Sunday, December 10, 2006

oiling the wheels of consumerism

i spent much of last week with the leaders of the cooperative movement. the seminar had been organised by their bank to chart the way forward. it was necessary since they said that commercial banks were eating into their market and threatening the very survival of the coop movement. the bank is fully owned by the coops and is probably the only bank where directorship is not determined by the number of shares owned but rather by the number of individaul votes one can muster. the coop movement has really helped develop this ocuntry and currently many countries are sending delegations to kenya to learn the business and implement it in their counries. i know at least two Kenyans who are 'consultants' in SA on the coop movement.

the coop business model is based on a simple principle, save and borrow. this encourages pple to save and also borrow from the commmon pool. its a very good model which created both a saving culture as well as financial discipline. pple invested and broke away from poverty on sacco's . we also know that in the 80's and part of 90's it was invariably missused as was everything else by the rulling elite and by the greatest monster of all - tribalism.

right now , the sacco's survival is threatened by availability of very cheap credit offered by banks who have suddenly found themselves with too much money and impopsible targets to meet. just 4 years ago, commercial banks kicked out poor savers by increasing their minimum balances to extreme levels. they proceded to close some branches in remmote areas. thats when pple turned to sacco societies to process their loans, payments etc. at that time, the sacco fosa was born. this was a rudimentary banking service offered by these societies. now those same commercial banks are knocking at the doors of the same custormers they threw out and offering them upwards of 2000,000 bob unsecured loan for as long a period as 5 years! on top of that they can give you credit card valued at 1 1/2 times your salary plus interest free overdraft. what this is translating to is massive and unbriddled consumerism. the saccos are also trying to keep their ground and trying to match the banks by loosening their lending requirements. this is a very dangerous precedent. pple are getting indebted to their necks and we may soon see a repeat of what happened in america when they had a personal debt crisis. americas market was more sophiscated and they were able to solve that problem by moving the laibility from the card companies. in kenya it may be a diff ball game. sacco savings currently account for almost 30% of total savings in kenya , if they collapse due to consumerism being oiled by banks then we may see a very huge dent in the available savings per capita in kenya. its funny that this is happening at a time when other countries are looking to kenya for lessons on the sacco model.

i have never heard this but this time, the shareholders of KPLC waited in vain for split and had to ask for it themselves! thats definitely new.

the slow down is on in earnest, but mostly due to MSC offer. pple are liquidating to buy MSC

odegle tip of the day
-- its important to build a good asset base first before spening. it helps to try and make the assets outweigh liabilities for personal financial security. remember an asset must be able to give future benefits. stocks are some of the best forms of investment especially if you are young.


  1. @Odegle: Banks are giving a run to SACCOs but SCCO loans are still a better deal when compared to borrowing a similar amount from a commercial Bank.

  2. i agree totaly. the only thing is that banks can give u a loan even though u dont have an account with them. the two business models are very different


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