Sacco tipped to attract more members

Attract or sink. This is the message the Malawi Union of Savings and Credit Cooperatives (Muscco) has nailed home to Savings and Credit Cooperatives (Saccos) in the country.

They have to work hard to attract more members to boost their revenue stream and grow profits.

Amid high interest charges and bureaucracy in banks choking the survival of most businesses, Saccos have, in recent times, become the only solace for most people to access credit without collateral.

While banks are charging interest rates at above 50 percent, Saccos rates are hovering at around 24 percent, below the bank rate—the rate at which commercial banks borrow from the central bank—at 25 percent.

But Muscco chief executive officer Sylvester Kadzola, speaking on the sidelines of PolyMed Sacco annual general meeting (AGM) in Blantyre this week called on Saccos to mobilise more members to survive the turbulent economic environment characterised by high inflation and soaring cost of living.

“What we see in PolyMed, Sucoma, Mudi and other Saccos is that they managed to sail through the economic turbulence simply because of size. What this means is that in this kind of environment, size matters very much because to cover your overheads, there is need for good revenue streams,” he said.

Kadzola observed that when a Sacco is small in terms of membership, the revenue it generates is limited and, yet, the costs are escalating every time; hence, difficult for smaller Saccos to survive the harsh economic environment.

He said more members with their ‘little’ savings would provide a good basis to do business and generate more revenue to cover costs in the course of doing business.

“Bigger size helps the Saccos to weather the storm compared to smaller ones because they will have difficulties to cover operational costs,” he said.

Muscco is the mother body of all Saccos in the country and, so far, according to Kadzola, about five Saccos performed well in 2012 despite operating in the hard economic environment, particularly heightened by the 49 percent devaluation of the kwacha and the subsequent adoption of a market-determined exchange rate in May which saw the local unit losing value.

However, with the dollars from tobacco, Malawi’s principal foreign currency earner accounting for more than half of the country’s foreign exchange earnings, now trickling in, the kwacha has slowly started to appreciate giving a temporary respite to Malawians.

But analysts argue that the appreciation of the kwacha is temporary and that it will start depreciating after the tobacco sales are over.

Commenting on the overall performance of Saccos, Kadzola said some have managed to post commendable results, but not as high as members would have wished.

“While other Saccos are doing well, others are still struggling basically because peoples’ incomes have been depressed and, therefore, their propensity to save is being affected.

“Sacco members are not saving as much as they would have wanted to because of the problems that we all are experiencing, but overall it was not a bad year for a few of our Saccos,” he said.

On the part of PolyMed, chairperson Gloria Chisakasa said the group did well by posting a surplus of K9.4 million (about $23 000) and an asset base has climbed 50 percent to K238 million (about $568 000) from K158 million (about $376 000) the year before.

This year, she said, the group to reinforce security of members’ money by computerising their system, finding a bigger office space as a requirement to meet Reserve Bank of Malawi (RBM) guidelines, increasing membership and training staff in customer care.

Despite the economy sailing in troubled waters, the financial sector led by the banks is making huge profits.