Afya Sacco seeks CBK licence for conversion to micro-lender

Afya Sacco is raising capital from its members to hit CBK’s minimum requirement of Sh60 million for a nationwide deposit-taking micro financier. FILE 

By GEORGE NGIGI
 

 

Afya Sacco has applied for a Central Bank (CBK) licence to operate as a deposit-taking microfinance institution, setting on a transformational path for the co-operative society.\
\
 

The Sacco is currently raising capital from its members to hit CBK’s minimum requirement of Sh60 million for a nationwide deposit-taking micro financier (DTM).

“Afya (Sacco) has already applied for a license to begin its trading activities. Once trading commences the company will provide all Microfinance services,” says the Sacco on its website.

If approved it will be the first DTM to be operated by a Sacco and it will open the door for a transformation of the financial industry landscape, with more Saccos likely to follow path. DTMs are regulated by the CBK as they are allowed to collect deposits from the public, which they can use to grow their loan book.

Saccos on the other hand are regulated by the Sacco Societies Regulatory Authority (Sasra) and are only allowed to collect funds from their members.

CBK has licensed six DTMs since 2010 when regulations creating the micro-lenders were passed. Most micro financiers are credit only (those allowed to give loans only without getting deposits from the public).

DTMs lend to the public depending on their ability to repay, while Sacco loans are backed by customers savings and guarantors. Saccos are popular with members because of their more friendly cost of credit.




Many Saccos are however limited by liquidity problems, delaying some of the members’ loan applications.

Afya Sacco is calling its members and other interested parties to buy shares of at least Sh5000 and a maximum of Sh60 million in the new institution. It has a membership of 39,016 and as at end of 2011 it had deposits of Sh6.4 billion and a loan book of Sh6 billion.

Saccos have also started partnering with banks to issue cheque books to their account holders allowing them to serve the business community. This has been accompanied by wider product range which includes long term facilities such as mortgages and development loans.

Stima Sacco has partnered with Family Bank while Unaitas has turned to ABC Bank. DTMs are also able to participate in the clearing house through a representative bank.

Under the regulatory environment of Sasra, the Sacco community is picking itself up from years of misconduct which had seen it lose public confidence as some of them collapsed with hard earned savings.

There are over 110 licensed Saccos with an asset base of over Sh200 billion.