by admin 
Have you ever received a phone call asking you to tell someone you know to pay their loan? Why?
Probably because you were their loan guarantor for a particular instance in your membership. Loan guarantors make the lending system in a Sacco possible.
The essence of guarantors in a Sacco is to manage the risk by spreading it to several members. Being a guarantor is committing to protect Sacco’s assets and the resources given in essence, you are the security.
As a guarantor, you have no claim or right on whichever assets are purchased by the borrower. You only shoulder the effects of their behavior and results after taking the loan.
The risk is that you may lose your shares if the loan borrower defaults on paying the loan.
Saccos’ leverage on the relationships between the loan borrower and the loan guarantor to be able to recover the amount given. The belief behind this system is that the loan borrower values the relationship with the guarantor hence why they will pay the loan to avoid inconveniencing their friends.
Some causes of non-performing loans are job layoffs, diversion of funds, and simply unwillingness to pay. The recovery process is what brings conflict, especially from the guarantor. This situation is strenuous for both the borrower and the guarantor.
As part of efficiently lending and streamlining the lending process, Saccos should work to reduce risks as much as possible so that all the stakeholders involved have a fallback plan. This will help in your goal for customer satisfaction and retention.
Here are some ideas you can use to minimize lending risks for loan guarantors and your Sacco:
New Loan products that don’t require guarantors
Other things can be used as collateral to secure loans. The range of collateral items can vary depending on the loan’s type and value. For example, Houses, log books, and household items.
These things will relieve the other members of the burden of financing a loan they didn’t apply for.
Financial literacy classes and training about guarantors
They will help your Sacco members to manage their finances well and understand the importance of a good credit score and investing.
Investment in income-generating Assets like affordable housing
There won’t be a strain in operations even in cases of default as the Sacco will still have a continuous flow of income from the acquired assets through rental income.
The purpose of a Sacco is not just lending but for social development purposes. There would be no need for one to join a society that will not secure their finances. As a Sacco, go beyond for your members and you will experience tremendous growth.
Are you a Sacco official or member looking to know more about reducing loan risk?
Get in touch with us at +254740694782 today.
