The mandatory shutdown of businesses and supply chain disruptions caused by COVID-19
are taking a toll on the activities carried out by cooperative financial institutions (CFIs).
These institutions are crucial providers of financial services to households and small and
medium-sized enterprises, with a large rural presence in many developing countries.
Although some rural areas have been less affected by the spread of the virus, they are being
severely impacted by the economic distortions on demand—and in some cases,
exports—associated with the pandemic.
CFI supervisors from Kenya and Mexico and representatives from Albania and India had an
opportunity to discuss some specific challenges faced by CFIs during a webinar organized in
July by the World Bank CFI Center of Excellence in partnership with Rabobank Foundation.
The cooperative nature of CFIs and their ability (or inability) to access public resources to
cope with pandemic-related stress make their case different from that of non-cooperative
financial institutions. These characteristics, combined with structural issues regarding CFIs’
integration in the financial system and oftentimes relatively weak oversight, raise some
questions: How are these entities faring in the presence of COVID-19? Can CFIs and their
members and clients access public resources to deal with the crisis—and to what extent?
No failures (yet) due to COVID, but emerging signs of stress
While none of the countries represented at the event reported thus far any failures attributable
to COVID-19, signs of emerging difficulties were evident:
The pace of CFI business is clearly slowing down, as portrayed by Kenya’s SACCO
Societies Regulatory Authority (SASRA). The regulatory body reported negligible asset
growth of Kenya’s CFIs between March and May 2020, compared to the same period in the
two preceding years. The average growth rate of gross loans was negative in the same period
of 2020, in sharp contrast with the positive growth rates in the two previous years.
As figure 1 shows, deposits in associated cooperatives, known locally as SACCOs,
maintained a growing trend from previous years, which may be a sign of resilience among
the CFI membership. Yet the outlook is dim, given job losses and pay cuts among SACCO
members that are likely to affect their ability to save.
Read more:
https://blogs.worldbank.org/psd/calm-storm-impact-covid-19-cooperative-financial-institutions
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