Kenyan banks scramble for investment groups with niche financial products

Few years ago, Kenyan banks and other financial institutions shuddered at the thought of financing traditional investment groups which they considered high risk. But the implosion of these saving outfits which have morphed into financial machines with multibillion projects has sent financial institutions back to the drawing board.
Now almost all banks have financial products meant to entice the investment groups, fondly referred in Kenya as chamaas, with favorable interest rates and sizeable loan potential. 

Deposit taking microfinance institutions have also been keen on taping into these groups as they look to bolster their deposits.
Research indicate that there are some 300,000 investment groups in the country with a combined asset base of $300 million concentrated in the stock market, real estate, transport, offshore markets, bonds, energy, wholesale and retail, hotels, transport, energy and agriculture sectors.
Financial analyst Weber Otiende posits that the financial institutions' obsession with the investment group is a nascent alliance which is bound to turn up to a formidable union due to the tried and tested importance these institutions peg to the clubs. “You just have to look at the behaviour of the banks to see they have changed tact and where their attention has been. Some are rebranding to reach an ever bigger clientele while majority are spending a huge advertising budget speciafically to woo the chamaas,” he said.

The craze for a pie of the investment clubs is not just limited to banks. The government is also mulling collaborating with them to raise funds for development projects.
Data indicate one in three Kenyans is in a chama, registered or unregistered which has financial institutions on tenterhooks.
Established banks like Co operative Bank, Barclays Bank, Kenya Commercial Bank, Sidian bank among others have also joined the fray.
Notable products advanced by the banks to the clubs include loans based on monthly contributions, administrative services to chama’s,group chama insurance last expense products, dedicated chama bank accounts and staff and ustodial services for Chamas among others.

Just last year Muramati SACCO, which initially started as Murang’a Tea Growers, a savings and co-operative society that mainly served tea farmers in Central Kenya, was one of those that changed names and rebranded in the quest to grow countrywide. It is now known as Unaitas Sacco Society with a keen focus on investment groups having hinged a huge part of its business in partnering with them. Last year it organized a nation wide awareness conference for all interested chamaas meant to rope them in to the Unaitas SACCO chamaa.

Now banks argue that it is easier to work with chamaas, empower them and grow them to become SMEs at an early stage rather than financing SMEs which might drag their operations.

www.unaitas.com

www.co-opbank.co.ke