Here are 5 reasons why Kenyans borrow SACCO loans and how they spend it

Here are 5 reasons Kenyans borrow SACCO loans and how they spend it
  • The top five countries in Africa with high penetration of Sacco’s are Togo, Senegal, Benin, Kenya and Seychelles. Kenya tops in shares, loans and savings.
  • In Kenya, there were 5,000 Saccos with 4.7 million members and a penetration rate of 19.53% as of 2014.
  • A sectoral lending study by the Saccos Regulatory Authority (Sasra) in Kenya sampled loans taken in 2016 and found some interesting reason why Kenyans turn to SACCOs for loans.

Savings and Credit Cooperative popularly known as SACCOs are emerging as a popular alternative to traditional banks for accessing cheaper and fast loans.

SACCOS work by pooling savings from its members and in turn, provide them with credit facilities at a fee and low interest in a bid to promote their economic interests and general welfare.

According to the World Council of Credit Unions (WOCCU) 2011 statistical report, there are 51,013 credit unions in the world, having a total of 196,498,738 members and a total penetration of 7.8% Penetration rate which is calculated by dividing the total number of reported credit union members by the economically active population age 15-64 years old (World Council of Credit Unions (WOCCU), 2012).

The top five countries in Africa with high penetration of Sacco’s are Togo, Senegal, Benin, Kenya and Seychelles. Kenya tops in shares, loans and savings.

In Kenya, there were 5,000 Saccos with 4.7 million members and a penetration rate of 19.53% as of 2014.

In Kenya, different SACCOs provide a number of products which include but are not limited to credit services, deposit and savings facility, cheque clearing, bankers’ cheques, standing orders, safe custody, and salary advances.

A sectoral lending study by the Saccos Regulatory Authority (Sasra) in Kenya sampled loans taken in 2016 and found some interesting reason why Kenyans turn to SACCOs for loans.

The Sasra study recommended a review of the reporting rules to make it mandatory for saccos to disclose specific reasons for loans, their status as well as setting up a standardised reporting template.

“The sum of Sh63.6 billion (54 percent) went into residential units development where Sh55.2 billion (46.5 per cent) was spent on construction of buildings with a paltry 7.1 percent, being Sh8.4 billion, used in the renovation of existing houses,” it said.

Here are the five reasons Kenyans borrow SACCO loans, according to Sasra.

Social expenses

The two-year study that sampled borrowing trends countrywide found that half of savings and credit co-operatives (saccos) members borrow to spend on social needs within the family.

26.9 per cent was borrowed to pay for electricity, sewer, water, TV, personal debts or for the purchase of vehicles and electronics.

Others borrowed to cater for burials and weddings among other rituals.

School fees

24.9 percent sought loans to pay school fees for themselves and their children.

Buying plots

About 46.41 percent of the borrowers spent Sh55.1 billion on buying plots indicating the rising demand for property across the country, mainly driven by saccos that buy large chunks of land and subdivide them among members.

Land ownership, mainly for residential houses, accounted for 14.2 percent of the loans given out amounting to Sh118.8 billion indicating ambition by members to stop paying rent.

Expanding businesses

About 13.5 percent of Sacco members spent Sh67.3 billion on expanding businesses, mainly retail and wholesale (95 percent), while the remaining Sh34 billion was spent on value-addition ventures, catering for medical needs among other needs.

Farmer loans

Farmer loans accounted for 12.9 percent of all loans disbursed in 2016 or Sh21.7 billion.

Tea farmers took the bulk of the loans followed by dairy and coffee farmers.

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