Savings and Credit Cooperative Societies (SACCOs) face intense competition from other financial services providers for the attention of those at the low end of the income pyramid.
This follows the planned launch of micro-credit products by the Government-run Hustler Fund.
“We will be launching a Hustler micro-credit product where SACCOs, Chamas, Women Groups and other financial firms can borrow for onward lending to clients or members,” said Dr. William Samoei Ruto-Kenya’s Head of State.
Micro-credit involves small loans disbursed to those at the bottom of the income bracket to assist them in growing their small businesses.
These borrowers usually lack any form of security or collateral, are poor and reside primarily in rural areas with no access to formal financial services providers.
Nearly all deposit-taking SACCOs have a micro-credit wing. They will now have to compete with the ones offered by the Hustler Fund, which is expected to be more affordable and easily accessible.
The Hustler Fund is a creation of the Kenya Kwanza administration, designed to allow those locked out of the formal financial system to access credit and savings facilities.
This Fund allows individuals to access unsecured credit through mobile phones and has a seed capital of KSh 50 billion. The Fund provides personal finance and plans to roll out micro-loans, SME loans and Start-up loans at low-interest rates to enable individuals and groups cut off by formal lenders to grow their hustle.
Available figures show that the Hustler Fund has so far lent out more than KSh 18 billion to date while its members have saved over KSh 900 million, a pool that the Fund is now building on.
Over 32% of Kenya’s National Savings comes from the cooperative movement and SACCO ecosystem, significantly contributing to Kenya’s national development.
“This is why I set up a ministry that will be in charge of the affairs of the cooperatives sector as well as all medium and small micro-enterprises. We want all these firms to use government support so as to grow, create linkages and support the development of our country,” said President Ruto.
Available figures indicate that 14 million Kenyans have mobilized a total of KSh 730 billion in savings through the SACCOs.
This is a deep pool of capital usually invested in various assets, instruments and projects as well as other ventures to generate a good return.
Additionally, loans amounting to more than KSh 700 billion are being serviced by SACCO members, who have taken advantage of the comfortable terms to invest in income-generating projects and other welfare-enhancing endeavours.
The flexibility and affordability of credit facilities offered by the SACCO sector and the collective and inclusive nature of its facilities provide greater returns to members in making transformative investment decisions.
Contributions of the cooperatives sector to Kenya’s social and economic transformation are undeniable and substantial.
Sixty-nine per cent of Kenyans, directly and indirectly, participate in the cooperatives sector and contribute more than 32 per cent to Kenya’s GDP.
SACCOs have provided a sustainable model for the government to create special funds that have successfully deepened financial inclusion by designing more responsive financial products and mobilizing savings. The Hustler fund operates on the same principles as the SACCO model.
The President said his government was keen to have a supportive institutional and legal framework to support the expansion and growth of SACCOs in Kenya.
“Plans to set up a central liquidity facility for SACCOs and create a shared services digital platform will enhance the sector’s performance to meet short-term borrowing needs of SACCOs while allowing them to access the National Payments System,” said President Ruto.
Cooperative societies ranging from farmers, financial cooperatives, teachers, and transport, have a combined of over balance sheet worth KSh 1 trillion and over 980 billion in members’ deposits.
Simon Chelugui-Cabinet Secretary-Ministry of Cooperatives, Micro, Small and Medium-Sized Enterprises (MSMEs), said they are working on several policy and legal frameworks to improve and deepen financial inclusion, especially those Kenyans at the bottom of the income pyramid.
