As competition stiffens from commercial banks, majority of Savings and Credit Cooperative Societies (Saccos) are making clever moves to accept personal security such as title deeds and log books in place of the traditional guarantors for loans.
In recent years, a significant number of Saccos across the country have reportedly been giving members the option of using collaterals to get loans.
Long gone are the days when salaried citizens dominated the cooperative world when all they needed to get loans was a payslip.
Now, the unsalaried person, especially the youth and businesspeople, has been given the option of using their properties or businesses as security, or simply taking a loan against their savings, as long as what they have accumulated is higher than what they are borrowing.
Tower Sacco Chief Executive Officer (CEO) Patrick Njenga says the use of personal assets such as log books and title deeds has made borrowing and lending easier, and it has the advantage of privacy as no one knows what you are up to financially.
“The use of own assets like log books and title deeds has ensured that there is privacy among Sacco members: They no longer have to coax a guarantor to fill in and sign forms when seeking a loan and that is actually a good thing because no one will badmouth anyone when they are in need of money,” he said.
Prime Time Sacco Chairman Thomas Rotich said the use of personal assets has been adopted by majority of Saccos in a bid to tap into youthful demographic, as well unsalaried ones who have little or limited amounts of savings in Saccos to ease the competition posed by commercial banks.
Rotich said that with the low interest rates offered by Saccos, they will be able to attract more members in the coming years, revealing that Prime Time Sacco is looking to accept collaterals for loans as a way of broadening the qualification criteria.
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“Guarantors work well when majority of Sacco members are civil servants but this is slowly changing as some have retired and we have the youth who are yet to secure jobs. The use of self-security such as title deeds and log books is in order as this will ensure that when one defaults on a loan the Sacco can liquidate the assets and be able to recover the funds,” he said.
Isaac Omwenga, Wakenya Pamoja CEO, said the new trend of using collaterals will ensure that members do not shift their fidelities to other Saccos once they get a loan.
“Through use of assets like title deeds as security in acquiring loans, members will not shift allegiances to other Saccos after receiving loans as it has been over the years, leaving their guarantors with a burden of paying back,” Omwenga asserted.
Augustine Munuve, Chairman of Univision Sacco, formerly Kitui Teachers Sacco, said the use of title deeds is emerging as the best security option given the visible mistrust on the issue of guarantors.
Nonetheless, Munuve noted that through the new approach, if one fails to repay the loan and the Sacco is forced to sell or auction the member’s assets to recover the loan, it will be difficult to determine the correct value of the assets.
He said there is need for streamlined policies on how to properly value the assets before issuing loans.
“Chances are high that the piece of land might be sold at a lower price than its correct market value, as well as in the case of a vehicle it can be worn out by the time the Sacco wants to sell it. This calls for streamlined policies on how to best value the assets before initiating loans,” he noted.
By Vostine Ratemo
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