Sharia-compliant Sacco makes waves in northern Kenya

A Shariah-compliant Sacco that promises to cushion pastoralists from incurring losses during droughts has opened a second branch in Wajir town.

Crescent Takaful Sacco (CTS), the first Shariah-compliant Sacco in Kenya, seeks to engage and provide financial inclusion to the poor in northern Kenya. The Wajir branch is the first outside Nairobi and is already creating a buzz among pastoralists in the region.

The Sacco, which has already enlisted 1,700 members countrywide, intends to tap into the region that remains largely unbanked, 50 years after independence.

CTS has various products tailor-made for the arid and semi-arid region such as the Mifugo Kash-Kash product that links pastoral traders to potential markets.

According to the Sacco’s Chairman Hassan Bashir, livestock traders are eligible for up to 70 per cent financing through the product.

“This will reduce animal loss during the drought period by providing a ready market and a profit-making alternative,” says Mr Bashir. Fatma Nasir, the Sacco’s sales team leade says the Mifugo Kash Kash is a trade-based product that applies Islamic finance principles in the livestock value chain processes in addition to being a financial product.

“The Mifugo Kash-Kash product is fully Shariah-compliant and it is, therefore, acceptable and palatable to both Muslims and non-Muslims alike,” she says.

The product is mainly delivered using the Islamic contracts of Mudharaba and Musharaka (equity partnership cinancing) between CTS and pastoralists and livestock traders. In both contracts, the profit share is pre-agreed upfront and a distinct profit margin is charged on each delivered transaction.

“The profit margin charged depends on the period of the expected trading cycle,” explains Fatma.

CTS also offers the Ayuta Emergency, a facility that provides benevolent profit-free services to its members. It is aimed at mitigating unforeseen emergencies such as medical bills in case of salary or income delays.

Ayuta is general terminology for social groupings, with an economic component such as merry-go-round, table banking and investment groupings.