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RESEARCH
KENYANS USING SACCO
LOANS FOR LARGE
INVESTMENTS, REPORT SAYS
By Samwel Mwangi
Kenyans are using SACCO loans “This suggests that digitals loans are not The report observes that SACCOs provide
to support large investments, substituting for traditional sources of just over 1 in 10 Kenyans with financial
according to a new study also credit, but instead are reaching a new services but have not broadened their
showing that digital loans are almost all audience of borrowers- perhaps people user base.
for consumption and emergencies. who were not satisfied with existing
options or previously unable to obtain “Despite their value in providing a more
The report by FSD Kenya, Central Bank credit at the size and terms they needed.” tailored lending and savings offer, they
of Kenya and the Kenya National Bureau are now struggling to expand their tax
of Statistics notes that 28 percent of In addition, the data showed 10 percent base.”
SACCO borrowers are using loans for of those borrowing from SACCOs were
large infrequent expenses, compared using loans for emergency while 16 The data on changes in market landscape
to 9 percent and 15 percent for Digital percent are investing in agricultural shows that SACCOs, Microfinance
Apps and mobile banking. production or businesses. Institutions and banks have each
registered a 2percent decline in the
This contrasts spending on basic personal An analysis on savings showed that number of users.
consumption, with the data showing that 46 percent of Kenyans are saving in
majority of Kenyans are borrowing for SACCOs for large infrequent expenses, On the other hand, mobile banking,
personal consumption. with formal savings overtaking informal mobile money and digital loans have
savings. experienced an increase in users to
45 percent of SACCO borrowers spent around 8 percent each.
the money on personal consumption, the The data further shows that 24 percent
lowest among all providers. Digital apps are saving for personal consumption, 12 FSD said 88 percent of Kenyans have
and mobile banking were at 67 percent percent for an emergency and 19 percent access to mobile money through their
and 62 percent respectively. for investment in agricultural activities. own or other people’s accounts while 1
in every 4 Kenyans use mobile banking
“Loans are mainly used for consumption Compared with other saving devices, services.
while savings have a broader range of SACCOs registered a 2 percent decrease
use cases and are more likely to support in usage from 13 percent in 2016 to 11 Questioned on why are not using SACCO
productive investments and investment percent in 2019. services, 51 percent of the respondent
in assets,” FSD said in the report. cited preferences while a further 30
Research shows that, for most savers, percent quoted lack of trust.
The data shows that formal and informal interest is not the primary reason for
borrowing has risen over the four year choosing a savings device. Instead, some The SACCO sector was the best
period, with the population using digital degree of liquidity together with flexible performing on service quality and
loans rising from 0.6 percent to 7 percent withdrawal terms are the most valuable affordability in comparison to other
and 6 percent to 9percent for mobile features, enabling people to keep money financial institutions such as banks,
banking loans. safe from the temptation to spend while insurance and mobile money.
providing access in times of emergency.
However, as digital loans have increase, “In a context where monthly household
SACCO loans have remained stagnant. The convenience offered by digital expenditure for the bottom 40 percent
devices was cited as the reason for averages Sh12,700, paying an average of
decline in cash savings. Sh6,400 a year to run a bank is beyond
the reach of many.”
38| SACCO Star Magazine
