Andrew Price

Regulators from across the African continent reported employing similar relief efforts to mitigate the impacts of COVID-19 on Savings and Credit Cooperative Societies (SACCOs), while expressing concerns about the future on a July 15 webinar hosted by World Council of Credit Unions and one of its associate members—the African Confederation of Cooperative Savings and Credit Association (ACCOSCA)

Regulators from Kenya, Tanzania, Malawi and South Africa all indicated they had taken measures to help prop up the liquidity of SACCOs, with many indicating they are refraining from downgrading restructured and rescheduled loans as “non-performing” while the pandemic continues.

The measures have been necessary due to the high level of deposit withdrawals and demand for loan restructuring from SACCO and credit union members who are out of work.

Andrew Price, Senior Vice President of Advocacy for World Council, noted that the international standard setting bodies—such as the Basel Committee on Banking Supervision and the Financial Stability Board—have advised national regulators to be flexible in allowing for such changes.

“When we get through this crisis, hopefully we can look back on how credit unions were the financial first responders that helped us get through it,” Price told attendees.

Peter Njuguna, Chief Manager of SACCO Supervision with Kenya’s SACCO Societies Regulatory Authority (SASRA), said his agency also reduced cash reserve requirements for SACCOs to push more money into the economy while waving fees for push transactions under $10.

SASRA is also requiring SACCOs to report liquidity returns on a daily basis, while having them provide monthly reports on loan classification and provision returns.

Several regulators stressed that this monitoring is essential to ensure SACCOs can stay solvent.

National credit union associations are also providing assistance through the adoption of technology to provide training for credit unions and membership education.

Ghana Co-operative Credit Unions Association (CUA), a World Council direct member, put US $1 million towards liquidity support for its member institutions.

“It’s inadequate (to cover all the losses), but we are trying our best,” said CUA Deputy General Manager Solomon Owusu Nyarko.

As a result of all these efforts, 89% of attendees on the webinar reported their SACCOs or credit unions have been able to remain open despite the impacts of COVID-19.

ACCOSCA Chair Cambridge Mdlalose said his organization was keeping a close eye on a few trends going forward, including:

• Risk exposure on restructuring or loan moratoriums.
• Weak capital structures due to reduced loan payments and savings.

Dickson Chidumu, Principal Examiner of Financial Cooperatives with the Reserve Bank of Malawi, said many credit unions and other financial cooperatives will fail if non-performing loans continue to be an issue after the pandemic ends.

“Most SACCOs won’t be able to sustain themselves if they hit 20% in non-performing loans,” said Chidumu.

Andrew Price noted that international standard setting bodies are also trying to look down the road to see what the future holds for financial institutions across the world.

“They’re trying to figure out what the impact on the banking institutions’ balance sheets will be and how they are going to react to that,’” said Price.