Savings and credit co-operatives angle to enter commercial banking business

In the last few months, there has been an increasing number of savings and credit co-operatives (Saccos) seeking licence to convert into commercial banks, or expressing their interest in acquiring a stake in an already existing institution.

On this list are Mwalimu National Sacco, which has made public its intentions to buy a majority stake in Equatorial Commercial Bank; and Unaitas Sacco, formerly known as Muramati Sacco, which has been on an expansion drive since it rebranded and is looking to enter bigger leagues.

While current trends in the commercial banking business may favour big players, this does not appear to be discouraging Saccos from seeking entry into the sector.

However, the Sacco Regulatory Authority (Sasra) has put on ice plans by Unaitas and Wakenya Pamoja to become microfinance banks, as well halted the acquisition of Equatorial Bank, saying it is looking out for the interests of these Saccos’ members.

This has raised questions on who has the final oversight when a Sacco looks to get into the commercial banking business.

The regulator maintains it has not put a moratorium on any Sacco wishing to convert or acquire a commercial banking licence, saying its role is to monitor how such developments will affect members, and a co-operative’s liquidity and capital adequacy ratios.


Sasra further applauded the growing interest in conversion, terming it a sign of the financial sector’s maturity.

“At this stage of maturity, there is a growing appetite for more sophisticated financial products and services, following demand from members. But those who have applied to either do an acquisition or convert have to wait for a letter of no objection from the regulator,” said Sasra Chief Executive Carilus Ademba.

To issue the letter, the regulator will consider the level of consultation done by the Saccos, and if due diligence was done before the conversion or acquisition proposal was put in motion.

The Ministry of Industrialisation and Enterprise Development, which is also involved in the process, further requires applicants to provide documentation on their profitability, as well as valuation and corporate governance reports.

“We are conscious of the time and will issue a letter of no objection to the applications that we have received as soon as we are satisfied,” said Mr Ademba. “We have not stopped any Sacco from moving to the next level, but we have to be satisfied that all the conditions are met. This trend is not unique to Kenya and there is no law stopping such conversations or acquisitions.”

Mwalimu Sacco said it is pursuing the acquisition of Equatorial Bank to offer a wider range of services that will generate more business.

In its 2013 annual report, the co-operative noted it would seek to establish a commercial bank as a full subsidiary in line with its strategic plan for 2014-2018. Further, its financials show that Mwalimu’s assets and size are more than double those of Equatorial.


“We were looking for any commercial bank that could sell us a majority stake. We thought applying to Central Bank of Kenya for a banking licence was a long route,” said Joshua Ojall, the former Mwalimu CEO. “My successor had inside information on Equatorial, and that is why we were able to approach the bank.”

The institution’s current CEO, Robert Shibutse, was previously executive director at Equatorial Bank.

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