Sacco members stare at reduced dividends

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Mar 6, 2017
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“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 main   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 Win as 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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