Saccos should strive to offer low interest rates on loans to members instead of pushing for high dividends. Cabinet Secretary, Ministry of Co-operatives and Micro, Small and Medium Enterprises Development Simon Chelugui said the competition for high dividends is how pyramid schemes operate.
“The predatory lending approach should be discouraged. There was an award, a trophy given to Saccos for high dividends but I want to see a Sacco that charges the lowest interest on loans to members because if we continue with this competition, you shall start going to borrow money to lend members and to make them happy,” said Chelugui.
Speaking to Sacco bosses recently at an event organized by Kenya Mortgage Refinance Company (KMRC) and the Sacco Societies Regulatory Authority (SASRA) in Nairobi, the CS said Saccos could play a role in the government’s affordable housing plan, noting that there is a deficit of two million units against the 200,000 constructed per year.
He urged Saccos to position themselves to provide more access to affordable mortgage finance and effectively tap into KMRC funding to increase the scope of their mortgage offering.
“This will allow members to own affordable homes and also stimulate demand at the lower supply in the affordable sector and thus provide a win-win situation for both the government and private sector lenders and developers,” he said.
Only 11 Saccos out of the 361 regulated in the country have partnered with KMRC, according to the firm CEO Johnstone Oltetia. He said Saccos offer long-term fixed single-digit interest loans at an average of 9.5 per cent, and only four Saccos have access to funding to lend. KMRC’s mortgage loan size stands at Sh8 million for Nairobi, its metropolitan counties, and Sh6 million outside Nairobi.
“So far we have disbursed slightly more than Sh8 billion since 2021 to our mortgage lenders with banks taking the huge chunk at 94 per cent and Saccos at 6 per cent and we hope to scale up to see the two take half-half the percentage within the next three years but later Saccos take the lead,” said Oltetia.
In 2022, Saccos disbursed Ksh227 billion in loans that went into financing the buying of land and houses, according to SASRA CEO Peter Njuguna.
Over 33 per cent of Ksh 680.35 billion loans to members by Saccos supported members to own homes and land.
He said these figures exclude what Kenya Union of Savings and Credit Cooperatives (KUSCCO) and the National Co-operative Housing Union (NACHU), which also do land and construction finance.
