The Ministry of Co-operatives and Micro, Small and Medium-Sized Enterprises (MSMEs) Development is urging all financial co-operatives to lower their lending rates to single digits to make their products and services affordable to members. This aligns with the Kenya Kwanza administration’s bottom-up economic model, which aims to eradicate poverty among those at the low end of the financial pyramid.
“We as the Ministry are pushing for a single-digit borrowing rate for all DT Saccos in Kenya. This is because Saccos continue to mediate between savings and investments and this is in tandem with President Dr William Ruto’s administration’s bottom-up economic model, a plan that was well discerned and discussed in 2022. Already, this economic plan’s effects are now being felt countrywide,” said Simon Chelugui, Cabinet Secretary, Ministry of Co-operatives and MSMEs Development. The CS said this during the Annual Delegates Meeting of Boresha Sacco.
CS Chelugui dismissed the notion that his Ministry was out to snatch business from banks and other financial institutions, insisting that the hustler fund was keen to capture only those with no access to formal financial services and collateral to offer as security.
“When this administration took office, there has been a notion that it is out to kill the business of formal banking institutions. But this thinking is untrue. In fact, the Co-operative Bank of Kenya is a major partner and our big brother in the financial sector. We are focusing on that individual at the bottom of the income pyramid, who has no access to a bank account or any other formal financial system and no collateral. This is why the hustler fund is providing credit as low as Ksh 500 through the state-sponsored hustler fund-which caters to those neglected even by Saccos,” said Mr. Chelugui.
The state-run Hustler fund provides loans as low as KSh 500 through the mobile phone, without any human intervention, and then monitors the loan repayment pattern of a borrower before it can give out more money.
The Fund plans to achieve financial inclusion and offer financial literacy and management skills training before graduating the borrowers to qualify for larger loan amounts up to the maximum product limit of Ksh 50,000.
“We have already developed a micro-credit product that will be channelled through financial SACCOs. We will enhance the limits of amounts of cash that one can access through this hustler product from a minimum of Ksh 10,000 to a maximum of Ksh 200,000.00, at a repayment rate of 7%. The loan will also be disbursed through individual mobile phone handsets,” said CS Chelugui.
He disclosed that an estimated 7 million Kenyans, previously locked out of the formal financial system, have been brought into the fold, trained, challenged, incubated, and encouraged to have a history, borrowing lessons and statements to present to Saccos, banks and other formal financial institutions.
Saccos stand to benefit from the hustler fund- which will positively impact the growth of members who know how to borrow and repay their loans diligently.
He urged the Sacco sub-sector to be innovative through the use of modern technology while embracing sound financial management practices as they strive to meet regulatory requirements and expectations of members.
 Fighting Graft
The CS said the Ministry is working on several legal and regulatory reforms, including expanding the mandate of SASRA to enable it to supervise all non-deposit-taking Saccos in Kenya, irrespective of their size, in addition to its current mandate.
“All Saccos in Kenya provide financial services and therefore must be under watch. Supervision is limited only to non-deposit taking Saccos with deposits of up to Ksh 100 million but we also need to watch for those with amounts below so that they do not collapse but grow,” said CS Chelugui.
Other policy reforms in the pipeline include new rules to guide the operation of Diaspora Saccos and those on virtual platforms as well as the long-awaited operationalization of the deposit guarantee fund – all these are now before the Cabinet for consideration, according to the CS.
His Ministry is also pushing for the creation of a Central Liquidity Facility for Saccos and a Shared Services Platform that will enable inter-Sacco borrowing, which is set to reality with the establishment of the Co-op Tech platform. This is in addition to moving forward with plans to activate the fraud and investigations police unit domiciled within SASRA to deal with the theft of Sacco funds by rogue officials.
“I am warning all co-operatives officials against dipping their fingers in the cookie jar. Those found culpable are on their own and will be punished. We will ensure that this unit is activated,” said CS Chelugui.
He gave instances of giant co-operative collapsing in Eldoret, Kiambu and Nairobi, societies that were seemingly established ostensibly to defraud members.
“We will ensure that this does not happen again and will use asset recovery authority to go for individual members and officials suspected of defrauding any Sacco,” he said.
A Bill to amend the Co-operatives Act Cap 490 is also before the Cabinet for consideration. The bill, which the previous administration had passed, is set for re-introduction by CS Chelugui to the Cabinet for review before it is retaken to parliament.
All these legal reforms, according to Chelugui, are meant to instill more public confidence and trust in members of the co-operative movement.
