Kenya Police Sacco eyes Sh50 Billion asset growth by 2022

By Steve Umidha

The Kenya Police Sacco is forecasting a 28 per cent boost in new clients and assets at least by 2022, betting that a digital push and new industry developments will help it grow this year even as the coronavirus upends businesses across the segment.

The Sacco plans to expand its asset base to Sh 50 Billion after announcing an impressive Sh39 Billion for last year from Sh34.8Billion a year earlier – a 12 per cent growth, underpinned by online growth and steady customers’ deposits which jumped to Sh32.6Billion compared to Sh29.1Billion in 2019.

“This year already looks promising owing to the fact that the economy has opened, with more businesses now in operations. We are equally hopeful with the vaccine now with us, which I have taken myself, the growth will surpass last year’s,” said the Saccos’ Chairman David Mategwa while addressing journalists.

Last year saw the industry’s total assets, loans and deposits by Saccos’ register an improvement compared to the previous year, with asset base jumping to Sh622 Billion in 2020 compared to $5.1 billion dollars in 2019 amid the COVID-19 pandemic, according to figures by Sacco Societies Regulatory Authority (SASRA).

“Despite the shocks experienced in individual and business incomes as a result of job losses and disruptions of value chains brought about by the advent of the COVID-19 pandemic from March 2020, the SACCO sub-sector performed relatively well, with an improvement in all key performance indicators,” said John Munuve, Chairman of Sacco Societies Regulatory Authority.

As a result, Kenya Police Sacco’s Mr. Mategwa is banking on last year’s overall performance by players and proposed amendments and new regulations to meet the society’s target this year.

“Were it not for the pandemic, we would have hit the mark by next year when the Sacco will be celebrating its 50^th year anniversary. The shortfall may be there but it is a target that is achievable,” said Mategwa.

Kenyan Saccos are on course with the implementation of an inter-Sacco lending market and eventual integration into the National Payments and Clearing system in a development.

Through, Sasra the industry regulator is working with a multi-agency team comprising the State Department of Co-operatives, the National Treasury, Central Bank of Kenya (CBK) and the Kenya Law Reform Commission (KLRC), and has drafted the legal framework for the operationalization of the Central Liquidity Fund (CLF) where Saccos can lend and borrow money from each other thereby cutting ties with Commercial banks whose loans are considered very costly.

Under the new regime, Saccos will run their own inter-Sacco market where they can lend and borrow from each other at reasonable interest rates to offset their financial positions which was not possible in the past.

The draft legal framework is currently under review by the office of the Cabinet Secretary in charge of Agriculture, Livestock, Fisheries, and Co-operatives and is expected to be submitted to Parliament by March as part of the Budget Policy Statements for the 2021/2022 fiscal year.

About 50 Saccos have shown interest in the initiative and are working with Sasra. “This will offer us the opportunity to lend to other small Saccos at interest,” said Mategwa, adding that law was at its advanced stages of its realization.

In 2019 President Uhuru Kenyatta issued a policy directive towards the establishment of a Central Liquidity Fund (CLF) for Saccos, with the ultimate objective of   integrating deposit taking (DT) Saccos into the National Payment System.

The move will also see Saccos drift away from external borrowing as a funding source for their assets largely due to the expensive loans and stringent conditions made by commercial banks.

In 2019, the Saccos’ cost of external borrowing stood at Sh2.33 billion, according to the authority’s annual supervision report (2019).

The fund will be run and managed by Sasra with funding coming from both the Saccos and the government.

It would also empower Saccos to issue their own cheques to their members unlike now when they are restricted to processing bankers’ cheques on behalf of banks on a revenue-sharing basis, which is heavily tinted in favour of banks