Financial constraints cripple Umwalimu Saccos loan book growth
Despite registering a huge profit last year mainly driven by increased loan book as well as dropping Non performing loans-NPLs, Umwalimu Sacco says lack of financial capacity is hampering the growth in its loan book .
To extend to its clients, the country’s teachers Savings and credit cooperatives relies on the returns from the loans disbursed as well as teachers’ savings which is not enough to satisfy the increasing demand.
“The financial capacity of the institution is still low, specifically in covering or supporting the teachers’ loan demands,” said Joseph Museruka, the Sacco’s Managing Director
This according to Museruka is also attributed to low interest rate that stands at 11 per cent which drive more the high increase of portfolio in long term than long term savings and reducing profitability for the Sacco financial self-sufficient and sustainability
Moreover, the delay in disbursement of government subsidies to the Sacco’s accounts as well as uncontrollable teachers’ retrenchment have affected the positive performance of the portfolio in terms of quality and efficiency.
“But we are looking at ways to increasing savings mobilisation and this is why we need more government support to have enough finance to lend to our clients,” he added
Indeed, the government in 2012 extend over rwf 30 billion to the Sacco to lend to teachers in a period of ten years, something that had improved the Sacco’s loan book as well as its profitability.
For example, by end of December 2013, Umwalimu Saccos had extended over Rwf 58 billion up from rwf 38 billion in the same period in 2012.
According to statistics from the Sacco, small business loans took a bigger proportion of the loan portfolio realised an upward trend from rwf 0.7 billion in 2009 to 26 billion in 2013,while agriculture and livestock loans increased from Rwf364 million in 2009 to Rwf 2.9 billion in 2013.
The Sacco also indicates that small business loans, agriculture, education and marriage loans are among the loan products that members are interested in while also noting that the Noon performing loan are at its lowest of 3.3 per cent.
Whilst, as of end of December 2013, the Saccos registered a net profit staggering profit of rwf 1.2 billion up this is due to low interest rates at 11 per cent up from the rwf 454 million loss it registered in 2009.