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Saccos embrace digital loaning, boost revenue

By Nicholas Waitathu
Thursday, October 15th, 2020
Personal loan. Photo/Courtesy
In summary
    • Unaitas Sacco chief executive Martin Muhoho confirmed that online lending and real time settlements have registered 35 per cent and 40 per cent growth respectively since March.
    • Stima Sacco CEO Hassan Gamaliel said the organisation has registered tremendous growth in terms of online banking, adding that owing to employment of robust technology, the society has been able to serve its members from the comfort of their location.
    • EacsUllabo.Sacco’s entrance into the digital lending space apart from being driven the need to survive Covi-19 shocks is also seen as meant to protect their interest and prevent members from relying on other sources for short term loans.

Savings and Credit Co-operative Organisations (Saccos) have for long been reluctant to embrace modern technology but matters appear to have changed drastically after the outbreak of the coronavirus disease.

The pandemic has prompted rapid adoption of new ways of doing business and interaction with customers. 

Even though grappling with low demand for loans and delayed remittances, Saccos have registered remarkable performance in terms of online banking.

Interviews with chief executive officers of various credit unions indicate that depositors have increasingly opted for online banking as part of adhering to the pandemic safety measures as outlined by the government.

Enhanced product

For example, Ukulima Sacco CEO Richard Nyaanga recently in a phone interview confirmed that online banking increased by 100 per cent between March and August, 2020.

“The increase is as a result of enhanced product (Ukash). Initially, the product was tailored for members whose salary was being channeled through Ukulima Front office services activities (FOSA),” he said. 

FOSA is a facility that offers services similar to those offered by commercial banks.  In March, online lending reached Sh118.8 million and increased to Sh130.1 million in April and then to Sh148 million  in May. 

In June members borrowed digitally Sh167.3 million  and Sh185.9 million in July while in August and September the online lending increased to Sh207.3 million and Sh237.7 million respectively.

Cumulatively up to September, online lending  with the sub-sector is estimated to have jumped from Sh155.6 million to Sh237.7 million compared to Sh82.1 million in 2019 financial year. 

Nyaanga said the society made aggregate loan disbursements of Sh4.2 billion for the period ended august 31, 2020, representing a marginal improvement of one per cent compared to Sh4.1 billion advanced during the same period in 2019.

The low uptake during the pandemic period, he added,  was mainly due to restriction in movement of members as loan process requires members to visit branches to fill forms.

“There are slight challenges in remittances from employers and this may be due to challenges posed by Covid-19.

However, we are optimistic that with the gradual re-opening of the economy we shall be able to see some improvements in remittances,” he added.

For instance, he said, organisations, especially in the private sector, saw some employees being laid off while some had salaries cut by between 50 and 75 per cent, adding that these changes drastically affected remittances.

Jamiii Sacco CEO Eliud Chepkwony said the Sacco recorded a 15 per cent growth between April and last month.

“We advanced Sh120.7 million between April and September this year. Online lending was low in 2019 but this year it has registered an upward growth. We will continue to leverage technology to increase loan disbursement,” he said on phone.  

Most of the Saccos expect to register high remittances mainly from counties after President Uhuru Kenyatta signed into law the 2020/21 County Revenue Allocation Bill recently.

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