Savings and credit co-operative societies (Saccos) have achieved a significant milestone by surpassing Ksh. 1 trillion mark in member deposits for the first time ever as of June 2023. The achievement is remarkable considering the current economic hardship that forced savers to withdraw their funds to meet their daily expenses.
According to the latest data from the state department of co-operatives, savings grew by 15.6 percent to reach Ksh. 1.047 trillion in the year leading up to June 2023. This was from Ksh. 906 billion recorded the previous year. This accomplishment marks a major milestone for Kenya’s co-operative movement.
The State Department stated that the target was accomplished due to enhanced member confidence and improved access to financial services through the adoption of digital channels by Saccos.
Growth in deposits amounted to Ksh. 141 billion which helped co-operatives surpass the targeted Ksh. 950 billion for the year. Surpassing the projected deposits is a clear indicator of the pivotal role Saccos play in mobilisation of savings in the economy . It also shows that more Kenyans are embracing a savings culture as they seek to accumulate savings for future needs and obtain loans for development.
Despite the prevailing economic hardships coupled by rising prices and government deductions, Saccos managed to mobilize an average of Ksh. 11.75 billion in fresh deposits on a monthly basis. This pace of growth in deposit mobilization outpaced the previous year’s increase of 7.1 percent or an equivalent of Ksh. 60 billion.
The growth in deposits calls for the necessity for a Deposit Guarantee Fund (DGF) to safeguard savers in the event a Sacco files for bankruptcy. DSG is aimed at cushioning members deposists incase a Sacco collapses.
Although the Sacco Societies Act of 2008 provides for a deposit insurance fund for credit unions, the scheme has not yet been operationalized. Section 55 of the Act lays the groundwork for the creation of a DGF to protect Sacco members’ deposits up to Ksh. 100,000, excluding share capital. That is when a Sacco collapses due to liquidity challenges or governance issues.
In terms of specific types of Saccos, deposit-taking (DT) Saccos witnessed an increase in savings from Ksh. 474.25 billion to Ksh. 522.59 billion by the end of June, surpassing the targeted Ksh. 490 billion. Non-withdrawable deposit-taking (NWDT) savings also grew to Ksh. 97.86 billion from Ksh. 90.64 billion, exceeding the target of Ksh. 91 billion.
In a statement, the state department noted the achievement of the targets is attributed to improved member confidence, branch expansion and the adoption of alternative service delivery channels by regulated Saccos.
Apart from DT and NWDT Saccos, other co-operatives also experienced a remarkable growth with their deposits reaching Ksh. 426.55 billion. This is up from the previous year’s Ksh. 341.11 billion representing a 25 percent increase.
Higher returns offered by Saccos compared to commercial banks largely contributed to this growth. In 2022, regulated Saccos provided an average interest rate of 6.92 percent on members’ deposits, while commercial banks averaged 3 percent.
The friendly model of Saccos allows savers to doulby benefit from earning interest on their savings as well as using the funds as collateral to secure loans. Typically, most Saccos allow members to take loans three times their savings.