Saccos forge new ways to cheap loans

Savings and Credit Cooperative Societies will soon start lending to one another to flee the high interest rates being charged by commercial banks.

The sector’s regulator said it is putting final touches to a platform that will allow the societies to turn to one another for cheaper credit, similar to commercial bank’s overnight lending facility managed by the Central Bank of Kenya.

“We are working on the modalities with stakeholders being brought together to decide on how to operationalise it,” the Sacco Societies Regulatory Authority (Sasra) chief executive officer Mr Carilus Ademba said on Thursday.

The new facility to be known as the Central Liquidity Fund (CLF) will see saccos borrow money from each other to meet their daily financial needs.

He said once the CFL facility is implemented, it will help address the liquidity crisis facing saccos and help reduce the cost of borrowing money.

Cooperative Bank stands to be one of the biggest losers among commercial banks, given that it is the main lender to saccos.

The facility will also allow saccos grow their loan books, having eliminated their liquidity challenge.

The sector is counting on an international gathering of African Cooperative leaders set to be held mid-August to share best practices on its implementation.

Saccos in Kenya control over Sh250 billion in deposits.

This money is, however, held by commercial banks, which lend to the same Saccos at commercial rates of between 20 to 27 per cent.