First published on April 15, 2014
Last Saturday I was speaking to several leaders of various cooperative societies and saccos in Nairobi and its environs. The default thing that these saccos (and am sure this is what your sacco or coop society is doing, raise your right hand if am wrong…) do is buying large parcels of land, they subdivide it and sell it to its members and make a “small profit”. This is a normal trend and many of us agree that this might not be the best way to invest the members hard earned and saved resources.
In my economics class in campus, we were taught about economies of scale. These are the benefits of large scale production. When your sacco sub-divides land, it denies you as the member a chance to enjoy something bigger and better in future. It’s what the colonial government used to rule Kenya….the divide and rule concept. Let’s not allow our politicians to use the same concept during the forth coming elections.
After my talk to these officials, we went for a lunch break. The various sacco officials regrouped and as the lunch break came to an end, I had several cooperative societies officials “heed the call” to add value to the bulk land that they have. Of particular interest is this cooperative society that had already subdivided their land into 40*80 (1/10 acre plots) some place in Isinya. They were getting ready to start selling the plots to its members come December 2012. The officials came to the table where I was sharing lunch with my two assistants and made that all time declaration. The cooperative society secretary told me, “ Bwana Kariuki, you have opened our eyes, we will not sell the vacant plots any more. We will develop some nice small houses for our members.”
During my talk, I had introduced the sacco officials to unconventional sources of financing. These is where a financier, not your normal bank, but a company that is able to source money from foreign investors and lend it to local developers in real estate at rates lower than what the market is offering. In fact, the bigger the real estate development, the lower the interest rate. Again, economies of scale.
So I got the contacts of these cooperative societies that “have seen the light” and I connected them with a financier who will make their new dreams come true. These cooperative societies and Sacco’s will be able to borrow in excess of Kshs 300 million from this financier and use the money to develop a “paradise for its members”.
This is the new way your sacco and cooperative society or chama should do instead of just selling you vacant land in the middle of nowhere, for you to wait for the land to appreciate in value after “n” years.
If you knew that your sacco or co-operative society is planning to develop a “Buffalo Hills Golf Estate” kind of thing, am sure you would be more enthusiastic than you are now with 5 different 1/8th plots in the middle of what looks like a game park.
In summary, with your large parcel of land, come to our financier who will guide you into putting that land in to its “highest and best use” and give you the hundreds of millions that you need, then get a “Chinese contractor” or any other affordable contractor and within weeks…ok maybe 52 weeks…you have moved into your “dream house”.