The Government has communicated of its intention to go slow on approving plans by saccos that seek to open the common bond.
Common bond is where a sacco recruits members outside its jurisdiction. For instance, common bond occurs when a sacco affiliated to teachers opens its doors to members outside teaching profession.
Recruiting members from outside their catchment area, especially the business community formed part of the strategic plan by a number of societies to primarily drive the much needed growth.
This has seen many societies double or triple their membership and report growth across key market segments.
However, the Government has shared its reservations on the strategy due to the rising number of loan defaulters.
While members think that it’s their right to take credit, mostly three times of their savings, repaying especially by the business community is never a walk in the park.
The check off system is an assured way for a member to repay the loan as it is enough collateral that in case of failure to clear the loan, then one’s salary can be deducted.
In its absence, thus, as it were with the business community, repaying the loan is a herculean task with stark reality of the high mortality rates of businesses.
The Sacco Supervision Annual Report 2016 indicated that Non-Performing Loans are on the rise and a number of saccos have started feeling the negative effect of loan defaulting.
To tame this worrying trend and ensure stability in this critical financial market player, some societies have either registered with the Credit Reference Bureau as others seek the services of auctioneers to recover the loan.
The attendant costs will eventually squeeze their balance sheets hence the need to ensure they remain afloat through the necessary Government interventions.
This is a good move to safeguard the members’ savings and further liquidation of the societies whose main aim is to mobilise savings and extend affordable and timely credit to its members.
Besides, it calls for extra measures to be put in place to ensure any future plans on the sector are well thought out.
It is for the best interest of the sacco that the sub-sector that has emerged as a key driver of the country’s economic growth does not falter.
Rethink on opening of common bond timely
