Dial *445# and follow

A loan default occurs when a borrower fails to make the agreed loan repayments within the stipulated repayment period.

When a member defaults on a loan, the SACCO initiates recovery procedures in accordance with its approved credit policy, registered by-laws, loan agreement and applicable SASRA regulations.

The following steps may be taken:

1. Loan monitoring and follow-up

The SACCO monitors loan repayments and identifies accounts with overdue instalments. The borrower may receive reminders and communication requesting payment or clarification regarding the delayed repayment.

2. Issuance of repayment notices

The borrower may be issued with appropriate notices informing them of the outstanding loan balance and requesting settlement of the overdue amount. The borrower is encouraged to communicate with the SACCO promptly to discuss the outstanding obligation.

3. Engagement of guarantors

Where a loan is secured by guarantors, the SACCO may initiate recovery measures against them in accordance with the signed guarantee agreements and applicable laws.

For non-deposit-taking SACCOs, Regulation 71(4) of the SACCO Societies (Non-Deposit-Taking Business) Regulations, 2020 requires the SACCO to notify guarantors in writing within one month after a loan goes into default.

Guarantors may also request information on the performance of the loan they have guaranteed.

4. Recovery from member deposits

Under Section 36 of the Sacco Societies Act, Cap. 490B, a SACCO has a first charge against a member’s deposits, share capital, dividends and interest payable for debts owed to the society, including obligations arising from guaranteeing another member’s loan.

The SACCO may also restrict withdrawals from a member’s deposit account where the member is in arrears on a debt owed to the society.

5. Further recovery action

Where normal recovery efforts have been unsuccessful, the SACCO may pursue further lawful recovery measures, including engaging an authorised debt collector or enforcing available loan security, subject to the applicable loan agreement and legal procedures.

6. Loan restructuring where applicable

Depending on the borrower’s circumstances and the SACCO’s approved credit policy, the SACCO may consider restructuring the loan to provide a manageable repayment arrangement. Approval is subject to the applicable requirements.

What should a borrower do when unable to repay a loan?

Members experiencing financial difficulties are encouraged to:

• Contact the SACCO immediately when they anticipate difficulties in making repayments.
• Explain their circumstances to the loans or credit department.
• Request an updated loan statement to establish the outstanding balance.
• Discuss possible repayment arrangements or restructuring, where applicable.
• Maintain communication with the SACCO throughout the recovery process.

Important information for members

Loan default does not remove a member’s obligation to repay the outstanding debt. Members are therefore encouraged to borrow responsibly, honour their repayment commitments and communicate promptly whenever they encounter financial difficulties.

The SACCO is committed to protecting members’ savings while ensuring that loan recovery is conducted fairly, professionally and in accordance with applicable laws and regulations.

Borrow responsibly. Repay promptly. Protect your financial future.