Saccos, MFIs align to new rate cap law

Saccos and other non banking financial institutions have been challenged to focus their energies on the non funded income as the market react to the interest capping law which has seen banks stare at thinner margins.

Currently the law which caps the bank’s lending rate at four percent above the central bank rate (CBR) and at least 70 per cent of CBR on deposits doesn’t affect micro finance institutions and Sacco’s.

Speaking to Citizen Digital, UNAITAS Chief Executive Tony Mwangi said that although the law affects the banks, market reaction has forced Saccos to conform to its recommendations.

“We are not compelled to do it because the law is only affecting on bank, but are being compelled to do it because it’s one market,’’ Mr Mwangi said.

Some banks have already announced plans to reduce branches as well to downsize staff leveraging on a digital strategy to cut on costs as profits on loan interest dwindle.

The Sacco now aims at increasing   the volume of business as well as to come up with innovative and compelling products that can withstand market competition as it also aligns its digital and agency banking.

Mr Mwangi said unlike banks, UNAITAS will be looking forward to more branch expansion as it gears towards becoming a bank as it has also applied for listing in the Nairobi Securities Exchange (NSE).

“Expansion is still on for instance next year we are opening eight branches, but we are already working on 5 of them, so we require more staff,” he said.