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Webinar: African Credit Unions Need to be Proactive on Liquidity Concerns

Officials from national credit union associations across Africa exchanged ideas on how to get their member institutions to prepare for increasing liquidity concerns caused by the COVID-19 crisis during an April 29 webinar presented by World Council of Credit Unions (WOCCU) and the African Confederation of Cooperative Savings and Credit Association (ACCOSCA).

Credit unions, called savings and credit cooperatives (SACCOs) in many African countries, are suffering as a result of economic restrictions put in place due to the COVID-19 crisis. Many of their members have been laid off and are withdrawing more cash than normal, while also seeking loan moratoriums or restructuring at the same time. The result has been a tightening of liquidity for many credit unions across the continent.  At the same time, Fumbani Nyangulu, CEO of MUSCCO in Malawi, noted that due to caution in placing long-term loans during the economic downturn, some credit unions are experiencing excess liquidity.

George Ombado, executive director of ACCOSCA, urged leaders from the national credit union associations to advise their member credit unions to be more proactive than reactive in meeting those liquidity challenges and addressing them cooperatively.

“COVID-19 is a disruption and there are many other disruptions that will still come. So, we need to find a way to be more proactive by developing things that might help us,” said Ombado.

Short- and long-term solutions

World Council technical advisors laid out short-, medium- and long-term strategies for alleviating those concerns.

One of the primary short-term actions suggested was to temporarily suspend or delay dividend payments to shareholders. Several national association officials said many credit unions were already doing this.

“We’ve also informed credit unions to halt all capital expenditure projects so they do not put undue pressure on themselves. Some of the projects can be postponed, so it doesn’t create a lot of liquidity issues for the credit union,” said Solomon Owusu Nyarko, deputy general manager of operations for Ghana Co-Operative Credit Unions Association, which also instructed member credit unions to reduce operating costs.

WOCCU Technical Advisor Jean Thiboutot advised that credit unions should seek out multiple funding options and lines of credit as well—both of which should be as diverse as possible.

But with the crisis continuing to unfold, WOCCU advisors said it would be important for all credit unions to run stress tests to forecast liquidity levels one year out.

“This forecast then needs to be tracked and monitored on a monthly rolling basis, so that we know where we are. And most importantly, it will provide greater transparency into significant cash outflows,” said Raphael Kuria of WOCCU Kenya.

Kuria said putting a plan like that in place will also help credit unions to not be “caught flat-footed” the next time an economic crisis arises.

National associations are being proactive in engaging with their regulators as well as their member SACCOs. Foday Sanyang, General Manager of NACCUG in The Gambia, reported having visited 92% of the credit unions in his country, engaging with boards of directors on how to manage liquidity and other measures to remain in business.

Technology is no longer a luxury

Several presenters also stressed the COVID-19 crisis should be a wake-up call to credit unions that don’t currently offer many or any digital banking options.

“All of our members should be connected through the kind of technology where all of the credit unions or societies (SACCOs) in that particular region have invested in, so that even when we have pandemics—we are still in business; we can still provide services,” said Solomon Atsiaya Angutsa, CEO of Kenya Police SACCO Society.

Cooperativism at work

Atsiaya Angutsa said credit unions should also take this opportunity to do more to educate members about the importance of growing their savings during good economic times. His was one of many comments made during the webinar about the importance of helping members manage their own liquidity. 

Baboucarr Joof of the Gambia Teachers Credit Union likewise described the proactive ways they are managing their own financial health, as well as the practical support they are giving members to help them avoid panic food buying. The Gambia Teachers Union is both preventing runs and also tapping into the cooperative spirit by partnering with food suppliers and consumer cooperatives to provide food items to SACCO members. 

The cooperative spirit extends to liquidity management as well. Several national associations are activating their Central Finance Facilities to manage both excess liquidity and lack of liquidity across credit unions.

You can watch the webinar in its entirety on World Council of Credit Unions’ YouTube Channel.

World Council's Technology and Innovation for Financial Inclusion (TIFI) Project team helped facilitate this webinar. TIFI funded by the USAID Cooperative Development Program.