Saccos edging closer to lending each other after Cabinet’s nod
Savings and Credit Co-operative Societies (Saccos) licensed to collect deposits are pinning their hopes on the next Parliament to help fast-track the setting up of a central liquidity facility allowing them to lend to each other.
The move follows a Cabinet approval of the draft legal structures for establishing the inter-Sacco lending facility enabling them to be tabled in Parliament for debate and endorsement. Currently, Saccos borrow expensively from commercial banks to meet their cash-flow shortfalls.
Peter Njuguna, Sacco Societies Regulatory Authority (Sasra) chief executive expressed delight the draft legal framework has been endorsed by Cabinet.
“We are now hopeful that the incoming Parliament will usher in the inter-Sacco lending window while improving operating liquidity, a key factor for sustained and competitive lending to members,” he said on phone.
The proposed establishment of the Central Liquidity and Shared Technology platform, which has been on the cards since 2016, is expected to enhance operational efficiency in deposit mobilisation amongst Saccos and reduce the cost of funds in the medium to long term.
This is among the reforms in the Sacco sector meant to compete well with the banks and allow them to meet unexpected or unusual short-term cash flow shortfalls.
The shared technology platform is also expected to reduce saccos’ reliance on costly bank loans to maintain monthly statutory cash-flow ratios.
“The Cabinet approved a framework on May 12 for shared services including shared technological platform and inter-sacco lending platform, this awaits a parliamentary nod,” the sacco sector regulator confirmed to Business Hub.
New regulations
All member Saccos will contribute to the Fund as prescribed in the new regulations that Cabinet has now approved. The move will come as a reprieve to the sector following the collapse of several Saccos, leaving desperate members with empty pockets.
The body will be registered as a co-operative in what will form one of the largest Sacco organisations in the country with an estimated over Sh100 billion in combined assets. It will start with deposit-taking saccos and offer front office services, while other regulated saccos will be brought on board as second-tier members.
The commencement of the fund will be part of the initiatives to bring back trust in the sector. Measures already implemented to bolster the sector include operationalising Saccos’ Deposit Guarantee Fund, a Sacco Fraud Investigation Unit, and prudent supervision of Back Officer Services (BOSA).
Mhasibu Sacco chief executive Anthony Gichia welcomed the cabinet approval, terming it as a new dawn for saccos.
“This is a going to be a game-changer since the majority of Saccos are going to work in synergy. Liquid saccos will now have an option to expand their portfolio and be able to lend to the ones with a deficit,” he said, adding: “This has been long overdue because as players we shall also enjoy fairer borrowing rates.”
