How Saccos can aid 'hustlers' foray into the stock market

However, financial experts agree that most hustlers have a good opportunity of reaping the benefits of the stock market by pooling their little funds together, especially through cooperative societies and savings and credit societies (Saccos).

The two have been instrumental in mobilising savings for millions of Kenyans. They could once again play a critical role in catapulting ordinary Kenyans into the elite club of shareholders.

But those at the bottom of the pyramid have made great economic strides by, first, standing together before charting their own individual path at a later stage.

Already, the 13 million members of over 22,000 Saccos, indirectly own shares of Co-operative Bank, which is listed at the NSE. A good number of these Sacco members fall into the group of hustlers.

They include peasant farmers, boda-boda operators, mama mbogas (greengrocers) and jua kali artisans who eke a living in the ubiquitous informal sector where earnings are meagre and erratic.

"Co-op Bank story is one of the banks seeking to raise capital to increase its competitive edge in the industry, and particularly ring-fence the cooperative sector that predominantly owns the bank," said Co-op Bank Kenya Chief Executive Gideon Muriuki. Mr Muriuki was speaking last week during the bell-ringing ceremony to mark the launch of the enhanced NSE Market Place, where President William Ruto was the chief guest.

During the Covid-19 crisis, Co-op Bank in the 2020/2021 financial year paid out over Sh11 billion in dividend payments, providing timely relief to the cooperative sector.

The cooperative movement, through a holding company, owns 65 per cent of the bank. Dr Ruto has made his intention clear about improving the lot of poor Kenyans by not only helping them access cheap credit to start and grow their businesses but also investing their money in such instruments as shares and stocks.

Stock market

The ongoing debate mirrors that of the early 1990s, just before the onset of the micro-banking revolution that saw peasant farmers, mama mbogas and jua kali artisans colonise the banking halls.

At the time, there was a condescending feeling among bankers that the hustlers could not be banked. And for a good reason.

A 2020 white paper by the Capital Markets Authority (CMA) showed that most of the youths, even those in universities, thought that the stock market is for the affluent. This, in turn, dampened their interest in participating in the securities exchange, according to the study.

"Market participation was generally low because only a fifth of adult Kenyans held one or more securities with urban residents and older males being the main investors. The youth had the lowest participation rate," read part of the report.

Among the adult population, ownership of stocks, shares and other securities was higher among employees and owners of medium and larger enterprises, according to the report.

Males had slightly higher participation in the capital markets than females while urban residents had significantly higher investment levels than rural dwellers.

This explains why a lot of critics reckon that it is a tall order for those at the bottom of the pyramid to engage in the business of buying and selling shares. This is partly due to the stock market's complexity, which is characterised by extreme mood swings that traders have christened as being either bearish or bullish.

But critics mostly point to the shallow pockets of millions of wananchi. To some, these are people who are desperate to quickly grow their wealth, a situation that has a number of them fall for get-rich-quick pyramid schemes.

These cooperative societies have helped hundreds of thousands of ordinary citizens to own land and build houses of their own. It can be a perfect vehicle for helping them own businesses.

But even Saccos themselves hold shares, both for listed and non-listed companies.

A report from the Sacco Societies Regulatory Authority (Sasra), the insurance sector regulator, shows that by end of December 2021, Saccos had Sh50.29 billion worth of financial investments, a big chunk of which were shares in companies.

For Deposit-taking Saccos (DT-Saccos), 40.9 per cent, or Sh16.2 billion, of their financial investments were shares and stocks of companies.

"Interestingly, the investments in the shares and stock of companies constituted a very large proportion of DT-Sccos financial investments when compared to 22.75 per cent of the financial investments of NWDT-Saccos (non-withdrawable deposit-taking Saccos), which constituted investments in stocks and shares of other companies," said Sasra. There are 360 Saccos licensed to operate between January and December this year by Sasra.


About 175 are allowed to operate a deposit-taking business, which means they mobilise savings from members, while another 185 are non-deposit-taking, meaning they use their own funds to give out loans to members.

The total number of members in the Deposit-taking Sacco system distributed among the 175-DT-Saccos was 5.47 million persons in 2020 compared to 4.5 million persons reported in 2019, according to the Sacco supervisory report of 2020. Official data shows that in five years to 2021, Sacco deposits, which are contributions from members, have risen 77 per cent to Sh540.6 billion from Sh305.3 billion in 2017 due to increased interest from members.

In the same period, the loans to members increased to Sh523 billion from Sh320.5 billion. Until 1964 when the first Sacco was formed, millions of poor indigenous Kenyans had difficulty getting loans or saving.

They were locked out by banks, which had stringent requirements for opening a bank account.

In the beginning, the Saccos faced a lot of challenges because the members were unwilling to regularly contribute their shares or to repay loans advanced to them, says George Ototo, the Managing Director of Kenya Union of Savings and Credit Co-operatives (KUSCCO), a lobby for Saccos, in a 2017 paper.

As a result, the government directed that only employees whose employers were willing to provide payroll deduction facilitation should be allowed to form Saccos.

Their monthly contributions and loan repayments were thus deducted from their salaries and paid directly to their Saccos.