Over 1.3 million individuals living in Kenya are no longer partaking in carrying out contributions every month, that are put towards the Savings and Credit Co-Operative Societies (SACCOs), as a result of the widespread loss of jobs that took place after the still ongoing Coronavirus pandemic hit the country.
According to SACCO Societies Regulatory Authority (SASRA) the number of people who saved but have now discontinued their contributions towards saving, increased from 79.5 percent which is 764,472 in 2019, to 1.372 million by 2020.
Members of Savings and Credit Co-Operative Societies (SACCOs) who are not active savers anymore, make up 25.09 percent or a quarter of the total membership of 5.4 million. This is significantly higher than the 16.95 percent which was the case in 2019.
The unexpected reduction in members who are making savings monthly, occurred during a year when the East African nation of Kenya’s economy went through unpaid leaves, pay reductions, and layoffs all of which contributed to Savings and Credit Co-Operative Societies (SACCOs) members being unable to carry out regular payments to the Savings and Credit Co-Operative Societies (SACCOs).
The somewhat gloomy situation in the Job market contributed as well to the increased occurrence of numerous individuals defaulting on their loans from the 175 Savings and Credit Co-Operative Societies (SACCOs) which are regulated by the SACCO Societies Regulatory Authority (SASRA) and also accept deposits.
The SACCO Societies Regulatory Authority (SASRA) via its yearly report for 2020 made it known that, “The sharp increase in the dormancy of members may be attributed to the general impacts of the Covid-19 pandemic on the general economy, resulting in reduced member transactions with their respective DT-Saccos.”
At least thousands of workers in Kenya were hit with job loses in 2020 due to the containment and preventive measures which were put in place to combat the still ongoing Coronavirus pandemic.
According to Business Daily Africa, the Kenyan Government has not yet released employment data the the period of last year; 2020. However, 1.72 million employees lost their jobs in the three (3) months to June, due to the economic difficulties brought on by the Coronavirus pandemic.
The reductions in pay as well as job losses during the pandemic resulted in reduced incomes and spending power, which in turn led to defaults in bill payments like rent, utilities and of course said savings with the Savings and Credit Co-Operative Societies (SACCOs).
Banks in Kenya experienced an increase in non performing loans as said loans increased to 14 percent of the total loans which were provided by June.
Kenya Power and Lighting Company (KPLC) more commonly referred to as Kenya Power also experienced its first loss in 18 years. The occurrence was due in part to delays faced during the collection of outstanding bills which got as high as billions of Kenyan Shillings.
The 175 registered Savings and Credit Co-Operative Societies (SACCOs) which operate in Kenya were all affected by the increase in loan defaults. Said loan defaults increased from 25.7 billion Kenyan Shillings in 2019, to 39.8 billion Kenyan Shillings in 2020. This shows an increase of 54.8 percent.
SACCO Societies Regulatory Authority (SASRA) which is the regulator for Savings and Credit Co-Operative Societies (SACCOs) in Kenya, classifies a member as dormant when he or she does not carry out contributions for a period of six (6) months.
Although there has been an increase in the number of savers in Kenya who are now inactive or dormant, there has also been an increase in the number of Savings and Credit Co-Operative Societies (SACCOs) members in Kenya who have been carrying out regular savings contributions. The number grew from 4.5 million to 5.4 million after the SACCO Societies Regulatory Authority (SASRA) issued licenses to three (3) more establishments; Acumen, Kimisitu, and Ushuru.
The total value of assets within the DT-SACCO system increased to 627.68 billion Kenyan Shillings in 2020 from the 556.71 billion Kenyan Shillings that was the case in 2019. Total deposits also increased by 13.41 percent to 431.46 billion Kenyan Shillings in 2020 from the previous figure of 380.44 billion Kenyan Shillings.
It is a widespread belief that the increasing defaults are a direct mirroring of the challenges businesses and the workforce at large, are experiencing in an economy which only just now beginning its recovery process from the severe damages inflicted by the still ongoing Coronavirus pandemic.
The economic challenges, have also affected the Savings and Credit Co-Operative Societies (SACCOs) members who are still active as they are now faced with more ‘loads’ with regards to the business spaces where loans are mostly secured by guarantees as opposed to securities like land, cars, and homes.
A number of industries and businesses alike, have significantly reduced their activities due to the pandemic a decision which sadly resulted in widespread cases of unpaid leaves for members of staff who did not get laid off, and job cuts as more and more establishments began to incur severe losses. Workers who had then been granted loans based on their salaries were unable to pay back said loans.
Businesses who secured loans based off of their projected inflows of revenue have also encountered difficulties with regards to meeting their financial obligations.
Kenya is reportedly looking to implement an unemployment benefit scheme through which employees on salaries who lose their jobs will be paid a percent of their salaries for a period of six months through a fund which will be backed by the Kenyan Government.
In October of 2020 Kenya eased up on a number of the lockdown measures it imposed to combat Coronavirus. Although the decision significantly improved its economy it has since then, undergone a number of partial lockdowns as a result of numerous waves of the pandemic spreading within its borders.
According to the International Monetary Fund (IMF) Kenya’s economy has however, continued to pick up after its slight contraction of 0.1 percent in 2020.
A forecast by the International Monetary Fund (IMF) predicted a sharp growth change of 7.6 percent in 2021 and 5.7 percent in 2022. It also pointed out that Kenya continues to face challenges with regards to returning to durable growth and that its previous gains in the reduction of poverty levels had been lost.
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