Last week Kenya's President Uhuru Kenyatta signed into law a Bill capping bank interest rates at four percentage points above the Central Bank Rate, currently at 10.5 per cent, eliciting mixed reactions.

Supporters of the new law say it will save loan borrowers, especially small businesses, from the jaws of banks which have long been portrayed as merciless merchants who thrive on exploiting customers by lending at high interest rates and paying very low interest on savings.

Those who oppose the new law argue that it will do more harm than good to the very people it is supposed to benefit. They posit that getting loans will be harder, especially for small businesses without collateral and a good history, forcing them to turn to informal lenders who will treat them worse than formal banks.

Well, whatever the outcome or the consequences of the new law, we must admit that it will not mark the end of the business.

It is a challenge that the affected, both bankers who largely depend on lending to make profit and businesses that also depend on loans to make profit, must find solution in their issues.

It is expected that bankers will find innovative ways of making profit despite the challenge. Equally, small businesses must find their own ways of survival in the likely event that loans become hard to get.

One such way is savings and credit co-operatives or saccos. Saccos are the most ideal source of funding for small businesses without assets to use as collateral.

First, saccos encourage the discipline of savings which is key to financial success. The fact that one has to save at least one third of the loan they intent to borrow helps in building an asset base in savings as well as reducing exposure. It also reduces debt risk by ensuring you don’t borrow more than you can repay.

Collateral for sacco loans is colleagues who must be members of the same sacco, although in some cases a logbook or other assets are acceptable.

Secondly, saccos lend at very low interest with hardly any hidden charges and very flexible terms.

The good news is that most saccos have reinvented themselves, rebranded and expanded their services, even offering many banking services.

Unlike in the past when only employees of large organisations or professional groups had the privilege of enjoying services of saccos, today virtually every persons is eligible to join a sacco as the cooperatives adopt a universal approach to include outsiders.

Saccos, unlike banks, are for members and by members. This means whatever profit is made by the sacco through lending and other commercial activities belongs to members and part of it is shared out in the form of dividends.

In addition to normal loans, almost all saccos have structured products such as instant and emergency loans, school fees and so on that can save you from knocking at Shylocks’ doors in case of urgent financial need.

This saves members the need to hold a lot of money in savings account for contingency purposes.

The monthly compulsory savings members have to make provide a solid base for retirement or plan B should the business go burst.

Most saccos also help members with financial education as well as investing and acquiring assets such as land and houses on favourable terms.

In this regard, I advice small business owners to form or join a sacco. By the time their business grows to a point where they need huge financing that only banks can provide, they will negotiate better terms because they will have accumulated assets and reputation to serve as collateral.

Mr Kiunga is a business trainer and the author of ‘The 7 Pillars of Financial Success’. [email protected]