The real cost of digital loan "migrators" in Kenya

I read an article that appeared on HiviSasa on "3 things that make merry-go-round chamas lack economic sense" at: https://hivisasa.com/posts/20780372-3-things-that-make-merry-go-round-chamas-lack-economic-sense. 

In this article, point #3 reminds me of what is happening with the digital loans where borrower X takes out money from “Fuliza”, a Safaricom lending product, say KShs. 4,000 (we have limits on what one can borrow). This is to be repaid in a month’s time together with interest of say Kshs. 40 (about 1% interest per day, with a penalty and interest if not repaid within one month – the rates provided by Safaricom are Kshs. 30 per day). 

Courtesy: Daily Nation

Towards the lapse of the one-month period, borrower X decides, using the same digital phone number, to take a KCB M-PESA digital loan of, say Kshs. 5,000 (again, there are limits) with the intention of repaying the “Fuliza” loan, totalling Kshs. 5,375 (interest (they call it facility fee) of 7.5%). This way, borrower X is able to repay the “Fuliza” loan of Kshs. 4,000 and is left with Kshs. 1,000 in savings, not forgetting that he has a Kshs. 5,375 to be repaid. 

After a while, borrower X decides to take yet another digital loan, this time the CBA M-SHWARI loan of, say Kshs. 8,000 to repay the KCB M-PESA loan of Kshs. 5,375. The M-SHWARI loan will be repaid together with an interest of Kshs. 600 (total: Kshs. 8,600, a “facility”/interest rate similar to KCB M-PESA loan of 7.5% per month). Mind you, all this time, the annualised interest rate on the KCB M-PESA and MSHWARI loans are 70% to 90% or more.  

Now, borrower X utilises part of the M-SHWARI loan to repay the KCB M-PESA loan of Kshs. 5,375 and is left with Kshs. 2,625, and a loan of Kshs. 8,600 to be repaid. The total amount owed to borrower X now stands at Kshs. 5,975 which must be paid to settle the KCB M-PESA loan fully. Given the behaviour of borrower X so far, he is likely to opt for more digital loans such as: Branch, Equitel Eazzy Loan, Equitel Eazzy Plus Loan, Jumo/ Kopa Cash, Kopa Chapaa, Micromobile, Mjiajiri, M-pawa-Sacco, Okoa Stima, Pesa na Pesa, Pesa Pata, Pesa Zetu, Saida, Tala or Zindisha. 

The end effect of such an individual is an endless debt state which will get to levels the borrower cannot repay the loan and this is when the threats from the lender begin. Effectively, the borrower has to repay the funds taken with a 6% rate per month (or an annualised rate of 71% per annum. Such an individual, forced by circumstances may end up discarding the SIM Card that he was using and look for another card. This is however, a very short-term solution to an action which may come with adverse longer term consequences. 

This is the state most of our (especially unemployed) youth are getting themselves into. Action needs to be taken to create awareness on the longer term effects and consequences of such behaviour.

David Mathuva

SACCO savings tips

Let me know what you think about these tips.

- Dr. David Mathuva

Top 15 SACCOs in Kenya as of 2015: By Asset and Deposit Base

TOP 15 AS AT 2015

Kenya’s SACCO sector has experienced tremendous dynamism especially with respect to deposit-taking (DT) SACCOs. Over the last four years, the numbers of DT SACCOs have showed interesting movements with the operating licenses of some DT SACCOs being revoked by the regulator while others are issued with tentative licenses as they boost their capital or liquidity. 

Within this period, we have also seen one DT SACCO being placed under Statutory Management due to liquidity among other reasons. These happening demonstrate the upheavals within the DT SACCO sub-sector hoping for stability to come with time.




Among the reasons cited for license revocation or restricted licensing include:

• Failure to meet or maintain minimum core capital and capital adequacy ratios;
• Perpetual illiquidity
• Severely under-capitalization (negative equity)
• Inability to meet obligations to depositors and third parties
• Unsustainable high external borrowing

Nevertheless, we still observe a number of new applications by SACCOs into the DT SACCO league and hope to see more in the near future.

In this issue, we perform a comparison of top 15 DT SACCOs by total asset and deposit base as of 2015 and 2013. It is interesting to note that the total asset base of the top 15 DT SACCOs has grown upwards by 36% from 2013 to 2015. This is a remarkable improvement and a demonstration of the growth being experienced in the DT SACCO sub-sector.

The summary below shows jostling amongst the top-tier DT SACCOs for the top 15 positions. The only new entrant into the top 15 DT SACCOs is Hazina SACCO, which replaced Magereza SACCO. The flamboyant teacher-based (now open to the public) DT SACCO, Mwalimu National rests comfortably at the top followed by Harambee SACCO. An interesting upward movement has been noted for Invest and Grow (IG) DT SACCO, which was formerly Kakamega Teachers SACCO (Kateco). The SACCO has moved to position 12 from position 15 in 2013. This may be attributed to the re-branding done which has exposed the SACCO to more membership hence more funds.

I have argued in my name change paper that there seems to be benefits felt after DT SACCOs change their name and on average, this seems to be felt within four years. For a detailed review of the paper, please visit: http://www.emeraldinsight.com/doi/full/10.1108/MRR-04-2015-0097.

We foresee more interesting dynamics especially in the DT SACCO sub-sector in the next few years with risk management taking centre stage in the sector. This expectation is informed by the regulatory changes experienced in the SACCO sector and the Commercial Banking sector, where we have witnessed interest capping for banks and restricted revenue diversification avenues for SACCOs. 

It is a wait and see moment...

By: Dr. David Mathuva

Kenyan SACCO Rankings - 2013

Kenya's SACCO sector has experienced tremendous development over time, with some SACCOs having asset bases greater than some Commercial Banks in Kenya. The shift from operating only back-office service activities (BOSA) to front-office service activities (FOSA) has seen SACCOs mobilise more savings. The changed regulatory framework for SACCOs in Kenya has also created more confidence in the sector and this has contributed positively towards a boom in the sector. Assets has grown in asset base and have disbursed billions of shillings in loans. Focusing on the larger SACCOs operating FOSA as of 2013, the 212

SACCOs had a total asset base of Khs. 258 billion (US$ 26 billion). This is considering that 3 SACCOswere not included in this analysis. If we were to take 60% of this as loan portfolio, the 212 SACCOs would have Kshs. 155 billion (US$ 1.5 billion) held as loans to members. This is a tremendous number by any means for a SACCO in a developing country like Kenya. Interestingly, the 181 licensed SACCOs as of 2013 had mobilised total assets of up to Kshs. 255 billion (US$ 2.5 billion), which is virtually 99% of the combined asset base for the 212 SACCOs. The Kenyan government has been supportive and keen on encouraging the remaining 34 SACCO obtain licenses. To date (2016), these SACCOs have dropped to 30. 

According to the rankings below, the top 105 SACCOs in terms of asset base are all LICENSED. This communicates something: that regulations may have played a key role in creating confidence in the public and building a trusted platform where citizens can entrust their hard earned funds in. For SACCOs to mobilise such an amount in assets, they must have lent out more from their deposits among other sources. Another possibility would be more SACCO members taking up more loans, which is a sign that SACCOs may be doing better than commercial banks as far as loan uptake is concerned. This is perhaps due to the relatively lower interest rate charged by SACCOs on loans which has been at an average of 13% per annum, compared to that of commercial banks at 18% per annum of even higher.

From the rankings, the top 5 SACCOs in asset base as of 2013 are now household names: Mwalimu National, Harambee, Stima, Afya and Kenya Police. These SACCOs are well known for their financial strength, even amid any occurrences that may shake them. Moving on to positions 6 to 10, again, the SACCOs listed in these positions are household names and very popular. Interestingly, a couple of these SACCOs re-branded and changed their names to better have a national outlook. Do not ask me why Mwalimu SACCO is now Mwalimu National SACCO. Muramati changed to Unaitas, and comfortably lies in position 8 out of the 212 SACCOs in Kenya as of 2013.

Most of the SACCOs ranked lowest are  not yet licensed. This is because they are yet to meet the regulatory requirements especially the minimum capital base of Kshs. 10 million (US$ 99,000). This could be the main hinderance for their growth to the likes of Mwalimu National of Unaitas. However, it is notable that some of these SACCOs have a worryingly low asset base e.g. the case of Nyabiera SACCO whose asset base is a meager Kshs. 742,655 (US$ 7,353.02) as of 2013. As I present this very first edition of Kenya's SACCO rankings, I am optimistic that the SACCO sector in Kenya will continue to grow and help Kenyan citizens improve their economic and social welfare drastically. That withstanding, caution goes to the SACCOs themselves not to forget the social bond that gave rise to what they are today. In as much as they pursue growth, efficiency and profitability, they should not forget their social cause! That social bond needs to be protected, and this is a real challenge to the regulator, SASRA and the Ministry in charge of cooperatives to ensure that this cultural heritage is strictly maintained.

No.	Code	Name of the SACCO	2013 total assets (Kshs)	Year Licensed
1	2265	Mwalimu National	24,540,360,722	2010
2	1916	Harambee	17,633,141,570	2010
3	2207	Stima	12,401,789,000	2010
4	1981	Afya	11,885,165,365	2010
5	2092	Kenya Police	11,522,841,000	2010
6	2375	United Nations	7,569,117,689	2010
7	2026	Ukulima	7,321,315,579	2011
8	6760	Unaitas	5,550,898,016	2010
9	2885	Imarisha	5,218,676,165	2010
10	2628	Metropolitan	5,058,769,436	2010
11	2299	Kenya Bankers	5,020,885,142	2011
12	2641	Gusii Mwalimu	4,847,710,969	2010
13	2349	Bandari	4,495,868,134	2010
14	1946	Magereza	4,321,807,965	2012
15	2738	Kateco	4,199,261,042	2010
16	1991	Hazina	3,574,790,356	2011
17	2567	Nyeri Teachers	3,556,870,000	2010
18	2549	Boresha	3,398,554,000	2010
19	2255	Kilifi Teachers  Society	2,907,396,670	2010
20	2102	Sheria	2,835,831,928	2010
21	4107	Bingwa	2,713,222,082	2010
22	2648	Mentor	2,685,943,000	2010
23	2406	Nacico	2,564,895,649	2010
24	6825	Solution	2,491,503,000	2011
25	2675	Cosmopolitan	2,332,995,565	2010
26	2275	K-Unity	2,283,613,742	2010
27	2559	Tower Limited	2,273,321,899	2010
28	3302	Waumini	2,130,630,266	2011
29	4536	Kitui Teachers	2,120,640,901	2010
30	2494	Muhigia	2,055,145,270	2010
31	1781	Masaku Teachers	1,926,102,940	2014
32	2869	Ndege Chai	1,919,157,604	2010
33	1726	Mombasa Port	1,853,300,993	2010
34	2633	Winas	1,845,123,982	2010
35	2044	Jamii	1,802,016,744	2010
36	2466	Chuna	1,740,316,115	2011
37	6826	Tharaka Nithi Teachers	1,709,492,212	2010
38	10672	Capital	1,706,782,290	2014
39	2077	Asili	1,577,396,176	2010
40	8315	Taifa	1,560,211,645	2010
41	6366	Yetu	1,560,105,754	2010
42	9510	Safaricom	1,535,197,310	2010
43	2169	Chai	1,533,892,016	2010
44	8056	Murata	1,530,024,161	2011
45	6336	Kenya Highlands	1,529,676,992	2010
46	2248	Maisha Bora	1,504,251,618	2012
47	6919	Naku	1,497,683,660	2011
48	3468	Kenpipe	1,461,652,952	2010
49	2314	Egerton University	1,421,550,409	2012
50	2658	Laikipia Teachers	1,418,029,214	2013
51	8379	Fortune	1,338,077,790	2011
52	2085	Ufundi	1,308,202,152	2014
53	2001	Ardhi	1,302,008,254	2014
54	2876	Bungoma Teachers	1,246,199,150	2010
55	2700	Wanandege	1,179,389,848	2010
56	4319	Moi University	1,179,360,610	2014
57	2483	Kenversity	1,101,343,095	2012
58	2185	Sukari	1,083,476,171	2011
59	6433	Wakenya Pamoja	1,061,675,951	2010
60	2624	Wareng Teachers	1,018,548,817	2010
61	1872	Teleposta	991,994,983	2014
62	6447	Tai	987,301,386	2010
63	3110	Wanaanga	986,763,398	2011
64	6894	Nawiri	977,847,028	2013
65	6531	Wananchi	966,246,899	2010
66	6070	Nassefu	937,057,088	2012
67	2022	Tembo	926,294,645	2011
68	2386	Nation	925,307,025	2010
69	2523	Taita Taveta Teachers	900,963,259	2011
70	2678	Simba Chai	826,215,131	2010
71	1834	Jitegemee	804,224,356	2014
72	10541	Ukristo Na Ufanisi	797,530,791	2013
73	3047	Mwito	791,949,383	2010
74	1615	Kenya Canners	776,956,175	2010
75	2757	Kite	745,147,800	2010
76	7178	Meru South Farmers	712,324,012	2010
77	7590	Marakwet Teachers	682,092,196	2011
78	2660	Trans-National Times	655,133,441	2010
79	2032	Elimu	644,751,986	2014
80	2709	Nandi Teachers	582,432,689	2014
81	2686	Comoco	578,342,069	2010
82	3626	Fundilima	554,000,143	2012
83	2690	Kapenguria	547,926,292	2014
84	2365	Transcom	542,808,133	2014
85	10020	Githunguri Dairy	539,617,797	2010
86	2655	Busia Teso Teachers	538,389,595	2012
87	9208	Kingdom	537,513,126	2010
88	8012	Orient	531,894,509	2011
89	2749	Narok Teachers	518,689,914	2010
90	6267	Daima	518,288,142	2010
91	6432	Biashara	509,670,960	2010
92	2484	Mombasa Teachers	508,533,392	2010
93	7591	Keiyo Teachers	503,457,856	2010
94	2635	Kwale Teachers	485,139,452	2014
95	6403	Universal Traders	467,450,167	2010
96	8721	Dimkes	455,099,436	2012
97	3109	Mo SACCO	448,096,784	2010
98	5939	Muki	425,936,854	2014
99	7315	Airports	421,339,972	2011
100	2664	Magadi	409,574,162	2010
101	6570	Sot Tea Growers	379,226,561	2010
102	2865	Taraji	370,150,869	2010
103	5014	Thamani	353,099,500	2010
104	5641	Skyline	349,333,278	2010
105	6780	Chepsol	335,475,985	Not licensed
106	5932	Bureti	330,498,865	2010
107	2795	Marsabit Teachers	327,613,497	2012
108	1920	Chemelil	320,889,783	2010
109	6977	2NK	318,211,920	2014
110	8843	Kenya Achievas	315,227,537	2010
111	5459	Vision Point	303,912,100	2010
112	6179	Maseno University	302,568,124	Not licensed
113	2747	Nafaka	294,804,571	2012
114	6228	County	292,387,777	2012
115	4918	Dhabiti	288,725,258	2011
116	6749	Ndetika Rural	288,568,432	2013
117	6721	Migori Teachers	285,601,339	Not licensed
118	2563	Reli	271,849,926	Not licensed
119	7497	Mwingi Mwalimu	259,741,830	2014
120	6679	Mwea Rice Farmers	242,665,216	2014
121	7320	MMH	237,418,055	2010
122	7593	Nyamira Tea Farmers	235,454,196	2010
123	5988	Baraka	233,666,365	2010
124	10068	Centenary	229,930,201	2010
125	3363	Puan	227,918,485	2013
126	2511	Isiolo Teachers	209,736,289	2013
127	3983	KMFRI	201,808,052	2010
128	9233	Ntiminyakiru	201,808,052	2011
129	3248	Samburu Teachers	200,556,148	2013
130	2843	Methodist	197,594,596	Not licensed
131	10243	Wevarsity	197,594,596	2014
132	6061	Nandi Hekima	190,272,793	2010
133	6864	Times U	190,219,424	2012
134	2033	Imenti	180,240,475	2011
135	6569	Konoin	176,883,461	2010
136	10226	Wakulima Commercial	176,791,538	2010
137	2626	Lamu Teachers	175,382,892	2014
138	7221	Kuria Teachers	175,187,721	2011
139	10624	Vision Africa	173,453,487	2014
140	6917	Nyambene Arimi	172,034,303	2011
141	3176	Kerenga	169,300,137	Not licensed
142	5676	Tenhos	156,203,123	2010
143	5142	Supa	152,079,439	2012
144	9141	Bondo Teachers	141,299,254	Not licensed
145	2196	Ndosha	140,464,648	2011
146	3350	Washa	140,446,374	2011
147	4830	Mudete Tea Growers	138,359,876	2012
148	2467	Lengo	137,685,846	2014
149	6645	Elgon Teachers	136,215,974	2014
150	2895	Nanyuki Equator	133,761,195	2014
151	8320	Rachuonyo Teachers	133,221,063	2014
152	11933	Kenya Midland	128,194,115	2013
153	2293	Kimute	126,517,966	Not licensed
154	2724	Tana River Teachers	122,718,786	Not licensed
155	7979	Siraji	121,250,685	2011
156	6172	Aberdare Rural	119,894,924	Not licensed
157	9302	Nandi Farmers	116,598,913	2014
158	6128	Sotico	115,827,616	2011
159	2149	Ufanisi	115,144,314	2013
160	9231	Fariji	110,709,949	2010
161	5370	Sheraco	110,457,582	Not licensed
162	9187	Enea	109,890,064	2011
163	6387	Githongo Majani	109,629,757	2014
164	2609	Jacaranda	108,632,928	2014
165	5937	Jijenge	108,439,944	2011
166	9111	Kiambaa Dairy Rural	107,062,118	2010
167	8337	Banana Hill Matatu	101,933,171	2014
168	7791	Suba Teachers	101,901,283	2014
169	2735	Nzoia	93,402,167	Not licensed
170	8333	Bonde La Kerio	85,703,936	Not licensed
171	9227	NGP Bamburi	83,080,514	Not licensed
172	6918	Trans-Counties	79,553,154	2014
173	3829	Agro-Chem	76,437,620	2014
174	10120	Miliki	75,214,519	2010
175	2271	Nufaika	73,450,731	2014
176	11121	Nyahururu Umoja	71,139,972	2013
177	2310	Tupendane	69,650,317	2014
178	6302	Kipsigis Edis	68,870,759	2013
179	4446	Baraton	65,468,568	2014
180	6180	Ogembo Tea Growers	62,959,318	2014
181	5749	Ainabkoi Farmers	61,759,647	2014
182	4615	Uchongaji	58,661,803	2014
183	2381	Koru-Homaline Company	56,262,269	2014
184	10474	Kolenge Tea	55,381,050	2014
185	9709	Good Faith	55,075,952	2014
186	10737	Ilkisonko Rural	54,824,653	2014
187	11181	Nest	50,219,536	2014
188	10897	Gastameco	46,427,899	2014
189	2031	Tuungane Tujijenge	41,818,767	Not licensed
190	7460	Omoreni	38,883,780	Not licensed
191	10633	All Churches	38,577,162	2014
192	8275	Nyando-Kisumu	37,935,329	Not licensed
193	3144	Flouspar	37,252,089	Not licensed
194	9927	Kaimosi Tea Growers	33,260,489	2014
195	1984	Mwendiwega	32,417,336	Not licensed
196	8804	Vihiga District Tg	28,867,563	2014
197	11194	Tescom	28,321,422	2014
198	10782	Nyankoba	26,651,182	Not licensed
199	11934	Mulot FSA Rural	26,239,058	2014
200	4541	Rea Vipingo	24,126,670	Not licensed
201	8261	Kikai Rural	20,136,156	Not licensed
202	9241	Kinamba Jua-Com	19,025,417	Not licensed
203	8982	Kiamokama Tg	18,871,303	Not licensed
204	10576	Rongai Rural	18,735,375	Not licensed
205	7057	Limuru Traders	18,050,721	Not licensed
206	7479	Micii Mikuru	17,668,386	Not licensed
207	10718	Lenga Tumaini	15,343,547	2011
208	11434	Rubet	13,722,288	Not licensed
209	11346	Chebosobon	10,761,762	2014
210	9026	Ihururu	8,704,165	Not licensed
211	7896	Chesikaki Rural	8,674,970	Not licensed
212	11005	Nyabiera	742,655	Not licensed