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Saccos lead the way in making homeownership cheaper for Kenyans

They typically offer competitive and member-friendly interest rates, which are often lower than those provided by commercial banks.

Saccos and cooperatives are the most preferred path to homeownership in Kenya as opposed to other channels, a study released by Kenya National Bureau of Standards (KNBS) indicates. It is followed by mortgages (housing finance), microfinance institutions, and chamas.

According to the KNBS data, Cooperatives, and Saccos top in providing access to homeownership by 31.8 per cent, Housing Finance Institution follows with 22.7 per cent, while microfinance institutions account for 13.6 per cent. Chamas however accounts for only 9.1 per cent.

Analysts reveal that the reasons why Saccos and cooperatives top in home ownership is because they are easy to access, are friendly and charge low interest rates compared to other sources.

Caleb Mugendi, financial analyst, admits that in Kenya majority of Saccos provide financing at a fixed interest rate of 12 per cent per annum for the duration of the mortgage. He says purchasing a home through a Sacco in Kenya offers a viable and affordable pathway to ownership for most individuals and families.

“By joining a Sacco as a potential homeowner, you can leverage the benefits of being a member including access to affordable financing, flexible savings options, and supportive community networks to achieve your homeownership dreams while building the wealth and financial independence for your future,” Mugendi says.

He says Saccos have remained and continue to play a crucial role in Kenya’s financial sector. They are a valuable and reliable resource for those seeking to own a home or their own.

This makes Saccos the best financing model compared to banks, which charge over 20 per cent per annum depending on the current applicable Central Bank Rate. Saccos recruit members who are required to remit a monthly payment upon which loans are given.

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Saccos typically offer competitive and member-friendly interest rates. These rates are often lower than those provided by commercial banks. The community-focused nature of Saccos allows them pass on savings to their members, making their loan more affordable.

Again, Saccos often require minimal collateral. Instead, they rely on the member’s saving history and trust built within the community. This approach emphasises personal relationships and financial discipline rather than traditional security.

Sacco loans security

By their nature, Saccos do require minimal collateral, they have flexible repayment terms, are easy to access by members, offer more lenient and community-focused loans restructuring option, and the application process is generally simple.

However, once someone has registered as a member and makes regular contributions, he or she is entitled to a loan, which he or she can get depending on how much he has contributed. “Such requirements compels people to save more well aware that if they save more, they will also borrow more,” Mugendi says.

Beatrice Chege, head of Absa Bank Mortgage, says mortgages are often misunderstood and underused in Kenya as the path to homeownership. This according to her is mainly due to misconception.

She says such can create unnecessary hesitation making many people to abandon the goals of owning a home. She refutes claims that homeownerships through mortgages are expensive.

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