More Kenyans are signing up with Savings and Credit Cooperatives (SACCOs) for saving, loans and as investment vehicles. According to a supervisory report released by the Sacco Societies Regulatory Authority (SASRA) for the period ending December 31, total assets for the 215 Saccos licensed to carry out front office service activities (FOSA) rose to KES 196 billion from KES 171 billion as at the end of December 2010.
Customer deposits
According to reports by SASRA growth in the SACCO has been driven by growth in customer deposits. Deposit taking SACCOs reported a membership growth to 2.09 million in 2011 from 1.64 million in 2010. As at the end of 2011, there were 3,887 SACCOs but the 215 which are deposit taking have the bulk of the membership and control more assets, deposits, and turnover.
As reported by Business Daily, Sasra’s chief executive Carilus Ademba said that the Sacco sub-sector recorded an average growth of 14 per cent last year in spite of slow growth of the national economy, coupled with stiff competition from conventional financial institutions.
According to the report deposits rose by 14% to KES140.6 billion up from Sh123.13 billion in 2010. Loans and advances went up by 20% to KES 147.7 billion up from KES 123.4 billion as at Dec 2010.
Funding challenges
SACCO umbrella body Kenya Union of Savings and Credit Co-Operatives Ltd (KUSCCO) in a forum earlier this month revealed that the sector was growing fast and there is need to explore alternative funding to sustain liquidity. Stakeholders in the sector have organized the First African SACCO Summit and one of the things to be discussed will be alternative financing.
“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 KUSCCO Managing Director. He added that there still is a loan deficit of between KES 30 and 40 billion which needs to be sourced to for the members.
SACCOs lend to their members on savings basis where a member can borrow up to three times their savings at low interest rates of below 10% depending on the SACCO. They are allowed however to charge a maximum of 12% interest rate on loans, which KUSCCO has termed as limiting bearing in mind the high Central Bank base rate, as SACCOs borrow from commercial banks.