Co-op Bank leads in provision of Banking Services to SACCOs

By Our Reporter

The Co-operative Bank of Kenya remains the sole supplier of Automated Teller Machines (ATM), Cheques and Agency Banking Services to the 175 Deposit Taking (DT) Saccos in Kenya.

The bank, through its Sacco-Link ATM brand designed for Saccos remains the highest provider of ATMs services for DT-Saccos with 112 DT-Saccos hooked and relying on its ATMs services.

This is an increase from the 109 DT-Saccos which were reliant on Co-operative Bank’s ATM services in 2019, thereby underscoring the critical role that the Bank plays within the DT-Sacco system.

DT-Saccos on their own have been unable to provide ATMs cards or other cashless payment instruments to members due to lack of a central settlement framework and connectivity to any national payment system infrastructure.

To ward off competition and find mitigation against incidences of the massive transfer of funds from the DT-Sacco system to the banking system which reduces the liquidity of the DT-Saccos, and to create convenience and efficiency to their members, several DT-Saccos have partnered with commercial banks, to enable their members to access ATM services.

In the partnership, the DT-Saccos normally opens and maintain ATM settlement accounts in commercial banks with sufficient funds to enable their members to access their respective individual savings accounts held in the Sacco through the usage of ATMs cards.

About 60 DT-Saccos are still, however, not connected to any ATM system, implying that their respective membership cannot access the funds held in the FOSA savings accounts remotely.

This has the effect of reducing their efficiency and competitiveness particularly with regard to the ability to mobilize and retain deposits.

Data from the 2020 SASRA Supervision Report shows that there was a total of 65 DT-Saccos providing agency banking services to at least one commercial bank in the country, and cumulatively the DT-Saccos were providing 114 agencies.

Saccos have continued to be appointed agents of commercial banking institutions, to offer agency banking services pursuant to the Banking Act which allows commercial banks to appoint third parties to operate as their agents for the provision of certain defined financial services.

The Co-operative Bank through its Co-op Kwa Jirani agency banking brand had the highest number of DT-Saccos providing the agency banking; followed by the Equity Bank with 19 agency banking services provided by 26 DT-Saccos while the KCB Bank through its KCB Mtaani brand of agency banking came third with 22 DT-Saccos serving as agents.

In 2020, some 29 DT-Saccos acted as agents for two commercial banks; 16 DT-Saccos acted as agents of three different commercial banks and 4 DT-Saccos acted as agents of four different commercial banks.

Despite the evolution of the payment systems in Kenya including the entry of card payments, mobile payment and other electronic payment solutions; cheque payments remain an important bill of exchange in commercial transactions.

Unfortunately, DT-Saccos are not legally authorized to issue third-party cheques in their own names, principally because they are not members of the cheque clearance and settlement system in Kenya which still remain a preserve of the banking institutions.

In order to meet the needs of their members, DT-Saccos have partnered with commercial banks for the issuance of cheques in a similar model as the partnership for the issuance of ATM cards.

For the period ended December 2020, a total of 79 DT-Saccos reported having cheque payment services with at least one commercial bank, while 96 DT-Saccos had no cheque payment partnership at all.

Family Bank had partnered with 11 DT-Saccos while ABC Bank had three DT-Saccos getting the cheque payment services from them.

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