Thursday, October 11, 2012

Saccos to build Sh500bn fund to avoid costly banking credit line


Savings and credit societies are seeking to build up a Sh500 billion fund from which they can borrow at lower rates to meet the high demand for loans from their members and avoid expensive bank lending.

Saccos were grappling with liquidity problems and were unable to meet members’ demand, Alpex Consulting Africa Ltd (ACAL) chief executive Joseph Kibe on Thursday told a saccos summit at Kenyatta International Conference Centre.

He noted that saccos had an annual absorption of Sh280 billion whilst the members borrowed slightly over Sh120 billion in 2011 causing a financing gap of Sh160 billion.

“This is evidenced by the massive loan backlog with the local financial institutions. We are finding a mechanism of setting up a cooperative fund in excess of Sh500 billion,” he said.

More competitive products

Saccos are faced with cut-throat competition from the commercial banks that are offering more competitive products leveraging on technology.

The government has in recent years initiated various reforms that have narrowed the difference between the saccos and banks.

“The summit brings together the consumers of capital and international suppliers of the same at a time when instability in the macro environment has emasculated the cooperatives and pushed them further into unsustainable debt burden in Kenya,” said ACAL head of finance advisory services George Njoroge.

Cooperative and Marketing minister Joseph Nyaga said the saccos had the potential to expand their activities with adequate capital and called on multinationals to fund them.

“If you become our partners we shall provide you with political insurance because of the numbers,” Mr Nyaga said.