COVID-19 frustrating Cooperatives’ fight against poverty

Kenya’s World Council of Credit Union’s (WOCCU) Country Coordinator, Mark Matabi, has voiced fears that the COVID-19 pandemic is frustrating efforts by the cooperative movement to alleviate poverty and social inequality in the region.

In a paper presented to the International Cooperative Alliance-Africa, on “Cooperatives fight against poverty and inequality in Kenya,” Matabi avers that the impacts of the COVID-19 pandemic might reverse efforts to promote social equality in East Africa through the cooperatives development model.

“Since establishment of the first cooperative in 1908, cooperatives in Kenya have been vital in the fight against poverty. Their growth and ability to metamorphose under different economic industries have enabled them to reach all sections of our society, help the poor and contribute to poverty alleviation,” Matabi observes.

Over the years, Matabi argues that Cooperatives have played a critical role in marketing produce on behalf of smallholder farmers, providing a voice to the poor in the policy making process and enhancing women’s socio-economic participation. This is in addition to facilitating social welfare for children and the elderly, access to financial services, affordable housing and employment opportunities.

He notes that today, 67% of Kenya’s population directly or indirectly depends on cooperatives or cooperative – related activities for livelihood, with financial cooperatives (Savings and Credit Cooperatives – SACCO’s), controlling more than 30% of the country’s GDP and accounting for 80% of total accumulated savings.

“Kenya’s SACCO movement is the most influential in Africa. It contributes nearly 62% of the savings and 65% of the loans disbursed through the cooperatives on the continent. With such contribution by cooperatives, Kenya was able to record a decline in poverty rate from 43.6% in 2006 to 35.6% in 2016,” Matabi said.

COVID-19 reversal

However, fears loom that the ongoing COVID-19 pandemic could reverse the strides made by cooperatives in the fight against absolute poverty and social inequality absent proper government response.

The 2016 National Household Survey (NHS) conducted by the Uganda Bureau of Statistics (UBOS) reported increase in Uganda’s poverty rate from 19.7% in 2012 to 21.4% in 2016. However, given the socio-economic challenges presented by the COVID-19 pandemic, experts predict a consequent rise in the poverty rate resulting from lost incomes and investments.

The same fear holds for cooperatives as they restart operations following the phased lifting of government restrictions, though with less vitality to fight poverty and promote members’ social welfare.

Ugandan situation

Sylvester Ndiroramukama, the head of the Uganda Cooperatives Savings and Credit Union (UCSCU) said the impact of COVID-19 on SACCOs in Uganda has been felt, although no survey has been conducted to ascertain the real magnitude of the pandemic on the growth and contribution of the cooperative movement and how it has affected general welfare of cooperators.

“In rural communities business has been going on; many SACCOs are dependent on agriculture. Since agriculture was not seriously affected by the pandemic, people kept doing their businesses and were able to do some savings, although credit operations was restricted, so they  couldn’t borrow,” Ndiroramukama said.

Comparatively, he said that those grossly impacted by the effects of COVID-19 lie in urban areas. Ndiroramukama notes that the closure of arcades and ban on transport affected the health and operations of many cooperatives.

”It has had serious impacts on the loan portfolio of these SACCOs.  In Kampala and Wakiso, it was even hard to access savings because movement was restricted.”

Stimulus fund for coops

Matabi proposes that a stimulus package fund should be established to revive cooperatives drastically affected by the COVID-19 pandemic.

He argues that the stimulus plan should be implemented alternately with other interventions that promote strong member-controlled cooperatives, enhance cooperative training and education and promote good governance, leadership and management practices.

According to Matabi, the response should also include promotion of technological solutions to reduce costs, generate more revenue and review the cooperative legal and regulatory frameworks “in respect to the current situation”.

“These considerations will continue to revive the cooperatives identity, spirit, value and principles while addressing emerging shocks in the communities and nations, even in the wake of such pandemics,” Matabi cautions.