How COVID-19 has impacted SACCOs in Kenya

The COVID-19 pandemic has upended economies and industries worldwide, and one of the sectors hit hard in Kenya is that of Savings and Credit Co-operatives (SACCOs). These organizations collect deposits and provide loans to individual members, playing a crucial role in the financial ecosystem of the country. In a recent interview with John Mwaka, the CEO of the SACCO Society Regulatory Authority (SASRA), CNBC Africa delved into the effects of the pandemic on SACCOs in Kenya and discussed potential recovery strategies. Mwaka highlighted both the resilience and challenges faced by SACCOs, shedding light on the liquidity levels, non-performing loans, governance, and their role in Kenya's economic recovery. One of the key themes discussed in the interview was the impact of the pandemic on SACCOs' liquidity levels and earnings. Mwaka noted that while borrowing by members had decreased due to the economic slowdown, most SACCOs remained stable. However, certain sectors such as aviation, transportation, and agriculture were facing challenges. The decrease in borrowing translated to lower income for SACCOs, leading to cost-cutting measures and operational adjustments to mitigate financial impact. Mwaka emphasized that SACCOs were actively monitoring the situation and implementing strategies to manage the decline in earnings. Regarding non-performing loans (NPLs), Mwaka acknowledged a rise in NPLs, particularly in sectors like agriculture, transportation, and aviation. The NPLs were increasing, posing a challenge to the financial health of some SACCOs. Monitoring and addressing the NPLs were critical to safeguarding the stability of the industry. SACCOs were urged to focus on mobilizing more deposits to meet the growing demand for credit, with an emphasis on collecting daily data and introducing innovative products to attract new members. Moreover, governance and accountability were highlighted as crucial aspects of ensuring the stability and security of SACCOs. Mwaka stressed the importance of robust governance mechanisms and ongoing monitoring of SACCOs' performance. Regulatory interventions and training programs for SACCO directors and key personnel were in place to enhance governance practices and risk management within the organizations. By enforcing good governance standards, regulators aimed to uphold the industry's integrity and resilience. In terms of economic recovery, SACCOs were identified as key players in driving Kenya's growth and development. With over 35% of the national savings held by SACCOs and cooperatives, their role in financing diverse sectors of the economy was instrumental. By expanding their loan portfolios, increasing savings, and upholding good governance practices, SACCOs could contribute significantly to the country's economic resurgence. The ability of SACCOs to invest in critical areas such as agriculture, industry, and SMEs positioned them as pivotal partners in fueling Kenya's economic progress. In conclusion, the challenges brought about by the COVID-19 pandemic have tested the resilience of SACCOs in Kenya. While facing reduced earnings, NPLs, and governance issues, SACCOs have demonstrated adaptability and strategic planning to navigate through these turbulent times. By focusing on financial stability, prudent risk management, and innovative growth strategies, SACCOs are poised to not only recover from the impact of the pandemic but also play a significant role in Kenya's economic revival.