Saccos plan to set up Sh100 billion facility for lending

By Jackson Okoth

The Savings and Credit Co-operative Society (Saccos) sector plans to set up a Sh100 billion lending facility to provide its members with an alternative and cheaper loans.

The development follows a difficult operating environment for Saccos. They range from expensive credit from commercial banks – its biggest and only lender, pushing them to near collapse.

“We are brainstorming on how to set up this facility to improve liquidity in the industry,” said Carilus Ademba, Chief Executive, Sacco Regulatory Authority.

 “We are also seeking the views of stakeholders and consulting industry before coming up with a suitable model.”

He spoke yesterday at a media briefing to announce a partnership between Kenya Union of Savings and Credit Co-operatives (Kuscco) and Alpex Consulting Africa Ltd.

 The two organisations are organising the forthcoming summit for African Saccos and Co-operatives.

“We believe this is the best move in the interest of the sector, given the overwhelming interest we have received from various stakeholders,” said Joseph Kibe, chief executive officer, Alpex Consulting Africa Limited. On the list of alternative financing avenues for Saccos is the Kuscco inter-lending facility worth Sh4 billion.

Over 1,700 Saccos use the facility. Due to high demand for credit, Kuscco plans to increase the size of this fund to Sh10 billion by the end of next year. Sh140 billion was given out as loans to over 1.8 million Sacco members last year. There is also a lending deficit estimated at between Sh30-40 billion.

The summit for co-operatives will be how to find alternative financing to meet this demand for credit within the Sacco sector.

“We feel that alternative financing in the light of prevailing liquidity challenges, governance and tax issues should form a key agenda during this summit,” said George Ototo, Managing Director, Kuscco Ltd.

In the last six months, commercial banks have increased their base lending rates in response to an upward climb in the Central Bank Rate (CBR).

But while the CBR has been lowered from 18 per cent to 16.5 per cent, cost of bank credit remains high-above the 12 per cent maximum allowed for Saccos to give credit to their members.