The planned formation of an inter-sacco lending window to cover for unforeseen and unusual short-term cash shortfalls is long overdue.
If well implemented, it has the potential to strengthen the sacco movement while safeguarding the welfare of millions of depositors.
For long, saccos have struggled to meet the regulatory 15 percent liquidity ratio to savings deposits. With a few sources of cheap credit, most rely on commercial banks that lend them money, albeit at high interest rates. Worse, the loans are not guaranteed.
But this inter-sacco lending window should come as a reprieve enabling them to access the much-needed cash.
There is, however, a need to have tight guidelines on lending to ensure that the window is not abused.
Sacco cash is essentially depositors’ savings. The failure of a struggling sacco to repay loans means depositors elsewhere stand to take a hit. If that comes to pass, then it will have failed from the onset.
This is a challenge the Sacco Societies Regulatory Authority should take up seriously.
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