Push for low interest loans, CS tells saccos

Cooperatives Cabinet Secretary Simon Chelugui (second left) during the launch of Mwalimu National Sacco unveiling of its lowest mortgage facility that is aimed at bolstering affordable housing to its members. [Collins Kweyu, Standard]

Saccos have been urged to offer low-interest rates on loans to members instead of pushing for high dividends.

Cabinet Secretary, Ministry of Co-operatives and Micro, Small and Medium Enterprises Simon Chelugui, at the same time, said saccos could play role towards the government’s affordable housing plan.

He said there is a deficit of two million units against the 200,000 constructed per year.

Chelugui said the government on its own cannot meet the housing demand and noted that saccos should come in.

‘‘I want to see saccos playing an important role in the financial sector like banks and any other financial institutions,’’ said Chelugui.

He added: ‘‘There was an award, a trophy given to saccos for high dividends but I want to see a sacco that charges the lowest interest on loans to members because if we continue with this competition, you shall start going to borrow money to lend members and to make them happy,’’ said Chelugui.

He said the competition for high dividends is how pyramid schemes operate. The CS said the predatory lending approach should be discouraged.

Chelugui spoke while addressing saccos bosses in a breakfast meeting organised by Kenya Mortgage Refinance Company (KMRC) and the Sacco Societies Regulatory Authority (Sasra) in Nairobi.

Special meetings 

He said his ministry had, in 2021, temporarily exempted the application of Section 49 of the Cooperatives Societies Act regarding convention of special general meetings to allow saccos get funding from KMRC.

‘‘The exemption was meant to facilitate saccos to access mortgage finance from KMRC since the provision had made it difficult for them to access this funding and we are making more reforms to make this process more sufficient,’’ he said.

He urged saccos to position themselves to provide more access to affordable mortgage finance and effectively tap into KMRC funding to increase the scope of their mortgage offering.

‘‘This will allow members to own affordable homes and also stimulate demand at the lower supply in affordable sector and thus provide a win-win situation for both the government and private sector lenders and developers,’’ he said.

KMRC CEO Jonstone Oltetia said only 11 saccos out of the 361 regulated in the country are their primary lenders. He said the saccos offer long-term fixed single-digit interest loans at an average of 9.5 per cent and only four saccos have access to funding to lend.

KMRC’s mortgage loan size stands at Sh8 million for Nairobi and its metropolitan counties and Sh6 million outside Nairobi.

‘‘So far we have disbursed slightly more than Sh8 billion since 2021 to our mortgage lenders with banks taking the huge chunk at 94 per cent and saccos 6 per cent and we hope to scale up to see the two take half-half the percentage within the next three years but later saccos take the lead,’’ said Oltetia.

According to Sasra CEO Peter Njuguna, in 2022, saccos disbursed Sh253 billion in loans with 28 per cent (Sh57 billion) of the money going into land and housing.

‘‘A third of the Sh71 billion went to land purchase while two third went to construction financing including commercial and residential buildings,’’ said Njuguna.

He said these figures exclude what Kenya Union of Savings and Credit Cooperatives (KUSCCO) and the National Co-Operative Housing Union (NACHU) which also do land and construction finance.

The CS also called for an amendment of the Retirement Benefits Authority (RBA) mortgage loans regulation to ensure institutions licenced under Saccos Societies Act No 14 of 2008 are included among institutions defined in under Section 38 (1A) of the main Act, as well as the regulations on offering mortgage loans.

This, he said, will enable sacco borrowers utilise their pension savings to secure mortgage loans. Chelugui said the government is now categorising saccos into sectors to know and understand which part of the economy they belong.

Housing and Urban Development PS Charles Hinga, speaking virtually, told saccos to take advantage of the government’s affordable housing programme.

‘‘Why could you buy expensive land for your members when the government is providing land at no cost and build for them houses when you can get an affordable house for them through affordable housing programme from as low as Sh1 million?’’ posed Hinga.

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