Stima Investment Co-operative Society will guarantee members’ loans at Rafiki Microfinance Bank to invest in homes.
The partnership ensures members and non-members of Stima Investment who wish to buy houses and plots sold by the co-operative have easy access to cash.
“Our partnership with Stima Investment Co-operative Society provides an opportunity for its members and non-members to access credit facilities that will promote home acquisition as well as construction,” read a statement from Rafiki Microfinance Bank.
Rafiki is setting aside Sh300 million for the partnership. Stima Investment has a membership of over 30,000 members.
Sale of houses and plots by the investment arm of the sacco is likely to result in an influx of new members to the parent sacco as they seek to get discounted prices and loan rates offered to members. An influx could strain a sacco’s liquidity levels.
Stima Sacco has been aggressively seeking new members by diversifying its products offering. It has increased its membership and asset base to move up the ranking ladder to position three from fifth two years ago.
Last month, it entered into a partnership with Family Bank for its customers to use the bank’s 80 branches to access cash. The sacco is building 1,500 housing units for its members at an estimated cost of Sh4 billion.
The houses will be built on the sacco’s 100-acre piece of land in Kasarani, near Kiriri University.
Saccos have been seeking to use their cash to construct houses at low prices for their members to invest in, leveraging on desire to own a home.
Ambitions of home ownership have, however, been limited to only a small group due to lack of access of funds. Other saccos offering houses and land products to members include Mwalimu Sacco, Safaricom Sacco and Chai Sacco.
Mwalimu Sacco is building 871 units for its members in Kisaju, Namanga Road, at a cost of Sh2.9 billion, while Safaricom Sacco plans to build 300 units on a five-acre piece of land in Mlolongo at a cost of Sh1 billion.
Saccos have been known to offer better lending rates than banks as they have to get members’ approval for the pricing unlike banks which pursue the profit motive.
As at December 2013, there were only 19,879 mortgage loans in the banking sector of an average size of Sh6.9 million.
Lenders were charging an average of 16.3 per cent for long-term house loans, attributing the high price to lack of long-term funds as most of their customers hold money for short periods.