Saccos emerge from Covid-19 morass


By Sammy Chivanga

Savings and Credit Cooperative Societies (Saccos) are recording a sharp rise in demand for development loans after the Covid-19 slump.

Most Saccos are now happy that members have emerged from the Covid-19 morass that had left the cooperative movement with a lot of liquidity.

The demand for development loans is in sharp contrast with what was the case for the better part of last year after many members put on hold their projects at the peak of Covid-19 disruption.

Growth in Saccos’ credit to private sector had slowed to 9.9 percent in June last year—one of the slowest paces in recent past— in comparison to March when it grew at 13.8 percent.

Saccos had mostly seen a spike in demand for consumption loans—usually of lower value compared to development and business loans—and therefore ended up with a lot of liquidity.

But in a shift of events, Sacco leaders interviewed by the Sacco Review now say that many businesses and individual members who had put on hold key plans such as expansion and improvement of infrastructure, are now reviving their projects.

This has led to increased demand for development loans, with Saccos which were sitting on idle cash now moving to satisfy the demand of members.

Trans Nation CEO Luncham Mugambi says that members are now coming out strongly to apply for development loans unlike last year when there was a reduction in demand for business loans.

“There was a drop in demand for business loans and we were also being careful not to lend much given the layoffs that were happening, said Mr Mugambi.

“But right now demand is coming back very strongly. We have released a lot of money and the loan book value has gone up,” he said.

Kenya Police Sacco chairman David Mategwa told the Sacco Review that the decision by government to start relaxing Covid-19 control measures from July last year is paying off and has helped members to restart their development and business projects.

Mr Mategwa says the requests for development loans are now overshadowing consumption loans.

“People are coming for more loans now. The uptake is high compared to what we witnessed at the peak of the pandemic,” says Mr Mategwa.

 “The uptake in January has particularly been high and we are seeing more of development loans. People are now buying lands and constructing,” said Mategwa.

Safaricom Sacco had for the better part of last year experienced a build-up in liquidity as members who were eying investments adopted a wait-and see approach due to Cocvid-19 situation.

However, Safaricom Sacco CEO Joseph Njoroge says that there is a change now and sees it being sustained going forward.

“People are back to normal economic activities and we are almost back to levels of loan processing we had pre-Covid-19,” Mr Njoroge told the Sacco Review.

“The recovery started from November and we are now seeing more of development loans. Majority of loans we are giving out are long-term,” said Njoroge.

Kilifi-based Imarika Sacco says most members had for the better part of last year shied away from development loans for fear of where to invest in the middle of the pandemic but a shift is happening now.

Chairman Renson Ndoro says the Sacco is now experiencing a strong demand for loans, which will be satisfied using the liquidity that had built up during the period of a slump in applications and jittery in lending.

“We have seen a god positive movement. We did a revised projection for lending last year but surpassed it due to recovery in applications from the last quarter of last year,” said Ndoro.

A rise in demand for loans is good news for many Saccos sitting on idle liquidity since interest generated from such lending forms the bulk of income from which members earn dividends.

However, Saccos will have to ensure the lending does not drain their liquidity in an environment that is generally still fragile as Covid-19 infections continue.  

Sacco Societies Regulatory Authority (Sasra) liquidity ratio guidelines requires deposit-taking (DT)- Saccos to at all times maintain a minimum of 15 percent of their savings deposits and short-term liabilities in liquid assets.

The liquidity ratio is an important measurement parameter of how fast or quick a DT-Sacco is able to meet its short term obligations.

Sasra says that the most critical of such short-term obligations are the payment on demand of the savings (FOSA) deposits.

The Sasra report for 2019 had shown that DT-Saccos maintained liquidity ratio at 50.92 percent, well above the prescribed minimum of 15 percent.

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