How saccos will help unlock growth in Kenya’s micro, small enterprises – Business Daily
Sacco members mark International Co-operatives Day in Mombasa on July 2, 2022. PHOTO | NMG
This year’s theme for the International Credit Union Day, “empower your future with a credit union”, was purposely chosen to underscore the work ahead to deepen and broaden financial inclusion. The World Council of Credit Unions (WOCCU) asserts that saccos have the perfect business model to financially empower the estimated 1.4 billion unbanked people globally.
These credit unions offer huge economic benefits in savings mobilisation and efficiency in credit for the households and their enterprises, especially the micro and small entrepreneurs (MSEs).
The development of Kenya’s sacco industry is no exception as the government formally recognises the credit unions as an integral part of the financial system. The financial services sector development plan has been consistently defined around three dimensions: financial stability, efficiency and inclusion.
While financial stability and inclusion has to a large extent been achieved, efficiency especially in access to credit by MSEs has been elusive. Financial Sector Deepening (FSD) Kenya Finaccess 2021 survey observed that while Kenya has made major progress in enhancing formal access to financial services by households, this has not resulted in efficiency gains as MSEs continue to struggle with high cost of credit.
It is thus a welcome development for the government to address efficiency in the credit market for the sake of households whose livelihood is solely MSEs in multiple sectors of the economy.
President William Ruto has consistently stated the goal as a single-digit rate of interest for credit and recognised that saccos are integral to this policy target.
The government’s ultimate objective is to empower MSEs by addressing the multiple challenges they experience, one of which is costly credit and other barriers to affordable loans. It is logical that appropriate interventions in that segment of our economy will enhance productivity for the good of all.
The rebirth of a Ministry of Cooperatives with an additional responsibility of developing MSEs is a strategy to leverage and scale the impact of the co-ops and the enterprises in the economy through forward and backward linkages; unlocking efficiency gains through economies of scale. The proposed Hustler Fund, for instance, is a form of ‘credit guarantee’ to de-risk these micro-borrowers and enable scaling up access to credit by formal lenders like saccos who by design will also address the second objective of growing savings in the economy.
The industry is also hopeful that the regulatory policy reforms on the sacco shared services mechanism and a deposit guarantee fund will be fast-tracked, given their significance in enhancing efficiency and financial stability of the industry.
