6 million, the cooperative did not achieve a complete legal victory.

Buchana Coffee Growers Cooperative Society had filed its own counterclaim seeking approximately Sh5 million in damages and requesting the court to rescind the agreement and order financial accounts.

However, the judge dismissed those claims after finding that the cooperative had not provided sufficient evidence to support the damages it sought. The court also noted that the society had accepted financial advances from the miller under the agreement.

Wider Implications for Kenya’s Coffee Sector

The ruling arrives at a time when Kenya is undertaking major reforms in the coffee industry.

The government has been auditing historical debts owed by coffee cooperative societies and has stated that only properly verified liabilities will qualify for settlement. According to the Ministry of Cooperatives, many historical claims have either lacked supporting documentation or could not be fully substantiated.

The judgment also highlights broader concerns about financing models within agricultural value chains. While advance financing enables farmers to purchase farm inputs and maintain production, the case illustrates the importance of transparent loan terms, balanced contractual relationships, and responsible recovery mechanisms that do not undermine farmers’ long-term financial sustainability.

For coffee cooperatives, millers, and policymakers alike, the decision is likely to influence future lending agreements by emphasizing fairness, accountability, and stronger protection for farmers participating in Kenya’s coffee value chain