Challenges faced by SACCOs in issuing loans to members


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SACCOs face all kinds of challenges, and loaning stands out as this is their main business. Unless we ask ourselves questions surrounding SACCO operations, we cannot fully capture what we can do to overcome these challenges.

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Challenges faced by SACCOs in issuing loans to members

  1. 1. Challenges Faced by SACCOs in Issuing Loans to Members Challenges Faced by SACCOs in Issuing Loans to Members Stephen Kiritu Mwangi Co-operative Officer Stephen Kiritu Mwangi Co-operative Officer
  2. 2. Liquidity/Cash flow problems What is the source of our funds? Is the money enough? How is the money collected? How is the collection experience? How much is collected? When is the collection? Who is responsible for the Collection? Why is it so? How do we punish those who do not pay on/in time? Is there backlog? How big is the backlog? Why do we have a backlog? Do we know when more members than usual apply for loans? How do we get out of this situation or What do we do? Thesizeofthebuffersandother stabilizingstocks,relativetotheirflows
  3. 3. Loan Policy Are loans granted to bona fide members only? Are loans properly appraised and approved? Are loans properly guaranteed and approved? Are loans disbursed and done as per the approved terms and conditions? Are proper records of loans maintained? Are there effective monitoring and control mechanisms? Are delinquent loans detected for action? Is the loan policy sufficient/effective/efficient enough that it covers membership to issuance of loan forms to approval and thereafter? How do you recover loans and interests? Amendments, improvements...are they based on experience with the current loan policy? Who appraises and who approves loans? Is there Loan Application Form? Does it protect the society, loanee and guarantors? Are they filled and filed properly? How are lump sum contributions treated? The length of delays, relative to the rate of system change
  4. 4. Organization-Procedural and Structural Challenges-What are our responsibilities? How are we held accountable? What procedures are followed when granting loans? When and who issues loan forms? Who is considered first when granting loans? How are people recruited to become members? When are they given their first loans and How much are they given? Are there other policies that reinforce loaning in the society? How effective and efficient is loan appraisal process? Are loanees interviewed when more information is required? How do you balance society’s interests and you own? The strength of negative feedback loops, relative to the impacts they are trying to correct against
  5. 5. Loan Recovery Challenges How do we punish defaulters? How is guarantor-ship recorded? How are they taken accountable? Are there cells? How are cells formed and encouraged? Are these cells effective and efficient? What happens to delinquent loans? Are these recorded? Are follow-ups made? Who makes the follow-ups? How do you treat loans that were not guaranteed by guarantors if any? What was security? Who verified the securities authenticity? The rules of the system such as incentives, punishments, constraints
  6. 6. Competition Challenges Who are our competitors? How is the competition hurting us? Why is s/he hurting us? What are we doing to counter our competition? What indicators show that we are becoming better? Do we need to improve our services? What is our product range? How competitive are our products? How is our marketing-how do people know we are out here? What can we do to our members so that they become loyal and patronize society products? SWOT? The power to add, change, evolve, or self-organize system structure
  7. 7. Communication Challenges How do we communicate to our members when their loan requests are rejected or reduced from the original amount applied for or when they want to be served? How do we handle dissatisfied members? Are there procedures of handling grievances? Do members attend society meetings? Do they know why they must/should attend? When was the last education held? Did it cover loaning? Do members know procedures to follow when applying for loans? Do they understand why it is so? Has this been communicated to them? What can we do to improve communication? The structure of information flows (who does and does not have access to what kinds of information?)
  8. 8. Loan Use Challenges Do members utilize loans for the intended purposes? What loans are favorite with members? What percentage of the total loan is it? Is it beneficial to members? How many loans are members allowed at a go? Are their ‘serial’ borrowers? Of the ‘serial’ borrowers, how are they when we compare them to one loan at a time borrowers? Does society do any survey to determine how society’s products have helped its membership? The goals of the system
  9. 9. Loan Record Challenges Are there records? Are they properly filled and filed? Are they protected/safe? Where are they kept? Are they easily accessed by everybody? Who can access the records? Who is accountable for them? Do credit and other sub-committees keep records e.g. minutes? Can we safely say we can retrieve loan records that are five years old? The gain around driving positive feedback loops
  10. 10. OUR FATHER…. Considering: That service, democracy and brotherhood are the fundamental principles in the co-operative movement; That our objective is not only to serve the economic but also the social and cultural development as well as the human advancement of the members; and that in the co-operative system, the primary co- operatives, the federations and unions, the power of ultimate decision except those reserved by laws, resides in the membership. Grant us your Grace, to make integrity and unselfishness the basic standards of conduct; to guard against the use of our position in the co-operative for personal advantage; to discharge our responsibilities so as to promote and protect the best interest of the co-operative and its members; to accept the obligations of attendance, learning and participation relating to the position held; to give issues, objective hearings, to vote according to conscience and to support majority rulings; and to encourage open, democratic procedures in the election of qualified candidates for volunteer service to fellowmen. All these we ask of YOU. Amen. PRAYER