In 2021, the Kenya Mortgage Refinance Company (KMRC) successfully standardized mortgage origination processes for participating Savings and Credit Cooperative Societies (SACCOs), enabling SACCOs to become Primary Mortgage Lenders (PMLs) in Kenya. This move was pivotal in advancing financial sector inclusion within lower market segments. Moreover, KMRC recognized the untapped potential of SACCOs in facilitating affordable home financing, thereby increasing homeownership rates in the lower market segment. Fast-forward two years, KMRC reports that SACCOs and housing cooperatives now account for 90% of housing finance in Kenya, with commercial banks comprising the remaining 10%.
The popularity of Savings and Credit Cooperatives (SACCOs) has been steadily rising, with the potential to reach a broader audience, especially those in lower market segments. According to the SACCOs Societies Regulatory Authority (SASRA), despite the economic challenges experienced in Kenya throughout 2022, including severe droughts, high inflation, and rising interest rates, savings and deposits mobilized still grew by 9.8% in 2022 compared to 2021. Additionally, loans extended to the sector increased by 11.8% in 2022 compared to 9.7% in 2021. The total membership served by regulated SACCOs also expanded by 7.0% to 6.4 million Kenyans in 2022, compared to a 3.0% increase in 2021. These statistics underscore the increasingly vital role SACCOs play in financial discussions.
First, SACCOs play a pivotal role in promoting financial inclusion by offering financial services, such as savings accounts and credit facilities, to individuals who lack access to traditional banking services, particularly those in lower income brackets.
Second, their community-based approach fosters trust and cooperation, facilitating participation in local communities. SACCOs are often formed by individuals with common bonds, such as residing in the same neighborhood or working for the same employer, which enhances members’ loyalty and reduces loan default rates.
Third, SACCOs encourage regular savings among their members, enabling them to accumulate significant capital over time. This collective savings approach makes homeownership more attainable by helping members build substantial down payments for homes.
Lastly, SACCOs have more flexible collateral requirements compared to traditional banks, which is advantageous for individuals without substantial assets. SACCOs may accept collateral in the form of shares or deposits, which are more accessible to members.
Johnstone Oltetia, Chief Executive Officer of KMRC, noted that among the twenty PMLs currently working with KMRC, nine are commercial banks, and eleven are SACCOs and housing cooperatives. He stated, “Out of our total of twenty participating institutions, 9 are banks, and 11 are SACCOs. We have already provided funding to 8 of these institutions, with 4 being banks and the remaining 4 SACCOs. All 8 institutions have received funding from KMRC, which has been disbursed, and 3 more are in the process.”
SACCOs have substantial potential to address Kenya’s housing gap and promote homeownership. In our national pursuit of affordable housing, SACCOs serve as an inclusive and robust cornerstone, capable of turning housing aspirations into achievable realities for numerous Kenyan citizens.
