Before the coronavirus struck Kenya, the small investment groups known as chamas met regularly, and the micro-finance institutions lent freely and debt repayment worked efficiently through a co-guarantee scheme where loans were covered by other members through savings.
Many chamas always visualize being the next big thing. However, either most chamas collapse within 2 years or the members become disgruntled because their goals are not being met.
In March when the first corona case was reported in Kenya, the government started discouraging the gatherings and meeting regularly, and some safety protocols that were given by the government to cab the disease like the social distancing affected the regular protocol of the chamas meeting.
Even as the chama members worry about the ongoing effects of the public health crisis, the most affected people are the micro-finance loan lending organizations or the SACCOS.
Sacco chief executive officer Jackson Wanjau told the Daily Nation that the outfit, which was established mainly by recruiting Kenyans abroad started receiving a hit when dollars stopped flowing in March before it hit home hard.
“Kenyans abroad have also borrowed and many were remitting up to Sh50 million per month, then it was reduced to below Sh15 million suddenly. We largely lend to small businesses and some are in informal settlements where we rely on the co-guarantee to recover loans. When they stopped meeting, no savings flew in and loan repayment grounded to a halt,” Mr Wanjau statement by the Daily Nation.
Many of the organizations have been forced to shut down completely and rendering their workers jobless. Some of them as the private sectors are not even planning to come back into the business in January 2021 due to large loan debt they incurred during this period.
People are not comfortable going to public places and social gatherings yet. The government has tried to put so many safety measures in place, but all of that, essentially, is not going to matter if people will not come to the Chamas because of trust between one another, leaving the fear of who has contracted the virus and who has not.
You can’t force business as usual when life is not. Many businesses already operating with low margins pre-pandemic can’t survive under health-related restrictions that, while incredibly important, make staying afloat extremely difficult.
With the social distancing requirement, the pandemic has put to test one of the country’s most successful investment models and a key revenue earner for finance intuitions who gave small unsecured loans to businesses with the security that members co-guaranteed one another.