US-based consultancy to hand in report on inter-sacco loans today

Tuesday February 7 2017

Mwalimu Sacco members queue to access their cash. Saccos regulator plans to set up a system through which societies can lend one another. PHOTO | FILE

Mwalimu Sacco members queue to access their cash. Saccos regulator plans to set up a system through which societies can lend one another. PHOTO | FILE 


An American consultancy hired mid last year to advise on setting up of a centralised lending facility for saccos, akin to the interbank market, will today present a draft report to the credit unions’ regulator.

Madison-based Dave Grace & Associates will be presenting findings to the board of Sacco Societies Regulatory Authority (Sasra).

The experts are also lined up to make presentations on the proposed inter-sacco lending platform to other stakeholders, including the National Treasury and the Central Bank of Kenya.

“The consultants will be presenting their findings to the board on Tuesday and are also expected to meet other stakeholders,” said Sasra chief executive John Mwaka. “Once set up, this will fully integrate saccos into the national payments system.”

Mr Mwaka projects that the platform dubbed central liquidity facility will be up and running by the end of this year. Proposals from the experts will be forwarded to Treasury secretary Henry Rotich for inclusion in this year’s Budget statement and Finance Bill.

Kenya’s sacco industry regulator is banking on the new model to help cut saccos’ reliance on expensive bank loans to maintain the regulatory 15 per cent liquidity ratio.

Sasra has in the past two years withdrawn the licences of four deposit-taking saccos and placed another under receivership in what was linked to liquidity challenges.

The regulator has also accorded 13 saccos, including the giant Moi University Sacco and Telepost Sacco, temporary six-month licences expiring in June, attributed to liquidity management challenges.

Saccos do not participate in the interbank market and there is currently no centralised facility tailored to meet the needs of Kenya’s 177 licensed deposit-taking unions, or allow them to lend one another.

An overnight and short-term lending facility for saccos is likely to hit hard the earnings of commercial banks that currently give loans to credit unions to help them meet their short-term obligations.

Sasra is banking on the facility to arrest temporary liquidity shocks and imbalances by having credit unions with excess cash lend those in need.

The saccos’ central liquidity facility will also help inform monetary policy decisions and complement the interbank market as an effective guide in pricing loans, savings, mortgages, futures, options and swaps.

The sacco industry’s loan book grew 13 per cent to hit Sh258.1 billion in 2015 due to increased uptake from the 3.14 million members who belong to credit unions.

Sasra in the meanwhile last week revoked the licence of Banana Hill Sacco after failing to submit full-year financial results for 2015. It had its deposit-taking licence revoked while Jijenge Sacco, formerly Macadamia Sacco, will continue to run under statutory management of the regulator.

Sasra in 2015 revoked the licences of three deposit-taking saccos —Ntiminyakiru Sacco Society, Ogembo Sacco Society Ltd and Isiolo Teachers Sacco Society Ltd — due to failure to meet minimum capital requirements and poor corporate governance framework.

Jijenge Sacco will continue to run under statutory management of Sasra, the regulator said in a gazette notice.

It was placed under statutory management on October 2, 2014 due to liquidity challenges, high external borrowing and inability to meet obligations to depositors and other third parties.