Are Saccos ready to transform into banks?
Savings and Credit Cooperatives (Saccos) play an important responsibility in the lives of many Kenyans and especially low-income earners. They are self-help, democratic, and member independent-driven financial co-operatives. The bond and mutual relationship between the members of a particular Sacco has majorly contributed to the success of these firms. Members may be working for the same employer, belonging to the same tribe, labor union, social group or producing the same agricultural products.
Saccos have played a key role in socio-economic development in Kenya. These financial institutions have enabled many Kenyans to access to financial services, who could have otherwise been turned away by the banks. They have created employment opportunities and stimulated the growth of many small businesses in rural areas by encouraging members to save and borrow to boost their hustles and living standards.
Saccos have been cited as a key pillar in mobilizing savings and investments towards realizations of the Kenya Vision 2030. There are over 7,000 registered Saccos in Kenya, with a total asset value of Sh442 billion. Despite the huge positive impact, these Saccos have been treated as informal financial institutions and subjected to harsh regulations by the authorities. Mainstream banks have viewed these entities as competitors and will do anything to bar them from joining their comfort zones. Banks have now started venturing into the Sacco zone, something they were not doing some years back. Through many customized plans such as mobile banking, mainstream financial institutions now offer services such as faster loans at low-interest rates with fewer security demands. This is what the Saccos were doing from the beginning.
While many banks struggle to have a bite of the market share, others sinking into receiverships, mergers, and acquisitions, the Saccos continue to shine and are ready to join the mainstream financial zone. Since the massive fraud on customers’ savings by the Imperial and Dubai Banks in 2015, the Central Bank of Kenya has been very keen on issuing licenses to new banks, but now the battleground is open and it is between the Saccos and the banks. The regulator, CBK, should allow the Saccos that want to develop to get their licenses to transform to banks. This will enable them to bank their own money, do foreign exchanges, carry out trade financing and issue their own cheques among many other services they are not allowed to do as Saccos. The competition that will be created will wake the banks to leverage their services.
Unaitas recently dropped its dream of transforming into a bank despite investing a lot of money in meeting the bank registration requirements. The CEO stated that the Central Bank of Kenya moratorium still stands and bars them from getting a license.