SACCOs Face Major Financial Risk Without Credit Coverage, Warns Geminia Life Insurance
Geminia Life Insurance has raised an alarm on the significant financial vulnerability of SACCOs in Kenya due to the lack of credit insurance to safeguard against loan defaults caused by unforeseen circumstances such as the death of borrowers.
According to the SACCO Society Regulatory Authority (SASRA) Annual Supervision Report 2023, SACCO loans in 2023 totaled KES 758.57 billion, against member deposits of KES 682.19 billion.
However, only 86.33% of the total loan portfolio of regulated SACCOs was deemed performing. This gap underscores the risks SACCOs face when substantial member loans remain unpaid. Speaking at Geminia Life Insurance’s headquarters in Upper Hill, Nairobi, during an internal session on the role of life insurance in enhancing SACCO operations, Dr. Gichuru, the Managing Director, emphasized: “Credit life insurance is a vital safeguard for lenders, especially SACCOs, as it ensures financial resilience and stability during adverse events.”
Despite these benefits, many SACCOs continue to lend without attaching insurance, citing systemic challenges, lack of awareness, or perceived prohibitive costs.
Moreover, Kenya currently lacks regulations mandating lenders to insure all loan recipients. As a result, the responsibility for unpaid loans often falls on beneficiaries and guarantors, who may be forced to forfeit accumulated savings. Dr. Gichuru highlighted Geminia Life’s innovative solutions, saying, “Why expose SACCO members’ deposits to financial vulnerability when we offer tailored products like our SACCO Loan Guard? This solution guarantees full loan repayment to SACCOs in the event of a borrower’s death, disability, critical illness, or even income loss.”
Credit life insurance covers members with outstanding loans, protecting against circumstances that might hinder loan repayment.