In the wake of Covid-19, the co-operative sector which is a key driver in Kenya’s economy has not been spared in experiencing the devastating shock waves caused by the pandemic that continues to ravage the world at an alarming rate. Savings and credit co-operatives (saccos) make up about 45% of Kenya’s Gross Domestic Product (GDP), with an asset base of over Ksh1 trillion, mobilized savings and deposits in excess of Ksh732 billion and a loan portfolio of Ksh700 billion. In addition, the sector employs more than 500,000 people whilst necessitating self-employment especially through lending.
The Ministry of Co-operative Development estimates that 80% of Kenya’s population derives its income either directly or indirectly through co-operative activities. In a recent report by the World Council of Credit Unions (WOCCU) Kenya has the largest co-operative movement in Africa and is ranked in 7th position globally, making it very pertinent in the economic and social development of the country. The rapid mushrooming and proliferation of Sacco societies in the country has brought the number to about 13,200 registered Saccos, 175 of them being regulated by the Sacco Societies Regulatory Authority (SASRA) as of December 2019.
In the long term pursuit of Vision 2030, co-operatives were identified as key vehicles with flagship projects and medium-term plans already underway. Co-operatives are also key partners in the achievement of the Big 4 Agenda, birthed by the President, all working towards the same endeavor; the ultimate realization of Vision 2030. The Big 4 Agenda programmes cover affordable universal healthcare, decent and affordable housing, food security and nutrition, job creation and economic growth through manufacturing.
A plethora of factors ail the co-operative sector, stunting its growth, such as the non-remittance of dues by employers to Saccos, corruption, loan defaulting, non-performing loans, dormancy and cybercrimes. However, Covid-19 takes the cake with co-operatives already reeling under the adverse effects of the disease as the future remains uncertain.
The pandemic which has led to numerous job losses and closure of businesses has seen members unable to service their obligations to saccos. Many members have made abrupt withdrawals of savings in order to facilitate and settle demands such as rent, bills and food stockpiling during this disastrous period, coupled with fear, in the event that the crisis prolongs.
In a virtual meeting held by the African Confederation of Co-operative Savings and Credit Associations (ACCOSCA) and WOCCU recently, potential outcomes on the impact of Covid-19 on the co-operative sector were aired; from decreased loan portfolio quality, decreased liquidity as loans default while savings withdrawals increase, increased provision costs and write-offs. Possible moratoriums cannot be ruled out on debt collection, payments, foreclosures and evictions with a culmination of a global recession
The state’s affordable housing program through the Kenya Mortgage Refinance Company (KMRC), which had been scheduled to roll out in this second quarter of the year, will undoubtedly experience an indefinite delay due to the pandemic. This was an initiative between the Kenyan Government and the World Bank to support the affordable housing agenda by providing secure, long-term funding to mortgage lenders consequently increasing the availability and affordability of mortgage loans at much lower interest rates of between 7% to 9%.
The Kenya Union of Savings and Credit Co-operative Societies (KUSCCO) and Sacco Societies Regulatory Authority (SASRA) are among the bodies at the forefront, looking for workable solutions to weather the storm and ensure the sector does not crumble. The Union is championing for the release of KShs3 billion in withheld statutory deductions from employers to enable Saccos deal with COVID-19 pandemic. “The rapid rise in loan demands calls for parastatals, ministries and private institutions to remit the statutory deductions to co-operatives to mitigate the effects of the coronavirus in sacco societies,” George Ototo, Managing Director, said in a press conference.
Covid-19 has also led to the indefinite postponement of sacco annual general meetings and annual delegates meetings under the directive of the Ministry of Co-operatives, Industry and Trade. As is the standard norm in the sacco calendar of events, the first quarter of the year is dominated by AGMs/ADMs where different sacco board of directors and management meet their members to reflect on the general performance of their societies in the just concluded financial year. Some saccos that had already held their AGM/ADMs paid dividends early; the remaining ones were directed by the regulator to pay rebates nonetheless.
This era of digital disruption has never proved more relevant in the co-operative sector; saccos that have moved their services online are leveraging on the platform as their safety net, as members can access services at their convenience through mobile and internet banking. The 5th edition of the annual Sacco Leaders Convention could not have been more timely held in late February in Mombasa with the focus being embracing and investing in innovative technology driven strategies and solutions in this era of disruption. This was reiterated by the WOCCU in its 2020 global regulatory update
“Co-operatives should be allowed to play the critical role of financial relief in an effort to support people during the Covid-19 pandemic,” said Andrew Price, Vice President of Advocacy at the World Council of Credit Unions. He called on governments, authorities and regulators to ensure co-operatives provide pro-consumer financial services to help weather the crisis.
Covid-19 however brings to light the importance of saccos to inculcate effective risk management strategies to protect financial resources. This will ensure that the institutions are adequately prepared, prioritizing risks and making feasible plans to deal with any possibility.
The uphill struggle to stay afloat for the co-operatives sector amid the Covid-19 quagmire continues as strategies to mitigate the effects are deployed to cushion the industry from complete collapse. In the daunting quest to find a cure, humanity can only take stringent measures to curb the spread of the disease and hope that the cure is found soon so that normalcy returns.
By June Njoroge is a Public Relations Consultant for Co-operatives based in Nairobi, Kenya