Sacco members stare at reduced dividends

“The new rates will come into effect from December
1, 2016 and will apply to newly applied
products. The changes will not apply retrogressively.
Other terms and conditions applicable
remain as before,” Mr Richard Nyaanga, Acting
Chief Executive Officer of Ukulima Sacco
Limited stated.
Ukulima Sacco has reduced interest rates
on 8 out of its 19 loan products. On this list is
the interest rate on Emergency loans which was
reduced from 1.5 per cent per month to 1.0 per
cent per month.
Rates for Refinancing loans were also
slashed from 1.5 per cent to 1.2 per cent per
month while all loan repayments for products
repaid on interest were to be calculated based
on the reducing balance method.
The reducing balance method of calculation
brings the effective interest rates charged
on loans to between 4 and 13 per cent for most
Ukulima Sacco loans.
Other loan products whose prices were
reduced include Super Loan, FOSA Daima,
FOSA Flexi, FOSA Fahari and Bima Loan
as well as Share Invest. But not all Saccos are
reacting to recent developments in the mainstream
commercial banking business.
According to Imarika Sacco Chief Executive
Officer, Daniel Masha, the Sacco has always
had a varied interest rate regime and in
the last financial year, some rates remained the
same while others were revised.
He explained that this is a process that the
Society always goes through every year before
it draws up the annual budget.
“Movement in the Central Bank Rate is
just but one of the factors we consider when
reviewing our lending rates. There are other
numerous considerations that must also come
into play before we adjust any lending rates,”
Mr Masha said.
While there were Saccos which had no option
but lower rates in order to remain in business,
there are savings and credit organizations
that had already hit rock bottom even before
interest rate capping for banks came into force.
“We revised our lending rates much earlier
in the year, even before the law capping interest
rates charged by commercial banks came
into force. We are therefore at the bare minimum
levels and cannot go any lower because
this will jeopardise our operations,” said David
Kariuki, Chief Executive Officer of Winas Sacco,
formerly known as Embu Teachers Sacco
Limited.
Industry experts and top executives disclose
that Saccos must now devise methods
aimed at reducing costs while exploring new
revenue streams. Others will need to revise
their business models and shift from the more
expensive lending to providing cheaper longer
term credit to members.

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