After stiff resistance from the banking sector and powerful special interest groups within the cooperatives sector, the Government has finally announced the setting up of an inter-lending facility for Saccos.
This overnight lending facility, to be known as the Kenya Sacco Central, is scheduled to be operational by August this year, according to disclosures made by Simon Chelugui, Cabinet Secretary for Cooperatives and Micro, Small and Medium-Sized Enterprises(MSMEs) Development.
The facility will provide Saccos with a core banking platform enabling them to borrow from each other.
Chelugui said the World Bank-sponsored designs are complete, and what remains is for policy guidelines needed to operationalize the platform.
A move to set up an inter-Sacco lending facility follows intense lobbying within the cooperatives sector.
In a memorandum to the Cabinet Secretary, Ministry of Cooperatives and MSMEs, the powerful Cooperatives Alliance of Kenya (CAK) recently petitioned the CS to operationalize a Central Liquidity Fund (CLF) to allow for inter-Sacco lending and inclusion in the National Payments and Settlement System(NPSS).
CAK has proposed that the state set up a shared Core Banking and Digital platform for all Saccos to enable this, with the lobby group setting a timeline of June 2023.
The Kenya Sacco Central is expected to create efficiency and enable smaller Saccos to access state-of-the-art technology-including access to the National Payment and Settlement System.
 A corporate Sacco, the Kenya Sacco Central is a secondary cooperative, whose members are primary cooperatives.
The primary purpose of this cooperative is to provide specialized shared Sacco services to its members, including a Sacco Central Liquidity and Sacco Inter-lending, Shared Technology Platform, Access to Kenya’s National Payment and Settlement System and Support Interoperability for shared Digital Channels and Branches.
If the Government succeeds in setting up an overnight lending window for Saccos, the list of those likely to be worst hit are commercial banks. -who earn massive commissions and fees by providing Saccos with access to the cheque clearing house as well as loans to meet the short-term liquidity requirements of these financial outfits.
While DT Saccos can offer quasi-banking services, banks have a competitive advantage owing to their exclusive access to the National Payments system, cheque clearing house and possession of overnight lending facilities. This scenario will be altered over the next six months.
A shared services platform will also enable even smaller Saccos to access Core Banking platforms and offer ATMs and Mobile Banking without having to incur huge capital outlays.
Although Saccos have a central finance fund run and managed by the Kenya Union of Savings and Credit Cooperatives Organization (KUSCCO), it still needs more muscle to service the needs of the entire Sacco industry.
As the Cooperatives sector expands in size and financial sophistication, pressure has been slowly mounting for financial cooperatives or Saccos to be part of the National Payments System, allowing them to provide fully-fledged banking services to members.
The Sacco industry has been lobbying to be included in the National Payments System, allowing these financial institutions to participate in the clearing house and issue their own cheques.
At present, Saccos spend vast sums of money on third-party fees and commissions to commercial banks to access these services.
