SACCOs can offer small businesses vital credit lifeline

SACCOs can offer small businesses vital credit lifeline

The latest update from Central Bank of Kenya shows that credit to small businesses in Kenya has fallen by nearly six per cent since the law capping interest rates was signed last August.
These businesses are the lifeblood of the economy, employing millions of Kenyans helping the economy grow. As such, their access to financing remains critical. They have been the biggest casualties of the slowdown in credit growth that has gripped the economy since last year, falling from about 17 per cent in January 2016 to a little over four per cent today.
In the past, we have seen indigenous banks grow from small outfits to large institutions on the back of financing the small businessman, inherent risk notwithstanding.
It is therefore a worry when the same banks now turn away from the very people who helped build them up. It is not all doom and gloom, however, since Kenya enjoys a diversified financial market that offers alternative channels from which a business can raise capital.
Savings and credit co-operative societies (SACCOs) are one such alternative.
They have for decades provided affordable, and critically, easily accessible credit to their members, saving them the hassle of dealing with banks whose loans have been expensive and accessible mainly to those with payslips and established businesses.
SACCOs have issued loans worth more than Sh250 billion to Kenyans, and carry deposits of more than Sh350 billion.
These funds can be leveraged to fill the gap left by banks which are no longer lending to risky customers, taking into account that the outstanding credit to SMEs by commercial banks is about Sh220 billion. This is not to say that SACCOs are impervious to risk, or that they have no duty of care to ensure that the contributions of members are lent out in a responsible and profitable manner.
In their way of doing business, SACCOs are different to banks, in that they tend to have a more personal relationship with their customers, and can therefore be seen as more of a partner to the borrower in their journey to financial success than a bank could ever hope to be.
It all draws from the original reasons for setting up savings societies. They were essentially not for profit, but rather meant to pool together funds for their members to access in times of need.


Source: http://www.businessdailyafrica.com/analysis/Saccos-can-offer-small-businesses-vital-credit-lifeline/539548-3993626-v4yu1az/index.html

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