Saccos up push to develop new digital loan products

The number of DT Saccos offering digital credit improved in 2024 to six compared to two in 2023. [iStockphoto]

Saccos are aggressively fighting for their space in the digital credit market, having introduced almost 100 products in their services between 2023 and 2024.

A majority of these products seek to offer loans of Sh50,000 and below to customers and are largely provided by Deposit Taking Saccos (DT-Saccos).

This is the same range where other digital credit providers like banks operate, according to data from the regulator.

These instantaneous, automatic and remotely processed loans are usually delivered to borrowers directly on their mobile phones.

Data from the Sacco Societies Regulatory Authority (Sasra) shows the number of digital credit or loan products stood at 345 in 2024 compared to 251 in 2023. This is an increase of 94.

The number of Saccos offering digital loan products also went up to 236 in 2024, compared to 170 in 2023.

The data contained in the latest Sacco Supervision Annual Report (2024) shows that while Saccos are the go-to institutions for credit, the allure of instantaneous credit by other service providers risks having them lose members.

“In order to retain their customer base amidst stiff competition from other credit financial institutions, mainly commercial banks and digital credit providers licensed by the Central Bank of Kenya (CBK), regulated Saccos have expanded their bouquet of loan and credit products to include digital and micro-credit,” the report says.

As most major banks record digital transactions at over 90 per cent, the need for Saccos to serve their members remotely has become apparent. The Central Bank of Kenya (Digital Credit Providers) Regulations 2022 define digital credit as a credit facility or arrangement where money is lent or borrowed through a digital channel and digital channel to mean the internet, mobile devices, computer devices, applications, and any other digital systems.

Sasra, however, says, these domestic definitions of digital credit or loan do not necessarily encompass the amount of credit or loan being lent or whether the same is a micro-loan or not.

Consequently, the amounts of loans or credit which would constitute a digital or a micro-credit are left open, with each credit provider left to design their own.

“But since the most common platform for borrowers to receive the digital or micro-credit is the phone, the amounts of digital or micro-credit can be referenced through the maximum amount allowable through the mobile money providers’ platforms used to deliver the credit,” the regulator explains.This is where the different categories of Sh50,000 and below, Sh100,000 to Sh300,000, Sh300,000 to Sh500,000 and above Sh500,000 come to be in the report.

According to the report, the number of digital credit products by DT-Saccos in the market that offer Sh50,000 and below stood at 170 in 2024, an increase of 50 when compared to 2023.

For Non-Withdrawable Deposit Taking Saccos (NWDT), this number increased from 55 to 64.

For digital credit products offering between Sh50,000 and Sh100,000, the number of products by DT-Saccos increased to 32 in 2024 from 26 in 2023. For NWDT Saccos, this figure stood at 16 in 2024 from 13 in 2023.

Products that offer digital credit between Sh100,000 and Sh300,000 were slightly reduced for DT-Saccos to 18 in 2024, compared to 20 in 2023. However, for NWDT Saccos, this doubled from eight in 2023 to 19 in 2024.

In the category of Sh500,000 and above, the number of digital credit products among DT-Saccos grew seven times to 14 in 2024, while for NWDT Saccos, the figure stood at three compared to one in 2023.

The number of DT Saccos offering digital credit improved in 2024 to six compared to two in 2023. This is while NWDT Saccos, two more Saccos joined to make a total of three.

In the Sh300,000 to Sh500,000 category, the number of DT Saccos in this space increased to five from three in the same period, as NWDT Saccos saw the entry of its first. In the Sh100,000 to Sh300,000 category, the number of DT Saccos offering digital credit products increased to 12 in 2024 from nine in 2023, while for NWDT Saccos went up to nine from four in the same period.

DT Saccos with digital credit product offering Sh50,000 to Sh100,000 increased to 23 in 2024 from 14 in 2023, while NWDT Saccos in the same category increased by four to 14 in 2024.

Monthly interest

There were 105 DT Saccos with digital credit products offering Sh50,000 and below in 2024 compared to 79 in 2023. Among the NWDT Saccos, the sector saw an increase to 58 in 2024 from 48 in 2023.

Interest rate for the digital loan products in 2024 ranged between 2.8 per cent and 10 per cent.

The 2.8 per cent rate was the average monthly interest for digital products offering between Sh100,000 and Sh300,000 in NWDT Saccos.

This is while the 10 per cent rate was for NWDT Saccos with digital credit products offering Sh500,000 and above.

According to Financial Sector Deepening (FSD) Kenya, a think tank in the socio-economic space, Kenya’s credit market is dominated by digital loans by volume, where banks meet over 90 per cent of these needs.

Additionally, the number of unique borrowers (both individuals and businesses) has risen from 7.5 million in 2019 to 11.4 million in 2023.

“In contrast to the increase of unique borrowers, the aggregate value of loans disbursed annually has been on a decline, with Sh2,067bn issued in 2019 compared to Sh1,937bn in 2023,” says FSD Kenya.