By Sammy Chivanga
Savings and Credit Cooperative Societies (SACCOs) will get a Sh3.79 billion dividend cheque from Cooperative Bank of Kenya, giving them a major liquidity boost in Covid-19 environment.
The pay-out, set for mid-April, comes after Co-op Bank board defied the prevailing dividend freezes and cuts in corporate Kenya to declare Sh5.86 billion dividend with Saccos emerging the biggest winners.
Co-op Holdings Co-operative Society, which represents Kenya’s co-operative movement, holds 64.5% stake in the tier I lender, against which it will get the majority dividends.
Co-op Bank board recommended Sh1 per share dividend—being same as the payment for 2019 results—offering the cooperative movement the much needed shot in the arm.
With this year’s dividend payment, Kenyan co-operatives through Co-op Holdings will have earned Sh19.4 billion in dividend payments from Co-op Bank in the last six years.
Co-op’s consistent dividend pay-out has enabled Co-op Holdings to recoup and exceed their entire initial investment in the bank.
Dividend pay-out in current Covid-19 economic disruptions will boost the liquidity of Cooperatives at a time they need to strengthen their businesses and support members through loans and dividends.
The payout, set for mid-April this year, is for its 64.56% stake in the Nairobi Securities Exchange-listed lender which booked Sh10.81 billion net profit for the financial year ended December 2020.
In addition, the controlling 64.56% equity stake is currently worth over Sh50 billion even at the current depressed stock market prices, which makes Co-op Holdings a major asset-holding Sacco.
Co-op holdings Co-operative Society chairman Macloud Malonza applauded the uniqueness of the Co-operative financial system that touches over 22,000 Societies and Saccos.
Covid-19 economic hardships have brought about the critical need to release the much-needed funds to the grassroots in the over 15 million-member co-operative movement.
Co-op said that it will pay the dividends before convening the next Annual General Meeting in line with Capital Markets Authority guidelines for navigating Covid-19 environment.
The lender’s decision to pay dividends was backed by its large exposure in consumer lending that is heavily leaning on public sector payrolls that continue to enjoy full incomes despite the pandemic.
Co-op Bank also enjoys a significant lending exposure to its strategic market segment – the Saccos.
Key Saccos such as Harambee, Stima, Kenya Police, Sheria, Ushuru, Ukulima and Afya heavily draw their membership from permanent and pensionable civil servants and related public sector payrolls.
This scenario has ensured that most of the loan repayments are honoured with minimal defaults despite the pandemic since public servants did not suffer layoffs or pay cuts as was the case in private firms.
Co-op Bank also enjoys strong capital buffers reinforced by Sh74.58 billion retained earnings that has come on the back of consistent frugal dividend policy.
The consistent trend in dividend pay-out by Co-op Bank has enabled cooperatives to recoup and exceed their entire initial investment in the bank.
Co-op went public in 2008 at an offer price of Sh9.5, equivalent to an aggregate value of Sh33.2 billion.
The lender has been deepening ties with the cooperatives movement and runs a dedicated business division to support co-operatives.
Co-op Bank Chief Executive Gideon Muriuki says the bank will continue deepening partnerships with the cooperative movement.
“Saccos are prolific mobilisers of savings and reliable providers of affordable credit to the majority,” said Mr Muriuki.
He added: We shall continue to nurture our bonds of partnership with the co-operative movement, and even as we go digital we shall walk that journey together.”
Co-op also runs a wholly-owned subsidiary, Co-op Consultancy Services, with full time consultants for offering capacity-building and institutional development advice to co-operatives.
Co-op Consultancy Services has executed over 900 mandates in the last five years, helping co-operative clients to adopt viable operating models and become competitive in the market.
Co-op Bank branches countrywide offer cash management and related support to Front Office Service Activities (FOSAs) operated by Saccos.
The bank invested in the Saccolink platform that integrates Sacco systems to the bank, which has enabled them to issue over 1.5 million Visa-branded debit cards to members.
The platform helps Saccos retain liquidity while at the same time giving members the debit cards to access funds in their FOSA accounts from any Visa-branded outlet.
