The SACCO Societies Regulatory Authority (SASRA) has unveiled its annual SACCO supervision report for 2022, revealing a concerning trend of loan defaults within agriculture-based savings and credit cooperatives (SACCOs). 

The report, which categorizes financial institutions into nine sub-sectors based on their operations, exposes the challenges faced by SACCOs whose members are primarily farmers. 

With 49 agriculture-based SACCOs under scrutiny, this comprehensive analysis provides vital insights into the state of the industry.

Widespread Loan Defaults Amidst Challenging Agricultural Conditions

The report discloses that agriculture-based SACCOs experienced the highest level of loan defaults in 2022, with a non-performing loans (NPL) ratio of 18.42 per cent. 

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This alarming figure is more than double the NPL ratio of the entire industry. Farmers, who form the backbone of these SACCOs, grappled with the devastating impact of a biting drought that severely affected their earnings and ability to repay loans.

Sub-Sector Analysis: Crop and Dairy Production SACCOs Hit the Hardest

Further examination of the data reveals that within the agriculture-based SACCOs, those specializing in crop production suffered the most, with an NPL ratio of 19.4 per cent. 

Similarly, SACCOs primarily involved in dairy production faced significant challenges, with an NPL ratio of 12.56 per cent. This marked a sharp increase from 2021 when these SACCOs had NPL ratios of 15.72 per cent and 7.32 per cent, respectively.

Divergent Trends in Other Sub-Sectors

In contrast to the dire situation faced by agriculture-based SACCOs, general service-based deposit-taking SACCOs exhibited the lowest NPL ratio at 4.95 per cent. 

Following closely were private sector-based deposit-taking SACCOs, with an NPL ratio of 6.36 per cent. 

Other sub-sectors reported varying levels of loan defaults, including universities-based (7.97 per cent), State corporation-based (11.07 per cent), county government-based (8.35 per cent), teacher-based (10.68 per cent), and community-based (14.18 per cent) SACCOs.

Significant Membership in Agriculture-Based SACCOs

The report underscores the substantial membership of agriculture-based SACCOs within the sector, totalling 2.74 million individuals.

This figure represents 42.6 per cent of the entire membership of regulated SACCOs, marking an increase from the 2.59 million members recorded in 2021.

These findings highlight the critical role that these SACCOs play in the financial landscape, particularly for farmers who rely on them for access to credit and financial services.

As the agricultural sector grapples with the ongoing challenges posed by climate change, it is imperative for policymakers, financial institutions, and agricultural stakeholders to collaborate on sustainable solutions. 

Addressing the issues faced by agriculture-based SACCOs and their members is vital to ensuring the resilience and prosperity of the farming community in these trying times.