LOAN POLICY

The purpose of Loan Policy is: 

•   to ensure that the society does not get into financial difficulties by approving loans in excess of funds available. (loan approved beyond capacity to issue is a major policy)

•   to ensure that there is fairness in loan granting by the society.

•   to minimize loan delinquency in the society.

The fastest way to lose friends, is simple just lend them money.

Lending Requirements 

•   the society must have been in existence and active for a period of not less than six months from the date of registration.

•   A member must have completed at least six months membership and contributed any amount to the SACCO society in shares/deposits.

•   A member who withdraws from the society and rejoins later will be treated as a new member for the purpose of this Loan Policy.

•    Lump sum amount (a one-time payment of money, as opposed to a series of payments made over time) of share/deposit paid to the society outside the regular monthly contributions shall remain in the society for at least six months before qualifying for a loan.

•    the society’s books of accounts have to be up-to-date in accordance with the Co-operative Societies Act.

•    All loans shall be restricted to members and shall be approved by the full management committee or the credit committee subject to final approval by the full management committee.

•   no member of the loan approving committee shall be present when his loan is being considered.

•    Employees of the society shall be eligible for membership but are not eligible to become members of the management committee or any other sub-committee in the society.

•    An employee or official who tampers with his regular share/deposit contribution and loan repayment shall be liable to prosecution under section 94 of the Co-operative Societies Act.

•    the rate of interest on all loans shall be determined by the management committee from time to time and approved by members in a general meeting.

•   All loans shall be insured by a reputable insurance company identified by the officials of the society.

•    All applications for loans shall be made on prescribed forms provided by the society and shall in each case set out the amount applied for, the purpose of the loan, terms of repayment and the type of security provided. the loan application form must be fully completed and must be guaranteed by at least three members.

•    the society shall maintain a loans’ register where all applications for loans received are
systematically recorded according to the date received, and which shall be used during loan granting.

•    it shall be an offence for an applicant, society employee or book keeping service employee to give false information regarding shares/deposits, loans and guarantees.

•    Loan applications shall be considered in the order in which they are received, provided that whenever there are more applications for loans than there are funds available, preference shall be given, in all cases, to smaller loans.

•    However, where amounts applied for are approximately the same, preference shall be given to loans for shorter periods. Within the foregoing preferences, priority shall be given in the following order:

»   Members who have never had loans

»   new members who have qualified for loans

»   Members who have cleared their first loans and have applied for fresh loans

•    the maximum amount of loan granted to a member shall not exceed three times a member’s  savings with the society but subject to a maximum of 5% of the society’s total share capital/deposits and reserves.

•    For purposes of eligibility for loans, a member’s total shares and deposits will be considered.

•    the maximum repayment period for development loans shall be as per the SACCo.

•    the society shall maintain 10% cash reserve of the total members’ savings. At least 50% of the cash reserve shall be kept in a deposit account and will not be available for granting loans.  the reserve shall be up-dated monthly.

•   in addition to development loans, the society my issue emergency loans and school fees loans.

•   Emergencies shall include sudden hospitalization, funeral expense, court fines and other unforeseen circumstances beyond the member’s control. the member will be required to provide documentary evidence of the emergency

•   the maximum repayment period for emergency loans will be 12 (twelve) months.

•   School fees loan may be granted to a member even though he has an outstanding loan on the following conditions:

•   the total outstanding loans, including school fees, must not exceed three times a members savings

•   only one school fees loan may be granted to a member in one calendar year.

•   the member will be required to provide documentary evidence of the school fees required

•   School fees loans shall be repaid within one calendar year

•   Emergency and school fees loans shall be given within a member’s entitlement

•   the society committee may introduce special savings and credit products as shall be required and approved by members from time to time.

EXCERPT FROM: Savings and Credit Co-operative Societies; Start-up Kit (Swiss Contact and Department of Co-operatives).

OBEJECTIVES OF SACCO SOCIETIES

The objects for which the society is established are to organize and promote the welfare and economic interests of its members.

In particular, the society undertake:

a) To promote thrift among its members by affording them an opportunity for accumulating their savings and deposits and create thereby a source of funds from which loans can be given to them exclusively for provident and productive purposes, at fair and reasonable rates of interest; thereby enabling them to use and control their money for their mutual benefit.

b) To ensure personal growth through the introduction of new products and services that will promote the economic base of the members.

c) To ensure progress of members and society through continuous education programs on proper use of credit, reduction of poverty, human dignity and co-operation.

d) To apply the co-operative principle of co-operation among co-operatives in order to promote members’ interests. In furtherance to the objects the society shall affiliate to the relevant National Co-operative Union and the Apex society.

For the attainment of the above objects, the society may do acts and things that are permissible under the Act, rules and these By- laws including but not limited to acquire property and chattels and doing all such other things as are incidental or consequential to the economic enhancement of its members interests provided such act is approved by the members in a general meeting.

SHORT HISTORY OF THE CO-OPERATIVE MOVEMENT IN KENYA

The co-operative movement in Kenya was found in the beginning of 20th Century. Africans were allowed to form co-operative societies in the 1950's when they were permitted to grow cash crops. The attainment of independence in 1963 became the turning point in the movement. It has ever since grown in terms of societies membership and share capital/member deposits.

The firs Kenya co-operative society, Lumbwa Co-operative Society, was formed in 1908 by the European farmers with the main objective of purchasing fertilizer, chemicals, seeds and other farm inputs and then market their produce to take advantage of economies of scale. In 1930, Kenya Farmers Association was registered as a co-operative society to take over the role of supply of farm input played by Lumbwa Co-operative Society. The African smallholder farmers fought for formation of their own co-operatives and later in 1950's they were allowed to promote and register co-operatives for cash crops like coffee and pyrethrum. Consequently at independence in 1963, there were 1,030 co-operatives societies with 655 being active with a total membership of 355,000.