Uhuru orders CBK, stakeholders to speed up establishment of a central liquidity facility

Lewis Njoka @LewisNjoka

Members of savings and credit co-operatives (Saccos) will soon enjoy cheaper loans after President Uhuru Kenyatta directed Central Bank of Kenya (CBK) and concerned stakeholders to fast-track establishment of a central liquidity facility.

He said the centre would enable Saccos to participate in the national payment system and allow them to develop innovative products for their members.

The facility will allow Saccos to lend money to one another, enabling them to address temporary liquidity shocks, access credit faster and at cheaper rates for onward lending to their members.

Affordable credit

Saccos will then be expected to pass down this benefit to their members, considering that they exist to assist members to access affordable credit as opposed to being profit-driven.

The facility will also inform monetary policy decisions and complement the interbank market as a guide in pricing loans, savings, mortgages, and other financial products.

Uhuru issued the directive on inter-Sacco lending during celebrations to mark the 97th International Co-operative Day at the Kenyatta International Convention Centre in Nairobi on Saturday.

Central liquidity facility is a mixed ownership government corporation created to improve the general financial stability of credit unions by serving as a lender to credit unions experiencing unusual or unexpected liquidity shortfalls.

Saccos currently borrow from commercial banks at maximum interest rate of 13 per cent while Saccos lend to members at rates below those of the market (generally 12 per cent). 

Worse still, the bank loans are not tailor-made for Saccos, hence, do not suit their needs. 

Currently, they cannot borrow from one another on a large scale as the inter-lending facility, which will serve as a clearing house, is not yet in place.