SACCOs( Savings and Credit Co-operative Societies) that are licensed to collect deposits will soon have a central liquidity facility that allows these societies to lend to each other. This is as soon as the draft legal structures for establishing the inter-Sacco lending facility is approved by the cabinet and then tabled for debate and endorsement by parliament.
As matters stand, SACCOs have to borrow expensively from commercial banks to meet their cashflow shortfalls.
According to Peter Njuguna, Chief Executive Officer- Sacco Societies Regulatory Authority(SASRA), the draft amendments to existing laws is already underway by a team comprising of financial sector regulators to enable the setting up of the central finance facility.
While National Treasury has indicated that it has set aside an undisclosed amount of cash to be used in setting up an inter-lending facility for SACCOs, there appears to be a lack of speed by the industry to set up the required structures six years since the idea was mooted.
SACCOs are required by law to maintain the regulatory 15% liquidity ratio of savings deposits and short-term liabilities each month.
According to Daniel Marube, CEO of Co-operative Alliance of Kenya(CAK), the inter-Sacco lending facility is still in its early stages. It has been proposed in a bill yet to be passed into law.
SACCOs are expecting stiff opposition from banks
Meanwhile, intense behind the scene lobbying is underway for SACCOs to have their own inter-lending facility to allow them access to cheaper funds they can lend to members.
At the moment, those deposit-taking savings and credit co-operatives with excess liquidity prefer to deposit the cash with local banks, which usually offer lower rates than what SACCOs can earn if they lend and borrow among themselves.
SACCO industry sources disclosed that they are aware setting up an inter-lending facility for SACCOs is likely to attract stiff resistance from commercial banks, who stand to lose a lot of business if the facility is set up.
The draft law is already in place, and SASRA has been given the mandate to set up this facility.