…appeals to members to apply for more credit facilities
The University of Ghana (UG) Cooperative Credit Union Ltd. is encouraging its members to apply for more loans, as the company was unable to disburse funds sitting on its books in excess of GH¢50million. This, the union explains, was expected to be disbursed in the 2019/2020 financial year; but for some reasons, members did not apply for the facility.
The Manager of the union, Francis Fiayiya – in an interview with the B&FT after the company held its Annual General Meeting (AGM), explained that cooperative unions per their regulations are required to give out 70 percent of their assets as loans; but the company couldn’t meet that.
He explained that a number of issues could be contributing to the drop in applications for loans; such as the long tenure given by banks to pay loans compared to cooperative unions with a shorter term.
Mr. Fiayiya pointed out that the development could be the reason some of their members have switched to banks which may offer a longer tenure for paying back loans. “I also think that for some time now salaries have not gone up, and people will not go for loans when there is no salary increase and they are also required to pay in a short time,” he said.
Due to this, Mr. Fiayiya stated, the company has designed a special loan product to encourage its members to apply for the loans. “I believe that over the years we have used a single loan product, one jacket fits all; and so members wanted alternatives and a longer tenure. Our tenure has been much shorter, and so we are designing products that will make it a little more convenient for our members,” he said.
Mr. Fiayiya also blamed the situation on the outbreak of COVID-19, stating that there was a decline in developmental loans normally procured by institutions. He was however hopeful that with easing of the restrictions and as businesses return to their normal operations, the applications for loans will increase.
Financial performance
Speaking on the union’s financial performance for the period under review, the Board Chairman – Dr. Samuel Nana Yaw Simpson, announced that the union’s total assets grew from GH¢125.74million in 2019 to GH¢151million in 2020; representing an increase of 20 percent.
He added that savings grew from GH¢76.3million in 2019 to GH¢91.38million in 2020, representing 19.8 percent. Mr. Simpson stressed that the union will use innovative means for encouraging its members to borrow from the company, since that is the only way to generate enough income.
“Net total loans to members as at end of the year was GH¢66.95million, representing 44 percent of total assets. This was below the union’s lending capacity of 70 percent total assets,” he said.
Way forward
In addition to all the measures taken to encourage borrowing, Mr. Simpson said the board has reduced interest on loans from 2 percent to 1.8 percent per month for last quarter of the year. As part of strategic measures to be adopted in 2020, the union is looking at deploying more technology to enhance its services and operations.
Furthermore, the union is reviewing its products to make it competitive in attracting more borrowing. The U.G. Credit Union still the country’s biggest and is open for credible institutions to apply for membership.
