LETTERS: Saccos must drop loan forms and guarantors to recruit millennials

According to the latest report released by Public Service Commission (PSC), at least 37 per cent of civil servants will formally retire in the next decade. Interestingly the number had increased from 35 per cent in the year 2016.

These statistics do not only point to the future pension crisis to the Kenyan government but it raises fears that the exit of senior citizens may leave a gap both in terms of deposits and membership in the saccos.

Interestingly the senior citizens have been cited as the core pillar of the saccos’ stability in terms of deposits.

While the exit of senior citizens appears to be the crisis haunting saccos, dealing with a new crop of members replacing them mainly composed of millennials has become a source of headache to them.

Most millennial members joining the saccos are already causing chaos to the sacco model as they continue to poke holes in their cultures and pose tough questions on the operational models.  But these hard questions can be necessary for the sacco of the future.

Let’s us look at some of the questions.

Why must I save to borrow a loan? This is the most common question since the millennials believe the saving and borrowing should be distinct.
There are those who want to access cheaper loans but not to save.

Owing to the low saving culture, pegging the loan limit to savings or deposits is quite limiting to those seeking credit facilities.

According to millennials, the credit limit should instead be pegged to the borrowers’ ability to repay.

Unless saccos review their operating model to address this question from millennials, they will continue losing potential members to commercial banks and investment cooperatives.

Why must I fill in a loan application form? To apply for a normal loan, most saccos still require their members to fill in loan application form and the infamous yellow form for guarantorship.

While most saccos are still rigid in regard to automation, banks have been able to invest heavily in digitisation.

Today, the numbers of walk-ins in local bank branches and ATMs have reduced because of digital banking.

To accommodate millennials, saccos should adopt automation.

Why must I look for guarantors for a loan? Getting a willing guarantor has become a headache for most sacco members because most people treat financial matters as personal.

While many have found their way out by either giving false information to their potential guarantors, many members continue to find this model quite intrusive.

This question explains why there is an increasing rate of people withdrawing membership.

Why must I pursue a borrower to repay a defaulted loan? One of the most difficult tasks to undertake is to compel a defaulter of a sacco loan to repay his outstanding loan on the basis that you were a guarantor.

READ: County defaults hit sacco loans, profits

Guarantors have no powers to compel a defaulter to repay the loan. Most sacco defaulters usually dismiss guarantors that the loan was awarded by the sacco and not the guarantor.

While saccos attach guarantors’ savings or deposits until the loan is fully repayed, loan application assessment is the role of the sacco, not the guarantor.

Why should I attend AGMs? According to sacco by-laws, saccos must hold an annual general meeting at least once a year to brief members, elect leaders and even pass resolutions.

Most millennials regard those AGMs as futile and costly.

To win the hearts of millennials, saccos should provide flexible and convenient platform for debate, elections and passing resolutions.

Isaiah Opiyo, financial trainer