Sacco inter-lending facility gets to home stretch

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Feb 15, 2017
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By Jackson Okoth
An American consulting firm
hired to do a feasibility study on
the possibility of setting up an
inter-Sacco lending facility has presented
a draft report to the Sacco Societies
Regulatory Authority (SASRA).
Dave Grace & Associates presented
its findings to the SASRA Board recently,
bringing closer the possibility that
Deposit-Taking Saccos could begin borrowing
through the window to ease their
liquidity shortfalls.
Other stakeholders that have received
this consultancy report include the National
Treasury and the Central Bank of
Kenya (CBK).
According to a senior official at SASRA,
the US consultancy firm was hired
to explore the possibility of having the
Authority directly fund Saccos through a
discount window modelled alongside that
of the Central Bank of Kenya (CBK).
The platform is expected to be up
and running once the regulator receives
funding from National Treasury to set it
up.Treasury is expected to allocate funds
in the 2017/18 budget for purposes of
setting up the platform.
At present, the Sacco industry does
not have an inter-sacco lending facility
and access to the national payment system.
While Kenya Union of Savings and
Credit Co-operative Society(KUSCCO)
operate a Central Finance Fund, it is still
small with no sufficient capacity to meet
liquidity demands of the Sacco industry.
“Although we already have a central
finance facility that is run by the Kenya
Union of Savings and Credit Co-operatives
Limited, the lobby group is reluctant
to surrender this facility so that it can
be better funded and be accessible to all
Saccos,” said Moses Chebor, the Chief
Executive Officer of Boresha Sacco Society
Limited in an interview in Eldama
Ravine.
Owing to lack of a Central Finance
Facility, most DT Saccos are faced with
persistent illiquidity problems. Borrowing
from commercial banks remains the
only option. But bank loans are expensive
for many of these Saccos.
“Only the establishment of an inter-
Sacco lending facility will solve this
problem. Discussions and plans are at
very advanced stages to establish this
platform,” said Peter Njuguna, Head of
Supervision at SASRA.
He added that the Sacco regulator
has also drafted a policy document that
will guide discussions on how Saccos
can participate in the national payment
system. At present, Saccos are not able to
issue cheques directly to their members
and can only access the national
payment system by partnering
with commercial banks.
The Principal Secretary for
Co-operatives, Ali Noor Ismail
disclosed that a number of Deposit-
Taking Saccos face liquidity
challenges and have been forced
to source for external funding
which is expensive.
“A study is thus being undertaken
to determine viability of
establishing a Central Liquidity
Fund,” he said at a recent workshop
organized by KUSCCO and
SASRA, at Whitesands Hotel in
Mombasa.
The regulator has withdrawn
the licenses of more than eight
Saccos in the past two years due to
their inability to meet liquidity and
capital adequacy ratios and having
a compromised credit quality.

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