SACCOs Expand Revenue Bowl as Harsh Economy Bites

By Jackson Okoth

 

S

avings and Credit Co-operative Societies(SACCOs) are busy redesigning their financial products, policies and strategies so as to compensate for low loan disbursements as a tough economy erodes household incomes and thrown many out of jobs.

 

For players like Mwalimu National SACCO, the plan is generate other revenues away from its core activity of collecting deposits and lending to members.

 

Non-funded income refers to revenue generated by a business or financial institution without directly using its own funds or capital.

 

By introducing cheque books and a contact centre, Mwalimu SACCO is seeking to expand its transaction fee earnings, and other charges for services provided to by the SACCO to its members.

 

“ There are those who still believe that cheque books actually are more convenient in terms of driving their business but of course there are other generations that believe that the digital platforms are better in terms of transacting with the SACCO. So it's a mixed bag and that's what we are pursuing,” said Mr Kenneth Odhiambo, Mwalimu National SACCO Chief Executive. 

Mwalimu SACCOs non-funded revenue currently stands at 11 per cent. With the new initiatives, the SACCO intends to push this to 18 per cent in the first year, 25 per cent in the second year and eventually hit 30 per cent within three years. 

SACCOs typically generate non-funded income from sources such as transaction fees charged for ATM withdrawals, funds transfer or payments processing.  Other sources include account maintenance charges, revenue from mobile banking services, online or digital payment services. 

While the 2024 Sacco Supervision Annual Report for 2024 is to be released next month, the latest edition shows that non-funded income for SACCOs in 2023 showed significant growth. 

For instance, SACCOs saw a 66.32% jump in operating income to KSh 13.73 billion from KSh 8.26 billion in 2022. The main contributors to this income was transaction fees, premiums, membership fees and card issuance. 

SACCOs also earned huge non-funded income from their investment in Government securities, money market funds and placement with other financial institutions. 

In 2023, SACCOs posted a 12.94% increase in total income, reaching KSh 136.3 billion from KSh 112.15 billion or 82.28% coming from loans while some 18% was from non-funded income.

 Some top-performing SACCOs by total income in 2023 included Stima SACCO( KSh 8.95 billion), Kenya National Police SACCO(8.86 billion), Mwalimu National( KSh 8.38 billion), Harambee SACCO( KSh 5.46 billion) and Imarisha SACCO( KSh 3.74 billion). 

While traditional  SACCO models are designed to collect  savings/deposits and lend to members, earnings from this revenue stream is now threatened by dwindling household incomes, job losses, high cost of living and the resultant huge non-performing loans due to poor loan repayments. 

Odhiambo said Mwalimu is seeking to cut dependence on member cash by seeking for alternative revenue streams. 

Mwalimu SACCO is also alive to the stiff competition posed by emerging digital lenders as well as banks and other micro-lenders. It is thus stepping up its digitization program to keep pace with fintechs and a rapidly changing credit market.

 With its Cheques, Mwalimu SACCO targets to capture the needs of teachers, who form the bulk of its membership and businesses that engage in high volume transactions that requires huge cash outlays. 

Mwalimu National Chairman Joel Gachari said the shift in customer dynamics is being driven by changing member demographics. 

“Over 30 per cent of our members are now drawn from outside the teaching fraternity. Their incomes have grown, and they are seeking bigger and more convenient solutions. The cheque book gives them an additional option alongside our digital and cash withdrawal channels,” Mr Joel Gachari, Board Chairman, Mwalimu National SACCO.

 

Mwalimu National SACCO is also polishing its mobile banking offering, a platform that allows members to access up to KSh 500,000. The SACCO intends to push this limit to KSh 3 million by the close of 2025. 

Given that SACCOs are still locked out of the National Payments System, Mwalimu SACCO has partnered with Family Bank, to provide the Cheque services.
 

The Mwalimu SACCO branded Cheque allows members to transact within banking timelines while maintaining the SACCO brand presence.

 

Banks Top List of Lenders to Kenyan Farmers: CBK Survey

 Farmers still rely on banks for most of the emergency cash requirements, purchase of farm inputs, payment for hired labour and purchase of machinery

By Jackson Okoth

Banks have remained the leading lenders to farmers over the last one year, at 39.1%, according to the July 2023 Monetary Policy Committee(MPC) Agriculture Sector Survey conducted by the Central Bank of Kenya(CBK).

Banks, digital loans, friends/family and the Hustler Fund were the main sources of credit for farmers, with the funds mainly used to finance, farm inputs, labour and equipment hire.  

Other lenders to farmers included the Agricultural Finance Corporation (3.4%), Microfinance Banking Institutions (2.3%), Buyer of Farm Produce (2.3%), informal money lender (1.1%) and Other (5.7%)

According to this Survey, 14.9% of farmers sampled borrowed funds from friends and family as well as taking digital loans from such platforms as Mpesa, KCB Mpesa, Mshwari among others, to finance their farming activities.

Co-operative Societies accounted for 5.7% of farmers who borrowed money to finance their farming activities.

The State sponsored Hustler Fund, which was introduced last year to provide cheaper credit to individuals at the low end of the income pyramid and with no collateral, accounted for 10.3% of those who got loans to conduct their farming activities.

CBK noted that the newly launched Fund has great potential to finance small scale farmers in settling day-to-day expenses such as payment of workers and purchase of inputs

This Survey drew respondents from wholesale, and retail markets, and farms in major towns across the country. These included Nairobi, Nairobi Metropolitan area, Naivasha, Gilgil, Nakuru, Narok, Bomet, Nyandarua, Nyahururu, Kisumu, Mombasa, Kisii, Eldoret, Kitale, Meru, Mwea, Machakos, Isebania, Nyeri, Molo, Kericho, Isiolo, Oloitoktok, Namanga and Makueni.

Credit facilitates access to requisite farm inputs such as seeds and fertilizer. It also facilitates the payment of workers, purchase/lease of land and adoption of appropriate technology in agriculture.

A majority of the sampled farmers in this Survey (86.2%) borrowed to purchase farm inputs followed by labour costs (50%) and hire/lease of farm equipment (46.6%) respectively.

This clearly shows that the farmers are in need of operating capital to run the day to day farming activities.

The proportion of the farmers who borrowed to expand their farms, buy equipment and machinery as well as diversify their farming activities was relatively low. This could be rationalized by the huge amount of money required for capital investments in agriculture.

Most of the sampled farmers cited high interest rates (29.5%) as the main reason why they had not borrowed to finance their farming activities. This was followed by 23.0% who indicated that they did not need credit while 18% feared crop failure, a likely scenario in case of insufficient rainfall, drought or flooding.

Some farmers also feared auctioning of their property (8.2%) in the event they default on the loans. Another reason was related to asset ownership where 8.2% indicated that the land was not in their name while 11.5% lacked collateral which is key when borrowing for agriculture.

Most lenders ordinarily require a farmer to present a title deed registered in their name for them to access credit.

This could explain why most of the borrowers either went for digital loans, loans from friends and family or Hustler Fund, all of which do not require collateral.

 

 

Banks Top List of Lenders to Kenyan Farmers: CBK Survey

By JACKSON OKOTH

Banks have remained the leading lenders to farmers over the last year, at 39.1%, according to the July 2023 Monetary Policy Committee(MPC) Agriculture Sector Survey conducted by the Central Bank of Kenya(CBK).

Banks, digital loans, friends/family, and the Hustler Fund were the main sources of credit for farmers, with the funds mainly used to finance, farm inputs, labour, and equipment hire.  

Other lenders to farmers included the Agricultural Finance Corporation (3.4%), Microfinance Banking Institutions (2.3%), Buyers of Farm Produce (2.3%), informal money lenders (1.1%) and Others (5.7%)

According to this Survey, 14.9% of farmers sampled borrowed funds from friends and family as well as taking digital loans from such platforms as Mpesa, KCB Mpesa, and Mshwari among others, to finance their farming activities.

Co-operative Societies accounted for 5.7% of farmers who borrowed money to finance their farming activities.

The State-sponsored Hustler Fund, which was introduced last year to provide cheaper credit to individuals at the low end of the income pyramid and with no collateral, accounted for 10.3% of those who got loans to conduct their farming activities.

CBK noted that the newly launched Fund has great potential to finance small-scale farmers in settling day-to-day expenses such as payment of workers and purchase of inputs

This Survey drew respondents from wholesale and retail markets, and farms in major towns across the country. These included Nairobi, Nairobi Metropolitan area, Naivasha, Gilgil, Nakuru, Narok, Bomet, Nyandarua, Nyahururu, Kisumu, Mombasa, Kisii, Eldoret, Kitale, Meru, Mwea, Machakos, Isebania, Nyeri, Molo, Kericho, Isiolo, Oloitoktok, Namanga and Makueni.

Credit facilitates access to requisite farm inputs such as seeds and fertilizer. It also facilitates the payment of workers, purchase/lease of land, and adoption of appropriate technology in agriculture.

A majority of the sampled farmers in this Survey (86.2%) borrowed to purchase farm inputs followed by labour costs (50%) and hire/lease of farm equipment (46.6%) respectively.

This clearly shows that the farmers are in need of operating capital to run their day-to-day farming activities.

The proportion of the farmers who borrowed to expand their farms, buy equipment and machinery as well and diversify their farming activities was relatively low. This could be rationalized by the huge amount of money required for capital investments in agriculture.

Most of the sampled farmers cited high-interest rates (29.5%) as the main reason why they had not borrowed to finance their farming activities. This was followed by 23.0% who indicated that they did not need credit while 18% feared crop failure, a likely scenario in case of insufficient rainfall, drought, or flooding.

Some farmers also feared auctioning off their property (8.2%) in the event they defaulted on the loans. Another reason was related to asset ownership where 8.2% indicated that the land was not in their name while 11.5% lacked collateral which is key when borrowing for agriculture.

Most lenders ordinarily require a farmer to present a title deed registered in their name for them to access credit.

This could explain why most of the borrowers either went for digital loans, loans from friends and family, or Hustler Fund, all of which do not require collateral.

 

 

African Investigative Journalist of the Year Award 2023 Scheduled for South Africa

  

 

 

By Jackson Okoth

 The inaugural African Investigative Journalist of the Year Award takes place between 20^th and 23^rd November 2023, at Wits University, South Africa.

Organizers of this event, an exciting new addition to the continent’s flagship journalism gathering, are calling on all journalists from Africa to submit their works. At stake is a chance to win US$ 5,000 in prize money.

This African award is open to all journalists or teams of journalists working in any media for stories from and about Africa, published or broadcast in African media between 1 June 2022 and 31 May 2023. Entries close at 2pm on 1 September 2023.

The award, supported by Absa, recognises outstanding examples of investigative reporting from Africa that reveal untold stories, hold the powerful to account, question those in public life and serve the public interest.

The award ceremony will be held at the African Investigative Journalism Conference, which takes place from 20th to 22nd November 2023 at Wits University- situated in Johannesburg, South Africa.

The 19th African Investigative Journalism Conference organisers have reached out to all fellowships to attend this AIJC 2023 event

This year’s conference that brings together Africa’s finest journalists, will offer three days celebrating great work, sharing with and learning from each other.

In 2022, the conference attracted over 400 participants from 36 African countries as well as 10 nations outside Africa in over 80 sessions in a place billed as the place to be if one is or wants to be an investigative reporter.

 Interested participants have been urged to fill a survey form, posted on the AIJC website, before 15^th September 2023.

This document, posted on the will assist the organizers to know more about fellow colleagues and make sure the conference meets their needs and interests.

 

 AIJC@journalism.co.za

 

Four Deposit-Taking SACCOs join the Top Billionaires Club in 2022, SASRA Reports

The number of Deposit-Taking SACCOs with members’ savings crossing the KSh 1 billion threshold increased in 2022. This follows the entry into this exclusive billionaires’ club by Defense Sacco Society with head office in Nairobi County; Faridi Sacco in Busia, Daima Sacco in Embu, and Elimu Sacco Society Ltd with its headquarters in Nairobi.

The latest data from Sacco Societies Regulatory Authority(SASRA) also shows that those DT Saccos that saw their members’ savings rise above KSh 5 billion increased from 28 in 2021 to 32 in 2022

The new entries to this higher category include Magereza SACCO Society Limited in Nairobi, Solution SACCO Society in Meru; Ollin SACCO in Kirinyaga; and Winas SACCO Society with Head offices in Embu County.

Jogoo Non-Withdrawable Deposit-Taking Sacco also increased its deposit liabilities to cross the KSh 1 billion mark in 2022.

 Although the Regulated SACCOs witnessed an overall increase in their total deposits in 2022 by 9.84%, with DT-SACCOs segmental deposits increasing by 10.19% while the NWDT-SACCOs segmental deposits increased by 7.97%; a deeper analysis shows that the growth rates were not evenly distributed.

A total of 289 regulated SACCOs reported positive growth rates in their individual deposits, while the remaining 70- Regulated SACCOs reported negative growth rates in their individual deposit liabilities.

The negative growth rates in the deposit liabilities were occasioned by membership withdrawals as well as the offsetting of deposits towards loan repayments upon defaults.

 SACCOs Are Most Preferred Choice for Savers-SASRA Report

Savings and Credit Co-operative Societies (SACCOs) loans and advances outweigh the deposits, an indication that SACCOs are the preferred loaning institutions by savers due to their competitive rates, and social collateral (guarantee) model.

This is compared to commercial banks and microfinance banks that offer lower savings rates and place stiffer conditions including a title deed before disbursing their costlier credit facilities.

According to the latest Sacco Societies Regulatory Authority(SASRA) Supervision Report 2022, the average interest rates paid by regulated SACCOs on member deposits in 2022 marginally increased to 6.92% in 2022 from 6.86% paid in 2021.

The Deposit Taking SACCOs segment paid the highest rates on their members’ savings at 7.11% in 2022 compared to the NWDT-SACCOs which paid a mean interest rate of 7.10%.

These returns on members’ savings were higher than the interest rates paid by commercial banks on savings which averaged 3% during the year 2022.

This cements the dual comparative edge of savings in SACCOs which not only earns interest but also applied as collateral against loans advanced to members.

In addition, SACCOs paid their members a return on their share capital at a mean rate of 10.47% in 2022 compared to a mean rate of 9.87% in 2021.

 Deposit-Taking SACCOs paid dividends on the members’ shares at a rate of 10.41% in 2022 compared to a rate of 9.44% in 2021; while the Non Withdrawable Deposit-Taking-SACCOs segment on the other hand paid a return on the members’ shares as dividends at a rate of 10.92% in 2022 from a rate of 10.55% in 2021.

SACCO has also continued to record a lower Non-Performing loan at 8.40% in 2022 compared to 13.80% for Commercial Banking Institutions and 31.78% for Microfinance Banks in the same period.

 It is notable that SACCO loans are funded by members’ savings and to a small extent external borrowing, unlike the case of commercial banks and microfinance firms which rely on external borrowings.

Commercial banking institutions dominated the deposit-taking institutions with total assets of KSh. 6.59 Trillion in 2022 followed by the Regulated SACCOs at KSh 890.30 billion while the Microfinance Banks’ total assets stood at KSh 70.43 billion.

In addition, Customer deposits in Commercial banking institutions stood at KSh 4.8 trillion compared to the SACCOs whose members’ deposits stood at KSh 620.45 billion while those of Microfinance institutions stood at KSh 46.49 billion in 2022 respectively.

Commercial banking Institutions led in loans disbursed, totalling KSh 3,630.25 Billion in 2022 followed by SACCOs with KSh 680.35 Billion while the Microfinance Banks stood at KSh 39.33 Billion in the same period.

The SASRA analysis shows that the SACCOs’ total assets in 2022 accounted for 11.79% of the entire balance sheet of deposit-taking
financial institutions in Kenya. This reflected a marginal increase from a proportion of 11.69% of the total assets of the deposit-taking financial institutions in 2021.

Commercial banks still have the largest share of the deposit-taking financial institutions’ balance sheet with a proportion of 87.28% in 2022 but representing a small decline from a proportion of 87.24% in 2021.

The Micro-finance banks accounted for the least amount and proportion of the total assets of the deposit-taking financial institutions in 2022 at 0.93% which is a drop from a proportion of 1.07% reported in 2021.

On the deposits front, the Regulated SACCOs market share stood at 11.43% in 2022 compared to commercial banks at 87.71% while the Micro-Finance Banks had a market share of 0.86% of the deposits among the deposit-taking financial institutions.

The commercial banking sectors’ total assets to the national GDP remained the most dominant within the financial sector space accounting for over 48.90% of the national GDP in 2022 with the pensions and insurance industries following at 11.79% and 7.06% respectively.

The contribution of the regulated SACCOs coming at 6.66% is quite significant to the economy and cements the critical role that  SACCOs play in the national development.

 And since most of the regulated SACCOs serve household economies especially those in the lower echelons of the economic pyramid, a lot more needs to be done to further deepen their contribution.

 

 Trans Century Plc climbs to week's top price gainer at NSE.

Trans Century Plc was the top gainer at the Nairobi Securities Exchange(NSE), its share price rising 18.45% to close at KSh 1.22 per share. This is compared to KSh 1.03 recorded the week prior.

Trans Century is a listed firm engaged in power, infrastructure and engineering industries across Africa. 

The firm began the year with a share price of KSh 1.45 KES but has since lost 15.86% off that price valuation, ranking it 58th on the NSE in terms of year-to-date performance.

Shareholders, who have been jittery following undisclosed plans by TransCentury to delist from the NSE, appear to have calmed. 

This is shown by the 9.91% increase of Trans Century share price in recent weeks since March 17, 2021.

The share price of Trans Century, with a Market Capitalization of KSh 341.96 Million, has gained 18.45% over the past one week, 9.91% over a month but a 15.86 % decline YTD performance.

The NSE Weekly turnover increased by 13.88% to KSh 2.34 billion from KSh 2.06 billion posted in the week prior. 

The volume of shares traded increased by 4.18% to 64.8 Million from the 62.2 Million transacted the week prior.

Safaricom was the prime mover with a turnover of KSh 1.2 billion, equivalent to 51.23% of the week's traded value. Its share price rose by 5.79% to close the week at KSh38.40, up from KSh 36.30 the previous week.

The Banking Sector came in second with shares worth KSh 558 Million transacted, an equivalent of 23.81% of the week’s traded value. 

KCB Group Plc closed the week 5.00% higher to KSh.42.00 per share and had 4.4 Million shares valued at KSh.186 million transacted. subsidiary 

Equity Group Holdings Plc gained 3.05% in share price to KSh38.85 on a volume of 3.6 Million shares and a turnover of KSh 137 Million. 

Car & General (Kenya) Plc was the week’s top loser, shedding 10.00% to close the week at KSh 21.60 from KSh 24.00 the week prior.

The Secondary Bond Market realised a 615.32% rise in activity with KSh 27.32 Billion worth of bonds traded against KSh 3.82 Billion worth of bonds transacted in the previous week.

 The Derivatives Market closed the week with a total of 116 contracts valued at KSh 4.2 Million transacted, compared to 76 contracts valued at KSh 3.5 Million posted in the week prior.

The benchmark NSE All-Share Index(NASI)was up 6.49 points or 4.09% to close the trading week at 165.08 points. This represented a  4-week gain of 1.07% and an overall year-to-date gain of 8.53%.

The NSE 20 share index and the NSE25 share indices were up by 14.20 points or 0.76% and 117.68 or 3.35% to close Friday 16th April 2021 at 1,882.96 points and 3,635.75 points, respectively. 

The NSE 20 and the NSE25 share indices have shed up to 0.78% and 6.46%, respectively, in YTD performance.