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How County Sacco doubled repayment period for tea loan borrowers

How County Sacco doubled repayment period for tea loan borrowers
September 28, 2020 Eastern Newspaper

By Mugendi Kangichu

A Sacco society in Embu has increased the loan repayment period for tea loan borrowers to provide sufficient time to recover their money.

County Sacco Society doubled the repayment period from the usual one year period, a move necessitated by a low bonus payout that was made to tea farmers last year.

Lenny Muchangi, the society’s manager, said nearly three-quarters of their members are tea farmers.

The Sacco, headquartered at Kanja market in the bustling hub Runyenjes town, and with branches in other parts of Embu and Tharaka-Nithi County, has a membership of over 33, 000.

“Since tea farmers received very little pay in last year’s bonus payout, we have decided to increase the loan repayment period to two years from now henceforth. This will ensure that a farmer can access loans and be able to repay within two years. If the first year’s bonus payment is not enough to pay their debts in full, then they can clear arrears in the succeeding year,” Muchangi said.

He added: “Many farmers haven’t been able to repay loans following the decrease of tea bonuses. Therefore, as a Sacco whose growth is anchored by mostly tea farmers, we have decided to increase the period of tea loan payment.”

Last year tea farmers across the country suffered a blow after the Kenya Tea Development Agency (KTDA) paid them poorly, according to farmers who vented frustrations in interviews with this newspaper.

For instance, Embu’s Rukuriri Tea Factory paid Sh39 per kilo, down from Sh49 per kilo in the previous years. Mungania Tea Factory paid Sh37 per kilo from the preceding year’s Sh50. Earlier, Rukuriri Tea Factory had topped the list of the best-paid tea bonus.

Muchangi said the move to increase tea loan repayment period doesn’t only aim at recovering the Sacco’s money, but also to ensure that ‘our debtors can afford to pay back loans at ease.’

The poor pay prompted farmers to think about replacing their tea bushes with other fast-growing horticultural crops but the Sacco’s chairman Henry Mbogo advised farmers to take time before they could uproot their bushes as things would get better.

Muchangi added that they are in the process of reviewing their old products to ensure young people and other Sacco members benefit greatly.

He said their main aim is to ensure that members develop in both wealth and health, noting that they were also in the process of introducing new products that would be launched later in the year.

“We are reviewing our old products and creating new ones to ensure they will fit our members, and especially the youth. Initially, we were not financing business startups but now we are set to launch Jijenge loan product for small businesses,” he said.

However, Mbogo noted that many Saccos record the low number of youth membership because there are no follow-ups; a situation that places Sacco’s future at stake.

He said the organization had embarked on junior accounts to ensure prosperity even in the future, adding that the Sacco that has over 3, 500 active junior accounts has put up follow up structures.

This, he said, will ensure that even after growing into adulthood, the children under their wings will continue transacting-and growing financially..

For the last three consecutive years, County Sacco has been receiving awards for being the best in junior account savings and management.

They have also been awarded for the best Sacco with excellent marketing strategies during the annual International Cooperative Days (ICA) in Embu.

“We have many plans both long-term, medium, and short terms which will help us maintain young members in the Sacco.

To achieve the prosperity of our Sacco we are launching products that will help us maintain young bankers. We advise young people to continue saving the little they have to secure their future,” he said.

Mbogo added that Sacco is in the process of ensuring the reduction of loan interest rates to 12 percent by 2024.

At the same time, he noted that the Sacco had started a housing arm that will see member share dividends increasing to 20 percent by the same year.

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