WOCCU Helps South African SACCOs Deal With Effects of HIV/AIDS on Members

PRETORIA, South Africa – Credit unions in South Africa – or SACCOS (savings and credit cooperatives, as they’re called in the country) offer both funeral insurance and loan insurance. So when funeral claims jumped from 36% to 82% in the last six months of 2002 due to HIV/AIDS-related deaths and threatened SACCOs’ bottomlines, the Savings and Credit Cooperative League (SACCOL) turned to the World Council of Credit Unions for help with researching the problem. WOCCU sent Vice President Lucy Ito and Anna Cora Evans of their Washington D.C. office. Funding help came from the U.S. Agency of International Development (USAID) through the Office of Private and Voluntary Co-operation within the Bureau of Democracy, Conflict Prevention and Humanitarian Assistance. WOCCU had conducted a similar study in Kenya the year before with the help of the Canadian Co-operative Association (CCA). According to Evans, that project was to determine “How credit unions can become proactive participants in a multi-sectoral response to HIV/AIDS; and what linkages or alliances could be forged with non-financial service organizations such as health service providers in order for credit unions to better serve their members.” Like in Kenya, most South African SACCO members have no other alternative to financial services. The requirements to open any type of account with a commercial bank are out of their financial reach. Members rely on the SACCOs to provide insurance for funerals – there are 28 South African SACCOs with about 12,000 members. When a family member dies, not only are loans left unpaid and insurance claims made, but relatives of the deceased often apply for an emergency travel loan to attend the funeral. But the cost goes beyond the immediate problems for the SACCOs, as they find an increasing number of orphans taken in by other family members whose resources are already stretched to the limit. Evans said she “found the responses more guarded and reserved in South Africa based on the stigma associated with the disease.” She suggested that “this may have to do with the position of the country’s political leaders on HIV/AIDS. While President Mbeki has been slow to acknowledge AIDS, Kenya’s former President Moi declared the situation a national emergency in 1999.” What was the same, she said, were “the challenges of bearing the cost of burials, paying for school fees and supporting orphans. Both countries have experienced severe waves of retrenchment in employer-based credit unions throughout the 1990s, and their credit unions need to learn how to administer credit to community members that are not receiving employer pay slips.” In South Africa Ito and Evans had discussions with SACCOs’ staff and boards on the issue. They also ran focus group discussions with members of six SACCOs: Cape Metropole, Cape Member & Employees, University of Western Cape, Ditsobotla, Alrode and Tshiya . It was the same methodology they used in Kenya talking to three different geographical areas within each country. Evans said, “The interview questions were primarily the same as those used in Kenya; however, we did add a few new questions related to the number of people who have relatives that are credit union members, and the number of members who have wills and/or would like to have a will.” They were assisted and accompanied by Mr. Sabelo Mamba, manager of SACCOL Development and Compliance. Some of the recommendations that came out of the study were that SACCOs should distribute health service provider and prevention information on-site featuring savings programs for medical and funerals, the use of hotlines, financial counselling, and will writing instruction. They also recommended debt consolidation so that members have only one credit obligation and to reduce transaction fees. Equally important, SACCOs need to be aware of capital requirements and other business problems associated with rising insurance premiums and loan losses. Evans said “HIV/AIDS has a tremendous financial impact on those individuals and communities affected by the disease. African credit unions, if provided with training on how to properly manage the operating risks associated with the pandemic, can provide safety nets for their members in the form of programmed savings and emergency loan products for their members during this time of crisis.” -