Motswedi Cooperative loses business to banks
Isaac Pinielo | Friday May 26, 2017 15:17
A consolidation loan is a loan made in order to combine several debts into one loan, usually for the purpose of reducing the monthly payments by extending them over a longer time period.
According to the chairperson of Motswedi SACCOS, Sipora Tsonope the society continues to see a lot of its members’ loan settlement by other financial institutions.
In an interview with BusinessWeek, she said loans that were cleared by the Society’s members through other financial institutions between April 2016 and March this year amounted to over P5 million.
“These financial institutions are giving us competition especially through loan consolidation initiatives,” she stressed.
Tsonope also said this poses a challenge as the society tends to lose out on interest revenue that could have been otherwise earned through the loans.
Lately, many financial institutions, especially commercial banks, have started capitalising on loan refinance and consolidation products.
Recognising that the situation is limiting their growth, she said the Motswedi SACCOS board is currently trying to come up with an affordable Society’s credit portfolio and risk management interventions, which can put the society at parity with market players.
Other challenges troubling the Society include loan delinquency of members, which the chairperson said was currently 55% as at April 2016 out of the total membership of 2,939.
She said the outstanding balance for the delinquent loans portfolio was about P1.5 million as at April 2016.
“As a mitigation measure, the Society has engaged the services of legal debt collectors to handle the collections,” Tsonope said.
She said there has been slow progress in the collections due to the slackness in the legal processes and also due to lack of sufficient information to trace the defaulters.
However, she said some of the defaulters have been served with summonses to pay and have committed to pay their dues.
She added that most of the defaulters are retirees and are still at large, as they have changed their addresses and contacts after retirement.
Meanwhile, Motswedi SACCOS issued about P1.04 million of quick loans to members from April 2016 to April 2017, fetching about P144,000 in repayments during the period. The interest paid during the period was P104, 353.
The total ordinary loans advanced to members from April 2016 to April 2017 amounted to about P28 million with P25.9 million disbursed to members while the Society collected loan administration fee amounting to P2.1 million.
Ordinary loans payments amounted to about P22.8 million in that period. In the same period, an amount of P2.7 million was advanced to members as emergency loans with P264,874 disbursed to members, while the Society collected P29,666 as loan administration fee.
Emergency loans payments amounted to P2.4 million from April 2016 to April 2017.