The savings and credit cooperative societies (saccos) regulator has urged societies sponsored by public universities to only lend members with salary accounts to tame rising non-performing loans, which are edging towards Sh3 billion.
The move followed findings that the amount of loan repayments, which were deducted from salaries of sacco members but not remitted by public universities and tertiary colleges more than tripled in three years to Sh2.68 billion in 2020.
Sacco Societies Regulatory Authority’s (Sasra) annual supervision report shows the cash-strapped institutions of higher learning accounted for 62.07 percent of Sh4.31 billion in non-remitted loan repayment deductions in 2020 compared with 39.5 percent in 2018.
This has prompted Sasra to issue a guideline to universities-sponsored saccos to ensure members process their salaries through Front Office Service Activity (Fosa) accounts before they get loans.
“We have urged saccos that they only deal with the member when it comes to loan repayment. If a member wants a loan, he must take responsibility for repaying the loan. Don’t tell the employer to deduct and remit to the sacco,” chief executive Peter Njuguna told the Business Daily.
University cash flows have in recent years been hit hard after lower entry grade adversely affected the lucrative parallel degree courses in which students paid fees based on market rates.
The drop in enrollment of the self-sponsored students, who used to generate billions of shillings for the institutions, resulted in a cash crunch, prompting universities to shut down several campuses.
This has seen universities’ outstanding remittances to the Kenya Revenue Authority, the National Hospital Insurance Fund, the National Social Security Fund, pension schemes, insurance companies, saccos and banks climbed to Sh62 billion in June 2021 from Sh34 billion in the year before.
Mr Njuguna said the guideline has helped slow down growth in non-remitted loan repayment deductions by universities, which were sharpest in 2019.
“That has worked well because now the saccos only give you a loan when you have an account with us,” he said.
"You either remit the money or bring your salary point to the sacco Fosa,” the Sasra chief said. “The issue has been you are being caught because there’s a third party who your sacco has appointed to be the one deducting savings and loans, but who has not been remitting.”