Did you guarantee a Sacco loan? Defaults are up 55 per cent
Dud Sacco loans jumped 54.5 per cent to Kes39.8 billion from Kes25.7 billion in 2019 as members experienced tough times during the Covid-19 economic fallout.
The largest chunk of loan defaults came from Sacco members, who had not paid their loans for more than a year amounting to Kes15.8 billion.
This was a jump from Kes8.9 billion in 2019 almost doubling in the value of defaults.
Another Kes15.7 billion loans were held by those who were late by three months while those with a one-year delay had borrowed Kes8.3 billion.
The Sacco annual report showed that 71 Saccos reportedly had their non-performing loans (NPL) ratio above 10 per cent which is an increase from 60 Saccos with similar NPLs ratio in 2019.
“The increase in the NPLs ratio can be directly attributed to the impact of COVID-19 pandemic which resulted in delay of repayments of some loans advanced to the members particularly among the non-employer-based deposit-taking-Saccoss,” the Sacco annual report read.
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Sacco members experienced a tough time during the Covid-19 pandemic with at least 1.7 million Kenyans out of jobs.
BusinessDaily reported the number of savers who had stopped making contributions jumped 79.5 per cent from 764,472 in 2019 to 1.372 million last year.
Defaulting members have led Saccos to falling back on member savings to recover the loans and calling guarantors to pay up or put pressure on the defaulter to resume payments.
This in turn can lead to skepticism in guaranteeing fellow members and hence affecting the ability of Saccos to issue loans.
Initially Saccos were aligned in that they had members from the same sector but as they increasingly open up, it becomes difficult for guarantors to trace the defaulting member.
It is, however, encouraging to note that notwithstanding the impact of COVID-19 pandemic on the national economy, 91.60 per cent of the entire loan portfolio was generally in good-stead, thereby underscoring the ever-resilient nature of the Kenya SACCO lending model in the provision of affordable credit to millions of Kenyans.
Loans under watch, which are late for 30 days are not considered defaulted but are bordering on the slippery slope. These reduced to Kes17.9 billion from Kes19.1 billion.
Performing loans that were paid within time increased from Kes374.5 billion to Kes416.9 billion.
