SACCOs Outperform Banks in Loan Market Amidst High Interest Rates
In a notable development, Savings and Credit Cooperative Organizations (SACCOs) have successfully attracted a growing number of customers seeking more affordable loan options as commercial banks maintain higher interest rates. Despite a third consecutive decline in the Central Bank Rate, which has been reduced to 11.25% from previous rates of 12% and 12.75% in August and October, respectively, commercial banks have been slow to lower their loan charges.
According to the latest 2024 FinAccess Survey, SACCOs have emerged as the preferred financial channel among Kenyans, leading with a monthly usage rate of 74.9%. This surpasses traditional banks’ 58.7% usage rate, highlighting a significant shift in financial preferences. Many Kenyans are turning to SACCOs not only for loan repayments but also for savings contributions and salary deposits, indicating a growing confidence in these cooperative financial institutions.
The Survey findings also show that an estimated 11.7% of adult Kenyans prefer to use SACCOs, compared to mobile money, which leads to 82.3%, while Bank usage increased to 52.5%.
Traditionally, SACCO members primarily accessed services at SACCO headquarters, a practice now standing at just 1.1 % as the sector has embraced the technological revolution.
SACCOs have adopted modern service delivery channels such as agency banking, internet platforms, and mobile technologies, significantly transforming member interactions.
Despite the shift towards technology, SACCO members continue to express strong confidence in branch-based services, particularly in rural areas, where usage remains high at 66.7 %, compared to 52.0 % in urban settings.
These insights highlight the evolving landscape of SACCO service delivery, emphasizing the importance of addressing barriers to technology adoption, particularly in rural areas and among female users.
Tailored training and simplified user interfaces could enhance inclusivity and accelerate the shift toward digital channels.
The majority of respondents who ceased using SACCOs identified voluntary withdrawal (51.7 %) and an inability to maintain their accounts (46.2 %) as the primary reasons for discontinuation. Interestingly, urban respondents were more likely to cite voluntary withdrawal compared to their rural counterparts, at 51.1 % versus 47.4 %, respectively.
Monthly usage patterns indicate that while mobile money dominates daily transactions, banks and SACCOs play a vital role in managing monthly financial obligations.
According to the Survey, attraction of SACCOs is attributed to their expanded reach following the registration of Non-Withdrawable Deposit Taking Saccos.
Lower interest rates on loans levied by SACCOs compared to commercial banks may also have motivated their higher usage.
The overall SACCO usage improved from 9.6 % to 11.7 %, as more individual households joined Saccos which offered loans at a relatively lower rate during the high interest rate period.
Mobile channels (e.g., USSD, apps, pay bills, POS, and ATMs) emerged as the most preferred usage mode at 70.6 %, surpassing traditional SACCO usage at 66.1 %.
