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Saving and Credit Cooperative Societies (saccos) are seeking access to the National Payments System (NPS) to enable them to transact international money services, taking on banks, mobile money, and money transfer companies that currently control the remittance market.
At least 60 percent of the saccos want the government to create a conducive remittance environment for them, by allowing them access to the payment system, a new survey by the Financial Sector Deepening (FSD) Kenya shows.
A majority 67 percent of the 140 saccos polled said that lack of direct access to the system is the primary challenge preventing them from participating in the remittance business.
Through their regulator – the Saccos and Societies Regulatory Authority (Sasra) – the credit societies now want the Central Bank of Kenya (CBK) to integrate them into the payment system.
“Sasra advocates for Saccos to be integrated into the NPS, enabling more active participation in remittance transactions,” FSD Kenya said in the report co-authored by Sasra.
The NPS is the arrangement that enables the settlement of financial transactions between a payer and a beneficiary and helps with the circulation of money in the economy.
In Kenya, only commercial banks, the CBK, the government, and payment service providers like mobile money operators such as M-Pesa and Airtel Money, and money transfer services, are allowed to participate in the system.
Because of their lack of access to the system, some saccos are forced to rely on banks, mobile money operators, or money transfer organisations in order to provide remittance services to their customers in the diaspora, while the majority do not offer those services at all.
According to the FSD survey, only 22 percent of Saccos handle international remittances, which mostly involve sending money to and from the country for asset financing of investment, and loans and savings for diaspora customers.
Most Saccos say directly accessing the remittance market will help them to retain their membership base, expand their membership, mobilise more deposits from members, and meet their members’ needs and demands.
Currently, saccos are not allowed access to the NPS because they are not permitted to deal in foreign exchange business, which is crucial to participate in the system. They are also not regulated by the CBK, which is the regulatory authority of the financial sector.
It will take an amendment of the law, specifically the Central Bank Act, the National Payment System Act of 2011, and the Money Remittance Regulations of 2013, to allow Saccos be recognised as financial institutions that can participate in the money remittance business.
FSD Kenya has recommended the utilisation of the planned Shared Services platform for Saccos by Sasra to be used as an avenue to enable direct access for Saccos to the system.
Diaspora remittances have become a primary source of foreign exchange for Kenya, now bringing in more money from abroad than any of the top exports in the country.
“While this can be achieved through multiple strategic options, the planned SACCO Shared Services initiative provides a feasible option given that it is already in motion and has planned for such value propositions,” FSD Kenya said.
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