Defaulters to lose property in stringent loan recovery measures
By Jackson Okoth
Deposit-Taking Saccos have warned members of stringent loan recovery measures that include use of debt collectors and Credit Reference Bureaus to lock out loan defaulters from accessing Sacco products.
The rate of non-performing loans has been on the rise in the Sacco sub-sector. This has led some Saccos to come up with stringent measures to address the problem that is threatening existence of the institutions.
Kenya Bankers Sacco has asked its members to obtain periodic statements from the organization regarding the repayment status on all loans that they have guaranteed others.
“We are tightening the Society’s loan appraisal system and hiring more debt collectors in order to deal with loan defaulters. We are also considering use of collateral for those seeking for credit in addition to guarantors. Defaulters will also not access Sacco products for the next 3 months after repaying their debts,” said Vincent Chisaka, the Sacco Board of Directors Chairman.
Balozi is also on the list of Saccos that has decided to aggressively use debt collectors and auctioneers to rein in loan defaulters.
Wanandege Sacco had to enter into a deal with Sacco Societies Regulatory Authority (SASRA), and was given a grace period of 5 years within which it will have to fully comply with International Financial Reporting Standards (IFRS-9). This is to allow the Sacco to pay dividends to members.
The Sacco made a provision of 5 per cent for 81 loans, totaling to Sh 27.5 million that had not been repaid within one month(watchful loans), 25 per cent provision for 63 loans worth Sh 12.9 million, not repaid within 30-180 days(doubtful loans).
The Society also made a 100 per cent provision for 386 loans where repayments had not been made for more than one year.
“We have already exhausted all available options. The board is therefore under increased pressure to go after loan defaulters and we are already talking to debt collectors, auctioneers and will soon be withholding deposits of defaulters and guarantors and using the HR department for enforcement,” said Johnstone Kamunde, Treasurer of Safaricom Sacco.
A snap shot at several Saccos indicate that the worst loan defaulters are those who have been guaranteed by others while there are less loan defaults for those members who have provided collateral as security for their loans.
At Kenya Bankers Sacco, over 52 per cent of total members have taken loans while 48 per cent have never borrowed. But out of the 52 per cent, 8 per cent are defaulters.
Out of a loan portfolio of Sh 486 million, a provision of Sh 208 million was set aside as provisions as per the IFRS-9 rules. Combined with a low uptake of its loan products and reduced interest income, the Bankers Sacco had to dig into its reserves in order to pay dividends and rebates.