SACCOS REMAIN RESILIENT  ACCORDING TO  A  REPORT BY SASRA 

The regulated  savings and credit co-operative societies ( Saccos)  in Kenya continue  to remain resilient in the face of the current challenging  economic times. According to the latest 2022 annual report released by the  Sacco Societies Regulatory Authority (SASRA), saccos remain a key player in mobilization of savings and provision of credit to Kenyans. In the report,  deposits received by regulated Saccos grew by 9.84 percent in 2022 in comparison to 2021’s 9.80 percent, a testament of the sector’s well anchored role in mobilization of savings.

Additionally,  their  total assets to the nominal  Gross  Domestic  Product (GDP)  remained the same at 6.7 percent in 2022 as the previous year,  while loan advances rose by 11.8 percent from 9.67 percent in the same duration. Total membership also increased by 7.02 percent to 6.42 million  in 2022 compared to an increase of 3.03 percent reported in 2021. A total of 11,188 Kenyans are directly employed by the sacco  sub-sector,  a clear signal of the crucial role it  plays in boosting economic development.

Landscape of regulated Saccos

In 2022, there was  a total of 361 regulated saccos in Kenya comprising  176 deposit taking (DT) Saccos and 185 non-withdrawal deposit taking (NWDT) Saccos. Two NWDT Saccos failed to meet their financial obligations to  members,  resulting to their authorization being revoked,  leaving a total of 359 regulated saccos in operation.

Tier one  Saccos with assets above Kshs. 5 billion increased to 47 in 2022 from 42 in 2021. The increase was occasioned by 3 DT Saccos and 2 NWDT-Saccos whose assets crossed the Kshs. 5 billion mark in 2022. The new entrants were Fortune Sacco , Yetu Sacco  , Maisha Bora Sacco  , United Women NWDT Sacco  and Balozi NWDT Sacco. Collectively, the 47 tier one Saccos dominated the total assets’ market share in which they controlled 70.05 percent of the entire total assets’ portfolio amounting to Kshs. 623 billion.

Mid-tiered Saccos remained at eighty ,  although five Saccos in this category moved up to the large-tiered category.  Since no new Sacco was licensed during the period, five small tiered Saccos grew their total assets to over Kshs. 1 billion to qualify entry to  the  tier two category. Small-tiered saccos with total assets below Kshs. 1 billion were 232 for the period ended December 2022, which is a drop from 239 in 2021.

No new license or authorization was granted in 2022. However, six new applications to undertake specified non–deposit taking business were received by SASRA,  while  one application was declined. The five remaining were allowed to proceed to the next stages pertaining to licensing of Saccos. The new applicants were GSK Sacco , Urban Roads Sacco , Timaflor Sacco , Pehani Sacco , Secularm Sacco  and J-Hela Sacco  which are yet to be cleared to start operations.

Three of the NWDT Saccos were authorized to mobilize membership and subscription from residents abroad. The three diaspora based saccos are the Kenya USA Diaspora Regulated NWDT Sacco , Grand Granite Regulated NWDT Sacco  and Stoke – UK Diaspora Regulated NWDT Sacco.  Of vital importance, members of the public are strongly encouraged to shun from undertaking any business with a sacco  unless it is fully licensed or authorized by SASRA. Members should conduct due diligence and check validity of a Sacco on SASRA’s official website before doing business with them.

As by end of 2022,  counties with the highest number of regulated Saccos were as follows: Nairobi county  at one hundred and seventy seven, Kiambu county at thirty, Mombasa  and Meru counties sixteen  each, while  Nakuru  and Nyeri counties had  nine  each. Additionally,  Embu and Nandi tied at seven  each and finally Bomet and Kericho closed the  top ten list with six  each. Top ten counties with the highest total number of Saccos’ branches are Kiambu with forty eight, Meru  forty eight, Nairobi county  forty six, Nakuru county  thirty eight, Embu thirty three , Nyandarua thirty two, Kirinyaga thirty one, Nyeri thirty one, Murang’a twenty six  and Laikipia with twenty three  branches.

The place for Saccos

Commercial banks led deposit taking institutions with total assets of Kshs. 6.6 trillion in 2022 followed by regulated Saccos at Kshs. 890.3 billion, while the microfinance banks’ (MFBs) total assets stood at Kshs. 70.4 billion. Customer deposits in commercial banks  stood at Kshs. 4.8 trillion compared to Saccos whose members’ deposits stood at Kshs. 620.5 billion while those of MFBs were Kshs. 46.5 billion.

In the gross loans and advances front, commercial banks led with Kshs. 3.6 trillion in 2022 followed by Saccos with Kshs. 680.4 billion. The microfinance banks closed at Kshs. 39.3 billion in the same period. Interestingly, among the saccos, loans and advances outweighed customer deposits , hence proving  that  they  are the  preferred lending institutions due to their friendly business models. As a matter of fact, loans and advances issued by regulated Saccos were  Kshs. 60 billion in excess of members’ deposits (Ksh. 680.4 billion less customers’ deposit Kshs. 620.5 billion).

Contribution of commercial banking sector to the national Gross Domestic Product  (GDP) remained the most dominant within the financial sector space accounting for over 48.9 percent of the national GDP in 2022. Pensions and insurance industries came in second at 11.8 percent and 7.06 percent respectively,  while regulated Saccos injected 6.66 percent. The percentage by Saccos signals the role Saccos play in the national economy.

Milestones

Total assets under management by regulated Saccos clocked Kshs. 890.30 billion in 2022 from Kshs. 807.30 billion in 2021,  registering a growth rate of 10.3 percent. DT Saccos continued to hold  the  lion’s share of 85.8 percent translating to Kshs. 763.50 billion,  while the NWDT-Saccos accounted for the remaining 14.4 percent. On the other hand, total deposits (savings) for regulated Saccos grew by 9.84 percent to reach Kshs. 620.5 billion in 2022 compared to Kshs. 564.89 billion recorded in 2021.

The average interest rates paid by saccos on members’ deposits in 2022 marginally increased to 6.92 percent in 2022 from 6.86 percent paid in 2021. DT Saccos paid the highest rates on members’ savings at 7.11 percent in 2022 compared to the NWDT Saccos who paid a mean interest rate of 7.10 percent. These returns on members’ savings were higher than the interest rates paid by commercial banks on savings which averaged  three  percent in  2022. Additionally, Saccos paid their members a return on their share capital at a mean rate of 10.47 percent in 2022 compared to a mean rate of 9.87 percent in 2021.

Membership in DT and NWDT Saccos combined increased from 5.99 million members in 2021 to 6.42 million members in 2022 representing an increase of 7.02 percent. DT Saccos enjoyed the highest increase of 7.3 percent to reach 5.96 million members by end of 2022. NWDT Saccos on the other hand saw their  membership increase by 3.14 percent to 475,270  in 2022 from 460,785 in 2021. Total number of dormant members dropped to 19.01 percent of the total membership of regulated Saccos in 2022 compared to a proportion of 19.70 percent of the total membership classified as dormant in 2021, showing improved patronage of financial services offered by Saccos.

On a positive note, saccos are embracing ICT to enhance their reach as well as ease their service delivery. Regulated saccos have continued to create partnerships with commercial banks, payment service providers and other third-party fin-techs to better their financial services. Notably, 209 regulated saccos have embraced the use of mobile USSD to bring their service at the fingertips of their members. 103 Saccos have deployed provision of services using the internet. Of all the DT Saccos 34.09 percent offer automated  teller  machine (ATM) financial services.

Moreover, Pesalink integration has been deployed by 13.64 percent of the DT Saccos. Thirty six DT Saccos enlisted 3,340 agencies in 2022 across the country who collectively oversaw 1.89 million transactions valued at Kshs. 26.5 billion in 2022. Notably, 54.9 percent of these transactions were cash deposits by members.

Non-remittance hurdle

In 2022, eighty  regulated Saccos were owed a total of Kshs. 2.70 billion as non-remitted funds belonging to 66,452 members, either as loan repayment deductions or non withdrawable (BOSA) savings deductions as at September 2022. Out of that total amount, Kshs. 2.02 billion was meant to repay members’ loans. The net result is that all these members’ loans stood defaulted and at the same time the ability of the said saccos to meet their financial obligations was crippled.

Nonetheless, SASRA forecasts a positive outlook in 2023 for the sacco sector  with growth projections and momentum expected to be maintained. High inflation and interest rates, however, are projected to reduce the savings propensity  of saccos,  thus undermining their  ability to mobilize savings from members.