More Kenyans turn to Saccos for loans, as debt from commercial banks shrinking to a record low last year. This is according to HTM Capital, which has been tracking Kenyans’ borrowing habits for the past 10 years.
The report says, Saccos have friendlier credit terms compared with banks even though the amount to be borrowed is limited to an individual’s savings. Also, Saccos are more accommodative in their debt collection than banks making them a good option during harsh economic times.
“Commercial banks’ share of aggregate private sector credit declined to a record low of 86 per cent while the Saccos’ share hit an all-time high of 11.2 per cent,” said HTM Capital in their report released recently.
The shrinkage by banks followed an 8.2 per cent drop in their loan accounts while those operated by Saccos shot up by 17.5 per cent.
The growth of Saccos also follows their aggressive recruitment without regard to whether new members have a common factor with the founders such as teachers Saccos.
Loan accounts operated by microfinanciers also dropped 14.5 per cent, despite the entry of international micro-lenders into the market.
Micro-lenders have been accused of being exorbitant in their pricing and equally uncouth in their collection.
The introduction of interest rate caps was expected to cause an exodus from Saccos to the banking sector but the reverse has happened. This would indicate that the banking industry is ailing from more than just the capping of interest rates.