Savings and Credit Cooperative Organisations (SACCOs) in Kenya are set to join the country’s National Payments System, a move which gets them closer to an inter – SACCO lending market, a local report says.
The move is also part of the government’s focus on financial inclusion as it seeks to reduce SACCOs’ over-reliance on banks for funding and other commercial services such as cheque processing and issuance.
Nonetheless, this is likely to impact banks which are said to have relied heavily on SACCOs for various third party business such as:
- Issuing of cheque books
- Processing of personal cheques
- Trade finance services
- Treasury management
- Electronic funds transfer
- Real-time gross settlements (RTGS)
If that were not enough, their loan books will be affected as SACCOs begin lending to each other through the Central Liquidity Facility (CLF), an equivalent of the interbank market.
For SACCOs, this is a win because they expect to access cheaper credit through this CLF facility. However progress for the inter-SACCO lending market has dragged on for sometime due to technical and financial requirements that the societies have not been able to implement.
The regulator, SACCO Societies Regulatory Authority (SASRA) officials told the East African newspaper that the vision for an inter-SACCO lending is still valid and the progress made by SACCOs is ‘encouraging.’
“It is something that the SACCOs have really pushed and we are hoping the new government can actualise that vision,” said SASRA’s Chief Executive, Peter Njuguna.
The national government is expected to assist the effort with a Cabinet Minister having revealed that the government will establish a KES 1 billion ($8.13 million) central liquidity facility for SACCOs within one year.
So far, 50 SACCOs out of 890 have committed to the establishment of the facility, with more being asked to join.
“Getting the consensus around the industry is never easy because this is an industry that is growing and some of the players are very far ahead while others are far behind,” said Njuguna.
SACCOs, voluntary associations where members regularly pool their savings, and subsequently obtain loans, contribute an estimated 7% of Kenya’s GDP.
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