Metropolitan Sacco puts aside Sh6.7 billion as bad loans surge

Members queue at Metropolitan Sacco along Koinange Street, Nairobi on April 19, 2022. [Denish Ochieng, Standard

Metropolitan National Sacco has made drastic changes to its management and operations as it seeks a fresh beginning after a tumultuous period.

One of the boldest decisions taken by the Sacco is to set aside some Sh6.7 billion as insurance against bad loans, a situation that will see the society not only report a loss for the year ending in December 2021 but also not issue dividends to its members.

The Sacco’s bad loans or non-performing loans amounted to Sh9.3 billion. “On a more positive note, providing for these loans will give the Sacco full use of the measures available in the law to recover these loans from the defaulting members and their guarantors,” said the outgoing chairperson Mr Christopher Karanja.

This was during the Sacco’s Annual General Meeting (AGM) in Nairobi last Saturday.

In other changes approved by members, the Sacco will go after serial defaulters, cut costs, and overhaul its governance structure to meet legal requirements and reflect the diversity of its membership.

Civil servants

This as the Sacco, which draws its membership from teachers and civil servants, seeks to bounce back from a tough environment aggravated by the Covid-19 pandemic.

Members with big loans are also expected to contribute more in the new changes, with Mr Karanja regretting that there have been cases of people with loans of up to Sh2 million contributing a monthly minimum of Sh3,000.

The Sacco will also have a new board and chairperson after members approved proposals to have board members who retire from active service automatically retire from the board.

The chairperson, vice-chairperson, treasurer and secretary-general are also to serve for only two terms of three years each. Other changes include the introduction of a delegates’ system to devolve representation closer to the people.

“The benefit of this system is that members will be able to elect local representatives who will air their issues to the board and ensure a more responsive governance of the Sacco,” said the chairman.

Sacco’s share capital has been raised from Sh10,000 to Sh20,000. Sacco CEO Mr Benson Mwangi said things are looking up after members who defaulted on the repayment of their loans due to the Covid-19 pandemic started making steady payments.

Because the Sacco has paid out a lot of money for these loans, it means that members will not be getting their dividends or honour the member refunds until the loans are repaid.

Members also endorsed a proposal for the closure of marketing offices and branches found to be unprofitable, leading to a reduction in the staff count.

After undertaking a review and fit-gap analysis on the ICT system, which was said to be weak, the Sacco has come up with a new ICT roadmap, which it hopes will make its services more efficient.

The changes are meant to help achieve liquidity management, deposits mobilisation, loan book rationalisation, operational efficiency and build-up of institution capital. Saccos’ performance this year has improved as the economy eased out of the Covid-19 pandemic.

With over 100,000 members, the deposit-taking Sacco draws its membership from the Teachers Service Commission, ministries, parastatals, Kenya Defence Forces, National Police Service, public and private universities, colleges, academies and the private sector.

It is the sixth-largest Sacco in the country with an asset base of Sh14.8 billion.