Sh9.9bn loan defaults strain Saccos

By Munene Maina

Delay in remittance of loan repayment deductions by the National and County governments is causing headache for Sacco bosses.
This has seen the growth rate of non-performing loans (NPLs) for most Saccos derailing growth in their businesses.
New Sacco Societies Regulatory Authority (SASRA) survey also indicated some governmental institutions particularly public universities, research institutions and parastatals contribute to this problem.
“The devolution of certain governmental functions which were hitherto centralised, has led to a situation where some Government-based Deposit-Taking (DT) Saccos have had to deal with several distinct payroll entities; as a means of making loan recoveries from their members,” said SASRA.
The bad economic times that many private institutions and companies operated in during the year 2017 was also attributed to the increase in the NPLs for the Private-Sector-based Saccos which increased from 5 per cent in 2016 to a high of 9 per cent in 2017 according to the regulator.
“A private company that is facing financial difficulty deducted loan repayments of almost Sh300 million, but failed to remit the same to a Sacco making nearly 75 per cent of its loan portfolio to be in default. The scenario is made worse by the company laying-off a majority of its employees, leaving it with absolutely no possibility of ever recovering the loans from those employees,” said SASRA.
Teachers’-based DT-Saccos which rely on the Teachers Service Commission (TSC) to effect and remit loan repayment deductions from members’ salaries, however, recorded a decline in bad loans.
The majority of the non-performing loans were however notably in the substandard category with over 77,869 loan accounts amounting to over Sh9.9 billion being classified as bad loans, although SASRA report said with mechanisms being put in place can be recovered.
“These are loans which are classified as outstanding for between 30 days and 180 days,” it said.
75 DT-Saccos NPLs ratio was below 5 per cent but the cause of alarm, the authority said, was with the 56 Saccos which registered NPLs of over 10 per cent.
Community-based Sacco had the highest NPLs at 15.91 per cent followed by the Farmers-based DT-SACCOs at 11.42 per cent.

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