Latest Central Bank of Kenya report that sheds light on the health of financial sector shows that non-performing loans (NPLs) ratio for deposit-taking (DT) Saccos jumped from last year’s 6.15 percent to 9.12 percent in June 2020—the highest since 2012 when it was at 9.6 percent.
Gross loans stood at Sh426.4 billion, meaning that the value of NPLs at the end of June was Sh38.89 billion in contrast with Sh25.79 billion at the end of December 2019.
The June figure means that about Sh91.20 of every Sh1,000 loaned out is likely to be lost, putting at risk the stability of the Sacco sector.
Savings and Credit Cooperative Societies (Saccos) share of non-performing loans (NPLs) has hit levels last seen nearly a decade ago on Covid-19 economic hardships facing members.
Latest Central Bank of Kenya report that sheds light on the health of financial sector shows that non-performing loans (NPLs) ratio for deposit-taking (DT) Saccos jumped from last year’s 6.15 percent to 9.12 percent in June 2020—the highest since 2012 when it was at 9.6 percent.
Gross loans stood at Sh426.4 billion, meaning that the value of NPLs at the end of June was Sh38.89 billion in contrast with Sh25.79 billion at the end of December 2019. The June figure means that about Sh91.20 of every Sh1,000 loaned out is likely to be lost, putting at risk the stability of the Sacco sector.
Saccos run on a credit system where members’ guarantee each other loans. A rise in NPLs therefore points to the possibility that both the borrowers and the guarantors ran into financial headwinds.
NPLs ratio tracks portion of customer borrowings that remain unpaid for at least three months and a higher figure points to customers struggling to keep up with repayments.
The latest NPL ratio is nearly twice the maximum of five percent that is prescribed by the Sacco Societies Regulatory Authority (Sasra).
CBK says many Sacco borrowers drawn from agriculture and micro small and medium-size enterprises have felt the brunt of Covid-19 economic disruption, leading to elevated loan defaults. “Credit risk remains elevated with NPLs increasing from 5.2 percent in 2016 to 9.12 percent in June 2020. Agriculture and micro and small enterprises sectors have been affected most by Covid -19 pandemic, making it difficult for members to service their loans,” says the report.
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