That sounds like the typical hand-to-mouth approach that we excel at as a nation. So you would get the 1m and dividends today "cheaply", but what happens to your plans for tomorrow? If the one million cannot complete your project, then what is your next source of funds? Would it not be better to borrow the 1m cheaply from the sacco, stretch to pay while knowing that you can go back immediately when your project requires more funding?

For average Kenyans do you think the money in sacco is meant to be a cash cushion for 6 months savings or it is their ONLY savings and a means to obtain "cheap" loans?

No one is saying putting your money in a sacco is bad but we are arguing that getting a sacco loan is expensive as compared to a bank loan

If you can make money, you can borrow with the expectation of paying back with money you make in the future. I see @Maichblack's arguement but Im lost on @iris and @enyand's views. I thought saccos are for people with terrible credit ratings and no security.

. Credit ratings was introduced to kenya just the other day . I don't think before we had this credit ratings like the west do and our people used to get loans from saccos then. Now about security you are right .sacco security is your fellow member who have to be 2 . Iv done both sacco and bank and I prefer sacco more . This is just me...

Am reading Jaindi Kisero's article in the businessdaily and he claims the governor has held three meetings with bank CEOs pleading with them to show goodwill by reducing lending rates. A down payment as he called it to avoid a head-on collision between a seemingly unstoppable populist bill and simple economic logic.

Well, the banksters have stuck to their positions. In his op-ed last week, the governor pointed out that between July 2015 and July 2016, the key indicators had reduced by a margin of 2%. During the same period, bank's lending rates had increased by 3%. Clearly, there is a strong case for the down payment.

Am curious to know how high level political lobbying works in kenya. Will the president join the governor in demanding a demonstration of goodwill by the banks ? Or are the bank's too powerful ? @murchr, where are you ?

the CB has enough tools to force interest rates whatever direction they want, this guy is merely passing the buck..don't we all remember what happened immediately NARC came into power?

I am waiting to see the entry of price comparison / aggregator websites to add transparency in these loans and credit products, intermediaries have typically increased transparency in such services albeit adding their cost/commission into the process.

@MB, I have re-read post# 199 slowly and carefully and it does nothing to convince me, unless you prove to me my inability to understand your post. Let's talk some numbers:

@MB:


@Iris:


In the pictures, please read "dividend" instead of "interest"

Assuming that we consider the first year after I take a loan of 1m from my sacco where I also have a deposit of 1m, my networth will be KES 497,279 at the end of the year, after subtracting what is owed on my loan. This is higher than your networth of 485,731 notwithstanding the fact that I can borrow way more than you. The calculation is based on interest of 12%/year, reducing balance over a period of 4 years. Note that Sacco's prorate dividends according to your deposits over the year. So you get more dividend on your contribution in January than in November.
The monthly loan repayment works out to 26,334/=, but to remain a member, Saccos require that you still contribute some amount towards the deposits. I have assumed a figure of 5.000/=, which is why you are depositing 31,334/=.
Using the same formula, the difference between my networth and yours increases in my favour over the next 4 years because my higher dividend is being compounded even if my contributions are small.
So at end of year 2, we will both be closing in to a million net worth with you at 902,792 and me at 930,604.
Now if we leave the numbers alone and consider other aspects; at end of year 2, you will have total deposits of 902792 and since you do not take loans from saccos, that is the only funding available for your next project. While I on OTOH will have 1,490,063 and can take a loan of (4,470,189-559,419) or 3,910,770. Now who is more likely to put on hold an uncompleted project?
Finally, if you step away from this theoretical comparison, how many of us Kenyans can remain disciplined enough to put aside that money that would have gone towards loan repayment religiously through the 4 years? No doubt you @MB would do it, but 80% or more won't. However, a good percentage of the 80% would reduce on their drinking/sponsoring/shoes enough to keep up with loan repayment.
Some of the arguments here make me wonder if banks have spokesmen in the same way KQ has Obiero. Of course SACCOs are not able to fund multi-million shilling projects that banks can fund, but 80% of Kenyans are looking for <20M which can be obtained from SACCOs more easily and competitively.