Savings and credit societies are seeking to build up a KES 500 billion fund from which they can borrow at lower rates to meet the high demand for loans from their members and avoid expensive bank lending. This is the sectors bid to seek alternative financing to solve the liquidity problems the sector has been facing in the past.
According to said Alpex Consulting Africa Ltd (ACAL) chief executive Joseph Kibe, SACCOs were grappling with liquidity problems and were unable to meet members’ demand.Kibe noted that SACCOs had an annual absorption of KES 280 billion whilst the members borrowed slightly over KES 120 billion in 2011 causing a financing gap of KES 160 billion. He was speaking at the African SACCO Summit at Kenyatta International Conference Centre.
“This is evidenced by the massive loan backlog with the local financial institutions. We are finding a mechanism of setting up a cooperative fund in excess of KES500 billion,” he said.
Saccos are faced with cut-throat competition from the commercial banks that are offering more competitive products leveraging on technology. The government has in recent years initiated various reforms that have narrowed the difference between the SACCOs and banks.
“The summit brings together the consumers of capital and international suppliers of the same at a time when instability in the macro environment has emasculated the cooperatives and pushed them further into unsustainable debt burden in Kenya,” said ACAL head of finance advisory services George Njoroge.
Alternative Financing
Kenya Union of Savings and Credit Co-Operatives Ltd (KUSCCO) Managing Director George Ototo said earlier that the summit will come in handy for all SACCO members as liquidity problems have been troubling efficiency of many SACCOs in the country. Ototo said seeking alternative financing, governance and taxation issues will form key agenda at the summit.
There are 5,000 registered SACCOs out of the total 12,000 registered co-operatives in Kenya and the Summit seeks to bring together at least 1000 SACCOs from all over Africa. According to KUSCCO, the SACCO sector mobilizes about KES 250 billion in the country. With current high interest rates offered by the banking industry, Ototo says more people are joining SACCOs to access cheaper credit.