Harambee Sacco records sharp drop in bad loans portfolio
Tuesday, February 11th, 2020
Harambee Sacco has cut its non-performing loans (NPLs) portfolio from a high of nine per cent in 2018 to two per cent last year, buoyed by improved loan collection, tightened financial controls and improved customer services.
Reduction in bad loans means that only two per cent of the money given out by the Sacco last year is at a serious risk of not being repaid unlike in 2018 when nine per cent was at risk.
In 2019, the Sacco gave out Sh15 billion worth of loans up from Sh11 billion the previous year.
The industry average for NPLs stands at 5.3 per cent, according to a 2018 report by the Sacco Societies Regulatory Authority (SASRA), way above the less than one per cent approved for Saccos.
The improvement comes at a time when the troubled giant Sacco is battling dwindling numbers of members, having declined to 73,000 in 2019 down from 76,000 in 2018 due members retiring and a recent government freeze on hiring.
Between 2012 and 2016 Harambee, Kenya’s third largest Sacco by member deposits, was embroiled in a number of corruption-related incidences that resulted in Sasra suspending its top officials and the organisation, posting a Sh145 million loss in 2017.
In the same period, Harambee’s total assets grew by 12 per cent to stand at Sh29 billion in 2019 up from Sh26 billion the previous year in what the Sacco management describes as one of the best years for the organization.
Harambee Sacco CEO George Ochiri, who has been with the Sacco for one year, described the improvement a remarkable change, saying his institution was following every loan given out to increase repayment rates.
“We also improved in a very big way on loan collections. At the close of 2018 we were collecting about Sh680 million a month.
This has moved to Sh930 million by December 2019, a jump of over Sh300 million,” he added.
“We’ve also seen very big growth that particular year (2019). Our loan book has grown by Sh3 billion.
Our total assets have grown by 12 per cent from Sh26 billion to Sh29 billion the same year,” he added.
Ochiri also attributed the improved NPL portfolio to the check-off system where employers deduct and remit money owed to the Sacco from member salaries.
“Members do not have many options except where they are below one third. We went ahead and made recoveries from guarantors where loans were defaulted.
We are talking about loans of close to Sh360 million that we have transferred the obligation to guarantors,” he said.