This archive report was first published on 10 May 2020.
Saccos Face Cash Crunch Amid Pandemic ¶
As the coronavirus pandemic ravages economies, Kenya's Savings and Credit Co-operatives Societies (Saccos) are facing a cash crunch. Many Saccos are at risk of collapse, with some already experiencing sharp downturns in member contributions.
Co-operative Alliance of Kenya Chief Executive Daniel Marube warned last month that Saccos face the risk of sinking if they fail to make prudent financial decisions. With the economy slowing down, many employees have been laid off or are on unpaid leave, leading to a surge in withdrawals from Sacco savings.
"There is concern by the management of credit unions of the affected sub-sectors as their members are opting to withdraw their savings to finance daily needs, mainly food,” Marube said. “This trend, if not curtailed, is likely to affect the liquidity levels of the societies and equally discourage the saving culture in the country.”
Most Saccos are cash-strapped, with most of the money in the hands of members who have obtained loans. Saccos with membership drawn from the travel and hospitality industry are the most affected, with activities in these sectors remaining at a standstill.
Metropolitan Sacco Chief Executive Benson Mwangi noted that they are yet to record recalls in members’ contribution that could be attributable to the pandemic. The Sacco plans to extend dividends before the Annual General Meeting (AGM), obliterating doubts that bad economic times and the coronavirus crisis could rob members of the benefits.
Wanandege Sacco, which boasts 3,500 members, is still going strong despite reduction in contributions by members from the aviation industry. The Sacco is taking measures to ensure its survival, including extending short-term loans and investing loose cash flows.
Cooperatives are determined to make the best decisions for members, with some advising them to reduce investment and concentrate on acquisition of basic needs. Others are exploring new activities to bolster their operations, including recruitment of Small and Medium Enterprises (SMEs) and diversification into other industries.
