Savings and credit co-operative societies (saccos) are enlisting the services of financial consultants to advise and help secure funding from foreign lenders, signalling a gradual shift from overreliance on the conventional local bank loans and member deposits.
Local financial and management consultancy AVLC Group said it had structured financing deals for more than five saccos to secure funding from the World Bank valued at more than Sh1.3 billion this year.
The consultancy said it was receiving more requests from other saccos seeking funding for on-lending to small businesses in various sectors, including trade financing, agriculture and startups.
The loans are being disbursed in Kenya shillings at varying interest rates, with the World Bank, for instance, offering saccos cheaper funding at nine percent.
This means that the societies can on-lend the funds at 12 percent and profit from the interest rate spread —the interest saccos earn on loans they disburse and the cost of interest of securing the same funds.
“So far, we have over five saccos with a total value processed of over Sh1.3 billion. But it is an ongoing process because right now we are in discussions with other saccos that have been reaching out to us to assist them, especially for the financial year 2026,” AVLC chief executive Andrew Kanyutu told the Business Daily.
“We have also had saccos, which are making enquiries from Uganda, Tanzania, to structure deals to access not only the World Bank funding but to tap into other funding available.”
He added that the institution is engaging multiple financiers from the US, the UK and the United Arab Emirates.
Saccos are targeting funding from international financiers to boost their lending capacity amid a challenging domestic economic environment that has severely impacted incomes for households and businesses.
For instance, the consultancy served as the lead arranger in a Sh500 million facility for Githunguri Dairy Farmers Cooperative Sacco under the World Bank-backed SAFER Fund, playing a key role in structuring the transaction, ensuring compliance with international financing standards and aligning the process with sustainability and impact goals.
“The World Bank’s SAFER Fund was meant to boost post-Covid, but you see, after boosting, now people would want to get to the next level, now you have stabilised, you need growth,” said Mr Kanyutu.
“The World Bank still has those kinds of funds and partners they work with to bring on board that funding. Those partners are even private entities who are willing to put funds, but their core business is not monitoring performances, but they are willing to do so through foundations, through certain channels.”
Structuring a financial deal means creating the specific framework and terms for a transaction, including how it is financed, how risk is allocated and how it will be repaid. It involves various components, including pricing, tax implications of the transaction, collateral, guarantees, and repayment schedules to meet specific objectives and manage risks.
In Kenya, the external borrowing ratio for regulated saccos, which measures the proportion of total liabilities from external sources, mainly commercial banks, has been set at a statutory maximum of 25 percent.
According to the Sacco Societies Regulatory Authority, the overall trend analysis of the external borrowing ratio of regulated saccos over the years shows a progressive decline.
The external borrowing ratio for deposit-taking saccos dropped to 2.51 percent in 2024 from a high of 3.02 percent in 2023, while that for non-withdrawable deposit-taking saccos dropped to 1.46 percent from 1.62 percent in the same period.
“Most lenders want to ensure their funds are safe and, apart from safety, that it is reaching the intended purposes. So they are looking at working with entities and consultants who can understand the customers’ local needs, for example, if you come to Kenya, it is easier for you to lend through a sacco than to come and establish a company and start lending because your core business is not creating the credit models or creating the recovery models,” said Mr Kanyutu.
“Your core business you have seen an opportunity, you need to invest, so you work with structured and regulated entities like Saccos who have been able to manage their risks because of the group lending which mitigate default and self- guaranteeing and also they reach the actual intended persons on the ground.”
In December 2021 the World Bank launched a $100 million (Sh13 billion) financing programme for small businesses destroyed by the economic fallout of the Covid-19 pandemic under a five-year programme seeking to safeguard recovery of about 70 percent of the affected firms.
The programme dubbed ‘Supporting Access to Finance and Enterprise Recovery (SAFER) fund’ has opened a window for saccos to strengthen their cash positions through cheaper funding away from bank loans.
The funds are being channeled through the Kenya Development Corporation (KDC).
The bank estimates that about two-third of small businesses in Kenya were affected by the Covid-19 crisis in 2020, with hopes that about 70 percent of them will resume operations based on the financial support.
