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Major boost for small enterprises as Saccos step in with Sh70 billion

By Nicholas Waitathu | December 5th 2014 at 12:00:00 GMT +0300

NAIROBI: Deposit-taking Savings and Credit Co-operatives (Saccos) advanced more than Sh70 billion to small enterprises last year, according to a new report. The report released Thursday reveals that Saccos used members’ contribution and savings to lend to micro, small and medium enterprises (MSMEs).

Compiled by Associate Consulting Africa Ltd, a management consulting firm, after a three-month survey undertaken in July to September 2014, the study indicated that the Saccos also used non-withdrawable deposits, Fosa deposits and other income to advance loans.

Ephraim Njega, the lead consultant of the team that compiled the report said businesses use Saccos to borrow due to low interest rates. He said customers also use the credit societies as they offer favourable terms and conditions and easy security options.

FINANCIAL SERVICES

Majority of Saccos, representing 67 per cent, were willing to expand their lending to MSMEs while 8 per cent were unwilling and 25 per cent did not respond to the question,” he added in the report titled “Extent to which Deposit Taking Saccos Provide Financial Services to Micro, Small and Medium Enterprises.”

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“Most of the loans advanced comprise 76 per cent of the member contributions and savings. Other sources of the loans include non-withdrawable deposits (6 per cent), Fosa deposits (2 per cent) and other Sacco income at 3 per cent.” he stated. “Thus internal sources account for 87 per cent of funds lent to MSMEs while the other 13 per cent is accounted for by external sources such as loans,” said Mr Njega. He noted that 63.7 per cent of the deposit-taking Saccos have loan products targeted at MSMEs while 36.3 per cent did not have such products.

Sacco Societies Regulatory Authority CEO Carilus Ademba said the credit unions for the last four years have thrived owing to improved regulations. “We have since 2010 been enforcing regulations which have contributed to the increased growth today.”

He noted that the growth in the Sacco segment is being demonstrated by the credit unions’ appetite fora  stake in local commercial banks. He said the Sacco segment in Kenya has registered impressive results, thus rising to position one in Africa and  seven in the world. Out of the top 20 Saccos in Africa, 18 are from Kenya.

“Our Saccos currently control more two-thirds of the total assets Saccos are in charge of in Africa,” said Mr Ademba. Njega said key reasons for borrowing included business expansion, cash flow boost and buying of assets.


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