Fraud: Busia County Staff Exploited Agricultural Fund, Posed As Farmers To Get Sh53.7 Million Loans

A damning audit report has exposed a sophisticated fraud scheme where 128 Busia County government employees masqueraded as small-scale farmers to illegally access Sh53.7 million from the county’s Agricultural Development Fund between 2016 and 2024.

The scandal, revealed in Auditor-General Nancy Gathungu’s report, has left the county facing the prospect of losing Sh50.7 million in non-performing loans, with serious questions raised about the integrity of both the county executive and assembly in facilitating the scheme.

Governor Paul Otuoma faced intense scrutiny from the Senate County Public Investments and Special Funds Committee on Monday, as senators demanded explanations for why his administration has failed to recover the fraudulently obtained funds three years into his tenure.

The fraudulent scheme operated through a deliberately weakened legal framework.

The Busia County Agricultural Development Fund Act of 2014 was allegedly “watered down” through collusion between the county executive and assembly, removing crucial provisions for loan security and recovery mechanisms.

This created a legal loophole that county staff exploited to access funds intended exclusively for genuine small-scale farmers who couldn’t qualify for commercial loans.

Initially, only 63 county employees admitted to receiving the loans, but a comprehensive audit revealed the true scale of the fraud, with 128 staff members having benefited from the scheme to the tune of Sh4.8 million.

The remaining Sh48.9 million was distributed among approximately 1,872 other borrowers, bringing the total number of beneficiaries to around 2,000 people.

During the heated senate session, Governor Otuoma acknowledged the severity of the situation, admitting that his administration inherited “a defective law in terms of recoverability of the loans.”

However, senators expressed frustration that recovery efforts only began in March 2024, nearly two years after Otuoma assumed office in 2022.

Senator Raphael Chimera sarcastically remarked that it appeared one could simply visit Busia County to receive free money without consequence, while Senator Agnes Kavindu questioned the significant delay in pursuing defaulters.

Senator Hamida Kibwana emphasized that punitive measures were essential, noting that merely pursuing defaulters would yield no results without enforcement mechanisms.

The constitutional implications of the fraud were highlighted by Busia Senator Okiya Omtatah, who cited Article 226(5) of the Constitution, which holds public office holders personally liable for losses arising from the improper use of public funds.

He demanded that the governor take action against officials who approved the unsecured loans, regardless of whether they remain in office.

Committee Chairperson Godfrey Osotsi suggested direct salary deductions as a recovery method for county staff who received the fraudulent loans, emphasizing that Sh53.7 million “is not pocket change” and must be recovered.

The Busia case appears to follow a troubling pattern in the county’s financial management.

A similar scandal emerged involving the Busia Cooperatives Enterprise Development Fund, where 92 cooperatives received Sh106 million in unsecured loans between 2014 and 2019. Of this amount, only Sh39.4 million has been repaid, with a mere Sh2.8 million recovered from defaulters.

Governor Otuoma confirmed that some officials who presided over the “shady scheme” remain in their positions, though he claimed his administration has not failed in recovery efforts.

He announced that the county attorney has been instructed to initiate legal proceedings against defaulting cooperatives and promised amendments to strengthen the fund’s legal framework.

Senator Omtatah warned that allowing the money to disappear would set a dangerous precedent, particularly given Busia County’s high poverty levels.

He called for summoning officials from the previous administration to explain their role in the scandal.

The revelations have raised fundamental questions about governance and accountability in Kenya’s devolved system, highlighting how weak legal frameworks and inadequate oversight can facilitate large-scale fraud.

As the county grapples with recovery efforts, the scandal serves as a stark reminder of the need for robust financial controls and transparent governance in the management of public resources.

The fate of the Busia Agricultural Development Fund now hangs in the balance, with its intended revolving nature compromised by the massive defaults, potentially affecting genuine farmers’ access to credit in the future.​​​​​​​​​​​​​​​​