Savings and Credit Cooperative Societies (SACCOs) are busy digging in and expanding their product offering into digital and micro-credit loans to ward off digital lenders. The idea is to safeguard their customer base amidst stiff competition from other credit institutions mainly commercial banks and digital credit providers.
Digital loans are instantaneous, automatic and remotely processed credit delivered to mobile phone or other devices through mobile money-provider platforms. The number of digital loan products offered by SACCOs has grown to 345 from 251 in 2023.
According to the Sacco Societies Regulatory Authority(SASRA) Database, some 269 SACCOs now offer digital loans with majority of them disbursing up to a maximum of KSh 50,000 repayable within two months. Another 17 SACCOs offer digital loans of above KSh 500,000 from only 3 SACCOs in 2023. The average repayment period of large amounts above KSh 500,000 ranges from 7-18 months.
The average interest rates for these digital loans per month range from 6.66% to 7.28% for deposit-taking SACCOs while NonWithdrawable Deposit-Taking SACCOs charge higher rates of up to 10% per month. SACCOs are also deploying other alternative delivery channels, including partnerships with third-party financial institutions – banks, and fintech companies to deliver their financial services and products to members.
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The latest SASRA Annual Supervision Report mentions that the main alternative financial delivery channels deployed by SACCOs is through partnerships with banks and fintech companies. SACCOs are relying on mobile money platforms, ATM connectivity, cheque financial services, Pesalink connectivity, digital credit and loans and SACCO agency business among others, to keep up with the technology race in Kenya’s financial markets.
SACCOs are now shifting members to digital branches as they move from the more capital-intensive traditional brick and mortar teller branch services. This is as millennials and Gen Z generations demand real-time financial transactions premised on the latest financial tech devices and channels.
SACCOs have equally invested heavily in the provision of digital loans either through the USSD code accessibility on feature phones, or internet enabled applications on smart phones.
In particular, 93.22% of all Deposit-Taking Saccos had deployed USSD code-enabled financial delivery channels by the end of last year. Others are on internet-enabled platforms and Apps.
While mobile money connectivity is progressively gaining traction in the SACCO industry, as it is in other sectors of the economy, SASRA warns of the cyber risks associated with these digital services.
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