Weak economy choking businesses to death, says Amica sacco CEO

The national government has been challenged to come up with ways of stabilising the economy to help businesses grow.

Amica sacco CEO James Mbui said the current state of the economy has made it difficult for businesses to thrive with many struggling to stay afloat.

The high cost of living, inflation and the weakening of the Kenyan shilling against major currencies have made it difficult for many Kenyans to conduct business, Mbui said.

He noted that the sacco that has 17 branches spread across Murang’a, Kiambu and Nairobi counties made minimal growth in terms of revenue while its net income almost stagnated.

The sacco was elevated to tier one status that is enjoyed by saccos with assets totalling over Sh5 billion after its total assets grew from Sh4.5 billion in 2020 to Sh5.6 billion in 2021.

The sacco recorded a growth of 24.4 per cent in 2021, recent growth during the last financial year as its loan book grew from Sh3.8 billion to Sh4.6 billion.

About 66 per cent of the loans were taken by small and medium enterprises, 18 per cent to farmers while the rest were taken by salaried people, institutions and chamas.

The enhanced loan book helped increase the firm’s revenue from Sh980 million by December 2021 as compared to the Sh773 million it had raised in 2020.

Last year, however, its growth slowed to 13 per cent amid a prolonged drought that affected the agriculture sector, leaving many food insecure.

Mbui said this year is even worse with fewer people acquiring loans as businesses are devastated by the weak economy.

“If you look at the factors that make the economy strong, they are all headed in the wrong direction. People have lost the borrowing power they previously had and the impact has been huge on the sacco,” he said.

“People are not borrowing loans because the interest rates are too high and those with loans are struggling to service them because of the state of the economy.”

The sacco, he disclosed, has however put in place strategies that will foster the growth of its business including diversification that has seen it reach out to the salaried as it previously focused on farmers and SMEs.

With El Nino, Mbui said people are not hungry and that bigger harvests will be recorded that will reprieve farmers.

But he said should the government not put in place measures to strengthen the economy, businesses will continue to suffer and traders will be unable to expand them.

He also noted that though the government has been giving signals of its intentions to support coffee farmers, the support is yet to be felt in the grassroots.

“We hear the government saying it will give out money to stabilise coffee prices but we are yet to see it actualised”.

In October, the Cabinet approved Sh4 billion to stabilise coffee prices through the Coffee Cherry Advance Fund started in 2019.

But Mbui said the funds are yet to get to farmers who have been acquiring advance loans as the harvesting season progresses.

He said this in Maragua on Saturday during his graduation ceremony after he was awarded an honorary doctorate degree on leadership and management by Kingdom Life University.

The university awarded Mbui for his achievements in steering the sacco from a low functioning firm to a tier one sacco during his nine-year tenure.

“The university saw my contribution since I joined Amica nine years ago and found a sacco that was not doing that well. I rebranded it and it has now employed 150 graduates”.

The sacco has also grown its assets from below Sh2 billion to over Sh7.2 billion while its income has increased from Sh200 million to Sh1.1 billion this year.

James Mugo, a farmer, said he joined the sacco as a young dairy farmer who was selling milk to KCC and they were being paid through the sacco in cash.

He eventually opened an account to have his earnings consolidated and is now able to access loans that have enabled him to tend to his tea farm and venture into more income generating activities.

“With this award, Amica sacco has joined the league of other financial institutions that are led by doctors,” he said.