Commercial banks in Kenya are gearing up for heightened competition from Savings and Credit Cooperative Societies (Saccos) that have moved to recruit over 3,000 agents to deepen deposits.\

Unlike traditional banks that typically offer high-interest loans but provide relatively low returns on deposits, Saccos are an option for those eyeing low-interest loans and attractive dividend payouts.

While this strategic move by Saccos is aimed at reducing operational costs associated with the establishment of physical branches, the development also puts pressure on mainstream lenders.

“The use of Sacco agency is another alternative financial services delivery channel which has gained traction among the DT-Saccos in the recent past as an alternative to the establishment of the traditional brick and mortar branches which requires huge capital outlay as well as recurrent maintenance costs,” said the Sasra in a report.

Kenya first introduced the concept of agency banking in May 2010, allowing commercial banks to engage third-party agents to provide specific services, including cash deposits, withdrawals, and balance inquiries on their behalf.

This innovative approach to banking has since been a resounding success, bringing banking services closer to millions of customers across the country.

Building upon this success, Saccos are now adopting the agency banking model to extend their reach and enhance accessibility to their services for their members.

According to the Sacco Supervision Report for 2022, recently released by the Sacco Societies Regulatory Authority (SASRA), 36 deposit-taking Saccos have collectively hired a staggering 3,430 agents to facilitate customer transactions.

In its efforts to regulate this burgeoning sector, SASRA has granted licenses to 176 deposit-taking Saccos and 183 non-withdrawable deposit-taking Saccos.

These Sacco-affiliated agents have played a pivotal role in enabling financial transactions for their members, handling a total of 1.89 million transactions valued at Sh26.50 billion during the year 2022 alone.

Increased competition between Saccos and commercial banks is expected to benefit consumers by driving innovation, improving service quality, and potentially leading to better interest rates and financial products.