One of the sectors that has been worst hit by disruptions of COVID-19 pandemic is the Savings and Credit Co-operatives (SACCOs), modeled along collecting deposits from members and lending to individual members.
Most SACCOs, especially those drawing members from such sectors as Hotel and Travel, Entertainment, horticulture, and transport, are staring at low deposits from members as layoffs, pay cuts and closures affect incomes of individual members.
” We have been experiencing low deposits from members as well as a fall in demand for loans from members. We have been experiencing problems after suspending our sales representatives from moving from place to place collecting cash from members,” said Dorothy Makena, Marketing Manager, Southern Star SACCO Limited.
She added that even after shifting to digital platforms, this new format remains challenging because avenues for conducting member education have been shut.
Kenya Union of Savings and Credit Co-operatives, a lobby group for the sector, has already sounded a warning of possible collapse of SACCOs, especially those drawing members from sectors such as aviation, tourism, horticulture, small businesses, and transport.
“Unless we rescue them they might not come back from the look of things,” said George Ototo, KUSCCO Managing Director.
While the Central Bank of Kenya(CBK) has been urging banks to renegotiate loan repayment terms with distressed borrowers, little information is coming out of what SACCOs are doing to affected members.
Savings and Credit Co-operative Societies, which include deposit-taking SACCOs as well as those, engaged in back office operations, had mobilized savings to the tune of more than KSh 420 Billion at the end of last year. This is estimated at 35 percent of overall national savings.
According to data from the State Department for Co-operatives, financial co-operatives have a combined balance sheet size of KSh 500 Billion.
Latest figures from SASRA indicate that there are 174 licensed deposit-taking SACCOs with a combined savings of KSh 342.3 Billion.
With the onset of COVID-19, these gains are at risk of being eroded due to mass member withdrawals and low deposits from members who have lost their jobs or are on a pay cut.
Experts maintain that non-performing loans (NPLS) in SACCOs will climb up owing to the pandemic. Unlike banks, SACCOs have been less aggressive in rescheduling loan repayments or offering moratorium, largely due to lack of adequate liquidity in the sector to assist SACCOs to absorb the loss in interest income.
The State Department of Cooperatives created the Cooperative Coronavirus Response Committee (CCRC) to bolster government action combatting COVID-19. According to Ali Noor Ismail, Principal Secretary, State Department for Co-operatives, this committee has so far raised KSh13 Million to assist co-operatives worst affected by COVID-19.
The CCRC draws members from ten key stakeholder organizations, including the State Department of Cooperatives, Cooperative Alliance of Kenya (CAK)—which will serve as joint secretary of the Committee—National Co-operatives Housing Union (NACHU), Kenya Union of Savings & Credit co-operatives (KUSCCO), Sacco Societies Regulatory Authority (SASRA) and others.
The CCRC promises to monitor and disseminate information on COVID-19 to members of the cooperative sector and the public, as well as lobby the government to provide relief to cooperatives once the pandemic is over.
The Committee also plans to offer financial assistance to cooperative members.
“We’ve been able to reach 5,000 co-operative households that have been affected by the pandemic and we will continue raising funds for mitigation efforts,” said the PS.