East Africa

Land, housing sectors take largest share of SACCO loans in Kenya

NAIROBI– A sectoral lending report by Kenya’s SACCO regulator, Sacco Societies Regulatory Authority [SASRA] puts the land and housing sectors of the Kenyan economy as the biggest borrowers of Sacco loans, accounting for 26.98 percent of the total credit facilities advanced by Saccos in 2021

According to Kenyan media agencies, SASRA has been piloting the collection of quarterly sectoral lending reports from SACCOs to determine the sectors in respect of which loans and other credit facilities advanced by SACCOs are aimed at financing.

According to the report, the education sector had the second highest proportion of the credit facilities at 20.83 percent of all the credit advanced in 2021 with the agricultural sector coming third with a proportion of credit advanced in 2021 accounting for 17.47 percent.

The analysis shows a majority of SACCO members borrow principally to buy or purchase land or housing, fund educational needs, and lastly for agricultural purposes.

According to figures from SASRA database, the amounts of credit advanced towards the trade sector; and the manufacturing and service industry sectors accounted for 12.16 percent and 7.88 percent, respectively thereby showing low activity of members of SACCOs in these sectors.

It is however interesting to note that some members of SACCOs took credit for purposes of repaying other credit facilities in the commercial or microfinance or mortgage finance institutions, or to pay for insurance premiums and make financial investments.

Consistent with being socio-economic enterprises, the amount of credit advanced by the SACCOs for the period ended December 2021 for consumption and social services accounted for 8.36 percent of the total credit and loan facilities advanced in the year.

The proportion of investments by Non-Withdrawable Deposit-taking SACCOs [DT-SACCOs] in land amounted to a paltry 5.68 percent of the portfolio investments while the investments in property and equipment accounted for the highest proportion of the portfolio investment at a whopping 62.32 percent.

The low investments by Non Withdrawable DT-SACCOs in the land are consistent with the fact that, unlike their DT [1] SACCOs counterparts which have heavily invested in land and buildings, the NWDT-SACCOs generally operate in rented premises and very few have invested in any land or housing.

Analysts maintain that Investment Saccos deals with high-value investments, land, housing, and motor vehicles, among others, yet there are no guidelines to oversee these investments and requirements for disclosure on sources of money. This makes it easy for these Saccos to be misused for the laundering of illicit funds.

The law stipulates that a DT-SACCO shall not invest in non-earning assets or property and equipment in excess of 10 percent of the total assets, of which land and buildings shall not exceed five [5 percent] percent, unless a waiver to that effect has been obtained from the Authority.

Section 46 [1] of the Regulations 2020 provides that a Non Withdrawable DT-SACCO shall not invest in land and buildings; and equipment in excess of ten percent of total assets, unless a waiver to that effect has been obtained from the Authority, provided that the: [a] investment in land and buildings shall not exceed five percent of the total assets; and [b] donated assets and foreclosed assets are excluded in arriving at this percentage.


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