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Opinion & Analysis

Sacco reforms key to raising financial inclusion

Saccos are popular with many Kenyans. file photo | nmg
Saccos are popular with many Kenyans. file photo | nmg 

With a membership of 3.6 million, around nine per cent of Kenyans belong to a savings and credit co-operative organisation ( sacco). Though the figure is low compared to countries like Canada or Ireland where the figure is around 44 per cent, it is still quite impressive.

Saccos provide an alternative banking avenue for people not served by formal banks. And with the coming into effect of new accounting standards for banks, the number of people who can’t adequately access financial services through the banks is bound to rise.

Hence the need for saccos can’t be overemphasised. They give opportunities for people to save and access loans at reasonable rates with few demands. This makes them popular with many Kenyans who have an entrepreneurial spirit.

There has been rapid expansion of saccos. Whereas in the past they used to comprise members from similar background e.g. location or employer, nowadays saccos are accepting members from the wider community.

And therein lies the risk. Saccos are more prone to default in loans repayment because by law, after saving for a period of time, members are entitled to a loan.

As they diversify their membership, follow up of disbursed loans might be hampered. This is more so as sharing of the credit information is voluntary and hence not fully utilised as is the case with banks.

Since the sacco members’ loans come mainly from members’ savings, at times members borrow more than they have saved. This stretches out the saccos and forces them to borrow from other expensive sources.

The government should consider stepping in with a fund from where the saccos can borrow money for onward lending to members. Also consider pooling the youth and women funds into a fund for saccos. This is because the two funds provide finances to groups and not individuals a role that people in a sacco can do. This would ensure more cash available for saccos and also remove the free-money tag associated with the fund.

Many saccos are currently feeling the heat from low business activity, staff layoffs etc. The regulators are doing a commendable job in ensuring that the saccos do not collapse with members’ savings.

Let’s all support the sacco movement to further increase financial inclusivity in Kenya. The sacco loan portfolio of about Sh300 billion may not rival the banks’ Sh1.9 trillion for last year, but it’s a great step forward.

The devolved governments should also play their part in encouraging formation and growth of sacco’ in their counties.

Kariuki Gathuitu, Nairobi, via email

There are salary disparities in same civil service job groups

As a former accountant and auditor in the civil service, I cannot keep quiet on this matter. I do not keep quiet whenever I have something to say, as you might have noted. There was an advertisement in the newspapers during the week comparing salaries for some cadre in nursing and what is paid to accountants in the civil service who happen to be in the same job groups.

Nurses in the same job groups with accountants were earning almost double when their allowances were taken into account.

And yet we say they are in the same job groups? There is a bit of misrepresentation there! Are we saying that accountants can comfortably live with what they earn, augmented with what they “make for themselves?” on the side.

Githuku Mungai, via email

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