Editor,

Allow me to react to the letter, "SACCOs can serve us better” (The New Times, May 26).

The problem is SACCO members. As member-based mutual credit institutions, its members should set credit conditions that take into account the members’ ability to pay, perhaps also giving greater weight to each loan application’s merits (for example, if it is for investment rather than consumption, the internal logic of the business plan and the capacity of the applicant to really see it through).

As it is now, the SACCO’s credit policy seems deliberately intended to exclude their own members from being able to access their own funding. And so they should stop calling themselves SACCOs and rename themselves finance companies, or something similar. And by the way, doesn’t the central bank have any guidelines on this matter? Is there a rate at which the central bank and policy-makers might consider a lender to have crossed into usury territory?

Other than that, I have no problem with financial institutions putting profit at the top of their goals. Without profits they wouldn’t be sustainable and might also risk their depositors’ funds.

Given their fiduciary role, it is right that they manage their risk-taking in a prudential manner. It is a duty they owe to all of us. But they also need to balance conservatism with a degree of entrepreneurship (i.e. risk-taking). If they don’t lend, they fail to grow the banked class and thus their customer base.

In the long term, it is in their own interest to expand their customer base by expanding their lending to encourage more and more local business formation. Conservative investments in government debt or lending to large and cash-heavy corporate won’t be enough to grow their overall business and ensure their own growth in tandem with the expansion of the national economy.

Mwene Kalinda