NAIROBI, December 16, 2024: Kenya’s Savings and Credit Cooperative Organisations [SACCOs] have attracted a growing number of customers seeking more affordable loan options as commercial banks keep charging higher interest rates. Despite a third consecutive decline in the Central Bank Rate, reduced to 11.25 percent from previous rates of 12 percent and 12.75 percent in August and October, respectively, commercial banks have been slow to lower their loan charges.
According to the latest 2024 FinAccess Survey, SACCOs in Kenya have emerged as the preferred financial channel among Kenyans, leading with a monthly usage rate of 74.9 percent. This surpasses traditional banks’ 58.7 percent usage rate, highlighting a significant shift in financial preferences. Many Kenyans are turning to SACCOs not only for loan repayments but also for savings contributions and salary deposits, indicating a growing confidence in these financial intermediaries.
The Survey findings also show that an estimated 11.7 percent of adult Kenyans prefer to use SACCOs, compared to mobile money, which leads to 82.3 percent, while Bank usage increased to 52.5 percent.
Traditionally, SACCO members primarily accessed services at SACCO headquarters, a practice now standing at just 1.1 percent as the sector has embraced the technological revolution.
SACCOs have adopted modern service delivery channels such as agency banking, internet platforms, and mobile technologies, significantly transforming member interactions.
Despite the shift towards technology, SACCO members continue to express strong confidence in branch-based services, particularly in rural areas, where usage remains high at 66.7 percent, compared to 52.0 percent in urban settings.
These insights highlight the evolving landscape of SACCO service delivery, emphasising the importance of addressing barriers to technology adoption, particularly in rural areas and among female users.
Tailored training and simplified user interfaces could enhance inclusivity and accelerate the shift toward digital channels.
The majority of respondents who ceased using SACCOs identified voluntary withdrawal [51.7 percent] and an inability to maintain their accounts [46.2 percent] as the primary reasons for discontinuation. Interestingly, urban respondents were more likely to cite voluntary withdrawal compared to their rural counterparts, at 51.1 percent versus 47.4 percent, respectively.
Monthly usage patterns indicate that while mobile money dominates daily transactions, banks and SACCOs play a vital role in managing monthly financial obligations.
According to the Survey, attraction of SACCOs is attributed to their expanded reach following the registration of Non-Withdrawable Deposit Taking SACCOs.
Lower interest rates on loans levied by SACCOs compared to commercial banks may also have motivated their higher usage.
The overall SACCO usage improved from 9.6 percent to 11.7 percent, as more individual households joined Saccos which offered loans at a relatively lower rate during the high interest rate period.
Mobile channels [e.g., USSD, apps, pay bills, POS, and ATMs] emerged as the most preferred usage mode at 70.6 percent, surpassing traditional SACCO usage at 66.1 percent.
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