The national government has assured Savings and Credit Cooperatives Societies (SACCOs) of its support to ensure that they don’t collapse due to the ravaging effects the COVID-19 on the economy.
State Department for Cooperatives Principal Secretary (PS) Ali Noor Ismail said that they were carrying out a study to assess in real terms the effect of COVID-19 on the cooperative movement.
“So far, we have seen that there is low repayment of loans, savings and deposits. Some companies have asked for loan moratoriums for up to one year and there is low uptake of loans,” said the PS.
He said that majority of Saccos are facing low liquidity challenges and there are fears some might close down.
The cooperative movement in Kenya is ranked as the best in Africa and seventh-best in the world with an asset best of more than Ksh1 trillion.
The cooperative movement has mobilized members’ savings and deposits in excess of Sh732 billion, and a loan portfolio of Sh700 billion.
In 2019, five Saccos were among the country’s top lenders after accumulating savings and assets worth Ksh149.9 billion, according to the Business Daily Africa report.
The five top saccos were Mwalimu, Harambee, Stima, Kenya Police and Afya.
Speaking on Monday at the Kenya Union of Savings and Credit Co-operatives Ltd (KUSCCO) headquarters while giving shopping vouchers to affected Sacco members, Ismail said the effects of the global coronavirus pandemic has heavily impacted credit unions as depositors were not regularly remitting monthly dues.
The liquidity levels have further been caused by some depositors opting to withdraw their savings.
“Majority of depositors and especially small traders have been affected and thus not able to remit payments as per the agreement with their Saccos as the level of incomes dwindle due to low performance of their business,” said Ismail.
The PS explained that the majority of cooperative societies in travel, tourism, and hotel, horticulture industries among other subsectors were grappling with liquidity challenges as levels of business have gone down.
He said that the national government has advised the management of Saccos to lay strategies geared towards safeguarding the organizations against further low cash supply challenges.
For example, Saccos have been urged to advance their depositors short term loans and agree with them on how to restructure their loans.
The cooperative movement formed a coronavirus response team to mobilize resources to assist the vulnerable members in the subsector.
The team chaired by Francis Kamande, who is the chairperson of the National Cooperative Housing Union (NACHU), has so far mobilized Sh13 million from stakeholders in the movement.
Kamande said starting next week, Saccos in Nakuru, Kisumu, and Mombasa counties would be included among those in dire need of support.
“Equally, we will mobilize more resources from other donors even outside the cooperative movement to assist more deserving cases. In the next three weeks, our target is to have assisted 15,000 members both within and outside the cooperative movement,” said Kamande.
KUSCCO managing director George Ototo said that Saccos whose members are not salaried are facing low cash flows as they are not remitting payment as agreed due to the effects of COVID-19.
“Cooperative societies in the affected economic subsectors like travel, tourism and hotels and horticulture are reeling under challenging times as their businesses dwindle. If no meaningful measures are put in place some Saccos might collapse or take a long time before attaining optimal business levels,” said Ototo.
He added: “We fear due to the coronavirus effects, non-performing loans are likely to increase this year and thus might deeply affect the operations of the credit unions.”
Vouchers worth Sh3.3 million were given out to over 3, 000 members of small-scale Saccos operating in informal settlement areas and low-income segments in Nairobi County.
Beneficiaries of the vouchers will receive a bag of 5kg maize flour, 2kg of beans, 1litre of cooking oil, four face masks and a bar of soap for handwashing.