Your Sacco could give you more than three times your savings if Kenya adopts radical proposals by the World Bank.
The Bretton Woods institution has released a study proposing to allow Saccos to access more deposits via the formal payment systems to allow them to offer big loans while increasing competition for banks.
Currently, there are 3.6 million Kenyans in 175 deposit taking Sacco’s that are regulated by Sacco Societies Regulatory Authority who have borrowed Sh297.6 billion by 2016.
World Bank which interviewed Mwalimu Sacco, Safaricom Sacco, UNAITAS believes that if SACCOs could access the payment system, they could attract a substantially higher level of deposits and increase the competition vis-à-vis banks, leading to a more competitive financial sector overall.
“Despite their popularity and substantial market penetration, SACCOs current cannot access formal payment systems which greatly limits the services they can offer clients,” the report by Mehnaz Safavian and Bilal Zia read.
This would substantially increase the number of financial institutions but would also raise the concerns that the country is overbanked.
In Kenya there are a total of 40 commercial banks, with Imperial Bank under receivership, 1 mortgage finance company, 12 microfinance banks, 8 representative offices of foreign banks, 86 foreign exchange bureaus, 14 money remittance providers and 3 credit reference bureaus.
This was part of the proposals fronted by the World Bank to contain the interest rates instead of using the rate cap.
World Bank also proposed reducing spending to curb appetite for debt that is forcing government to crowd out private sector as one of the ways to address the high cost of credit.
Banks were also asked to use information from Credit Reference Bureau to price customers accordingly while the state was urged to institute reforms that could make foreclosure faster.
Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.