Savings and Credit Co-operative Societies (SACCOS) have traded cautiously, over the past few years, when it comes to provision of loans to Small and Medium Enterprises (SMEs).
Saccos are skeptical to lending to the SMEs terming them as risky due to lack of collateral, inadequate information and proper documentation by the SMEs.
Additionally, SMEs lack of banking history and enough manpower from the sacco societies to conduct close monitoring and evaluation of the SMEs before and after lending them, among other reasons hinder saccos from financing businesses in these categories.
However, Antony Wangechi, the Head of SME Banking at Co-operative Bank, while addressing the sacco CEOs urged them to uphold and consider various key concepts in the SME lending to avoid entrepreneurial suicide.
Some of the factors to consider in lending to the small businesses Wangechi said included:
Segmentation and customer value. Saccos, he said, should segment their customers according to sizes and values. SMEs should be positioned and given solutions according to their sizes. Solutions for the small enterprises, he stated, should be different from the medium enterprises and vice-versa.
Credit risk management. The saccos should as well develop a proper credit risk management framework to evaluate risks and better manage their finances and operations. This will further allow the societies to be more aware of what to do to mitigate such risks.
Major on capacity building. He urged the cooperative movement to invest in customer trainings and education in order to impart financial knowledge to their members and create a bonding with them.This, according to Wangechi, will further enable the members to dimestify certain aspects that affect SMEs and enable the customers to uphold loyalty when working with the saccos.
Investing in customer service. This is a key concept that should be embraced by all saccos. To help achieve this goal, saccos are mandated to invest more time gathering detailed customer feedback. Great customer service, he advised, always win the trust of the members and drive customers to the sacco.
Mr. Wangechi further urged saccos to uphold the principles of lending which include; character, Capacity, Capital, Collateral and Conditions.
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