The Sacco Societies Regulatory Authority (SASRA) is advocating for the mandatory adoption of Credit Information Sharing (CIS) with Credit Reference Bureaus (CRBs) to enhance financial sustainability within the SACCO sector.
Speaking at the Sacco Leadership Forum hosted by Metropol, SASRA Chief Executive Officer Peter Njuguna emphasized the need to enact full file sharing into law.
He noted that such a move would help SACCOs bridge information gaps and make more informed lending decisions.
“The CIS mechanism has been in place for nearly two decades. The journey has been about balancing awareness and capacity development. The reluctance is not intentional; it is about enacting the right legislation,” Njuguna stated.
He added that making full file sharing a legal requirement would align SACCOs with other financial institutions that have already adopted risk-based pricing.
Metropol CRB CEO Gideon Kipyakwai echoed his sentiments, saying that embracing full file sharing would enhance borrowers’ creditworthiness and help reduce Non-Performing Loans (NPLs).
“When all financial players, including SACCOs, digital credit providers, microfinance banks, and commercial banks, leverage data and analytics for credit scoring, creditworthiness becomes a valuable currency. This will significantly lower NPLs and ultimately lead to a reduced interest rate regime,” Kipyakwai explained.
Rising Non-Performing Loans and Credit Risk Management
Over the past three years, regulated SACCOs have reported portfolios at risk exceeding 8%, with rising NPLs threatening profitability and asset value. CIS Kenya CEO Jared Getenga cautioned SACCOs against selectively listing borrowers, urging them to embrace comprehensive data sharing to maximize the benefits of CIS.
“The CIS mechanism benefits both lenders and borrowers, depending on the completeness of data submission. When SACCOs fail to actively engage in this framework, consumer records remain incomplete at credit bureaus, affecting credit scores and profiles,” Getenga noted.
Despite the importance of credit referencing, SASRA revealed that the SACCO industry has yet to fully embrace the practice, leading to potential gaps in credit decision-making.
The regulator also highlighted ongoing challenges in implementing effective credit scoring mechanisms, which have hindered responsible lending and financial sustainability.
To enhance financial resilience and drive membership growth, the SACCO sector has been urged to adopt technological advancements, innovate new products, and diversify income streams to improve liquidity and financial inclusion.
The Sacco Leadership Forum brought together CEOs and credit managers from over 200 Deposit-Taking (DT) SACCOs across the country to discuss the rise in NPLs.
The SASRA Annual Report 2023 highlighted critical issues in credit risk management that require urgent intervention to curb the increasing loan defaults.
One key recommendation is for SACCOs to adopt proactive credit risk management practices. This includes implementing strategies to identify potential risks early, monitoring loans more closely, and taking corrective actions before defaults escalate.
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