Plans under way to use Saccos in disbursement of women funds

The government plans to use Saccos in disbursing the Women Enterprise Fund in a bid to reach more women especially in the rural areas.

Women currently access the loans from financial intermediaries mostly based in urban areas, locking out those in far-flung areas.

“Most of the financial institutions like the microfinance institutions and banks are concentrated in towns and cities and women in rural areas find it difficult to access the loans, said Gender minister, Ms Esther Murungi.

“In the next disbursements in June 2010, we intend to use 34 financial intermediaries, the majority of which will be Saccos since they have a wider grassroots reach.”

She was speaking at the launch of Federation of Women Associations (Fewa) Co-operative Society in Nairobi last week.

Used channels
The women fund is mainly disbursed through Constituency Women Enterprise Scheme (CWES) and through selected financial intermediaries like banks, microfinance institutions, and Saccos.

CWES has an allocation of Sh1 million per constituency and advances loans of up to Sh50,000 to a maximum of 20 women groups per constituency.

An interest rate of five per cent is deducted up front to cater for administrative costs. In the next disbursements expected to start in June 2010, the allocation per constituency will be increased to Sh2 million from Sh1 million.

Financial intermediaries who were allocated Sh640 million from the fund in the 2007/2008 fiscal year, are supposed to lend to women at an interest rate of eight per cent with a repayment period of 36 months and a one month grace period.

The institutions lend to individual women or to companies incorporated by women.

Controversy
The planned use of Saccos is likely to trigger debate since Saccos only lend to their members. In effect, women investors will have to join one of the Saccos appointed by the fund’s secretariat to access the portion of loans channelled through the institutions.

A total of eleven financial intermediaries were used in the first disbursement of the fund: three Saccos, two banks (Co-operative Bank and Family Bank) and six other financial agencies.

The minister may be seeking to tap into the network of Saccos spread throughout the country, estimated to be more than 3,000 and having a share and capital base of Sh120 billion.