Saccos eye bonds market to raise capital amid lean times

By James Anyanzwa

Savings and Credit Cooperative Societies (Saccos) are considering new avenues of raising cash to shore up their cash-flow positions, which they say are currently under pressure.

The Kenya Union of Savings and Credit Cooperatives (KUSCCO) said its members should consider tapping into the debt market by issuing infrastructure bonds to remain afloat.

The body said its members are currently facing liquidity constraints due to their model of providing Sh3 to every Sh1 saved to members inform of loans.

KUSCCO Managing Director George Ototo said Saccos should also consider introducing new products and   participate in real estate investments through the Real Estate Investments Trusts (REITs).

“The issue of liquidity has been a challenge to us and hence Saccos need to consider floating infrastructure bonds,” said Ototo.

Saturated market

Mr Ototo was speaking during a Finance Services Conference and Exhibition in Nairobi on Thursday.

Going by recent subscription trends to both Treasury and Corporate bonds offers in Kenya, it is evident that Kenya has a huge potential.

 In 2009 for instance, the Government was able to raise a significant amount of funds to finance infrastructure development through the first 12-year Sh18.5 billion infrastructure bond which was oversubscribed by 45 per cent attracting a total of Sh.27 billion against a target of Sh18.5 billion.

 Similarly, the CFC Stanbic bond, the KenGen Infrastructure bond, the Safaricom bond and the government of Kenya’s second infrastructure bond were equally over-subscribed. Mr Ototo said Saccos are already operating in a saturated market due to competition from commercial banks.

Accountability

He said Saccos should rebrand and    open branches in areas where they do not exist.

“Saccos have remained a little bit traditional compared to banks,” said Ototo, adding that 35 Saccos have so far rebranded in order to have a national appeal, increase membership and recruit more members countrywide.

The Government through the ministry of Cooperative last year reckoned that governance has been a challenge to the co-operative sector for a long time.

It is argued that though a few boards have institutionalised the tenets of governance in their management systems, they have not committed themselves to the principles of accountability and transparency.

The success of any Sacco is benchmarked on good leadership, which requires societies to embrace prudential standards to guide their operations.

Sacco leaders are expected to be innovative to produce financial products that are demand driven and attractive to their members.  However with the new Sacco law, the Sacco Societies Regulatory Authority (SASRA) has moved to increase supervision and surveillance of Saccos.