Banks could lose a key loan business once the government establishes a fund where savings and credit co-operative societies (saccos) will borrow money to meet their obligations.
The new plan also seeks to create a new window for the groups to directly raise funds from wananchi via sale of shares, thereby enabling them to realise the true value of their stake.
Industrialisation Cabinet Secretary Adan Mohamed on Wednesday told the sacco leaders’ convention at Laico Regency Hotel in Nairobi that the move would enable groups to boost their capital reserves that will be used for expansion, innovation and also help them to undertake various programmes that enhance worth for members’ investments.
He said the soon-to-be-created centralised financing facility would enable moneyed saccos to lend to low capitalised counterparts at affordable interests for onward advancing to members, thereby ending the heavy debt burden from commercial lenders.
Saccos usually seek extra funds from banks for advancing to members, with others using the borrowed funds to purchase parcels of land that are later subdivided and sold to members.
Mr Mohamed made the remarks in a speech read on his behalf by Co-operatives Principal Secretary Ali Noor. He said county governments need to reverse an emerging trend where sacco deductions for their employees are withheld, thereby adversely affecting services.
Kenya Union of Savings and Credit Co-operatives Ltd (Kuscco) Managing Director George Ototo welcomed the formation of partnerships between county governments and saccos to run credit schemes for low income earners.
He said counties should seriously look at the remittances delays as they are affecting various programmes.
Saccos control over Sh500 billion in deposits and enjoy the highest trust among Kenyans, where 200 new saccos are registered on a monthly basis.