Half of savings and credit co-operatives (saccos) members borrow to spend on social needs within the family.
A Sectoral Lending Study by the Saccos Regulatory Authority (Sasra) that sampled loans taken in 2016 found that 26.9 per cent was borrowed to pay for electricity, sewer, water, TV, personal debts or for purchase of vehicles and electronics.
Others borrowed to cater for burials and weddings among other rituals.
Another 24.9 percent sought loans to pay school fees for themselves and their children.
This is in contrast to traditional borrowing patterns where most members borrowed to invest in agricultural ventures which in turn helped improve the well-being of members.
The two-year study that sampled borrowing trends countrywide found that farmer loans accounted for 12.9 percent of all loans disbursed in 2016 or Sh21.7 billion.
Tea farmers took the bulk of the loans followed by dairy and coffee farmers.
Land ownership, mainly for residential houses, accounted for 14.2 percent of the loans given out amounting to Sh118.8 billion indicating ambition by members to stop paying rent. “The sum of Sh63.6 billion (54 percent) went into residential units development where Sh55.2 billion (46.5 per cent) was spent on construction of buildings with a paltry 7.1 percent, being Sh8.4 billion, used in renovation of existing houses,” it said.
About 46.41 percent of the borrowers spent Sh55.1 billion on buying plots indicating the rising demand for property across the country, mainly driven by saccos that buy large chunks of land and subdivide them among members.
About 13.5 percent of sacco members spent Sh67.3 billion on expanding businesses, mainly retail and wholesale (95 percent), while the remaining Sh34 billion was spent on value-addition ventures, catering for medical needs among other needs.
The Sasra study recommended a review of the reporting rules to make it mandatory for saccos to disclose specific reasons for loans, their status as well as setting up a standardised reporting template.