Savings and credit co-operative societies (saccos) have become an integral part of the Kenyan economy and financial system, helping raise the national savings. Indeed, Kenya is a beacon of hope in Africa for countries seeking to create an alternative to the banking sector because saccos here have adopted creative ways of expanding and used technology in ways most movements elsewhere can only dream of.
For instance during the current pandemic, most Kenyan saccos have remained open due to technology that has become part and parcel of the financial sector that includes banks. This has helped rope in the younger generation unlike other countries where saccos remain a domain of the elderly. In Ukraine for instance, the credit unions had to shut down over the pandemic owing to lack of technological advancement.
Adopting technology has helped Kenyan saccos chalk up billions in assets, facilitating members to educate children, make investments and build homes. However, the challenge of getting delinquent members to pay up has remained a challenge, with some hopping from one to the next with impunity. While the establishment of the credit reference bureaus (CRBs) has to a large extent sorted out this matter for lenders, mainly banks, the legal framework for Saccos has never been complete despite the Treasury stating the intention during every other annual budget.
The Senate has now changed that through passing of the Bill, which originated from the National Assembly last October, aligning the Sacco Societies Act, 2008, with the Banking Act and the Microfinance Act, 2008. In effect this brings credit information sharing under a single regulatory framework.
In the past saccos would share positive information. But now they can share information of defaulters after informing them, meaning they will have nowhere to run to given that banks were long allowed to do so.
We believe once the President okays the Bill, this will go a long way in de-risking the financial system — which has major international ambitions of setting up a centre — and strengthen both Saccos and banks.
On the part of the holders of bad loans, it will encourage them to clean up house before they are shut out of the credit and savings system.
The President should sign it into law at the earliest opportunity.