Sacco Societies Regulatory Authority (SASRA) has plans to create a framework that will see the National Treasury (NT) deducting funds directly from exchequer-funded entities to Saccos.
SASRA Chairperson Jack Ranguma said county governments and their legislative assemblies, as well as public universities and tertiary colleges, have continued to top the list of defaulters of Sacco loans, hence the need for a scheme to deduct money directly from Treasury to settle the arrears.
By the end of 2022 for instance, county governments owed Saccos Ksh1.35 billion, which translates to 49.97 per cent of the total Ksh2.67 billion owed.
Public universities and tertiary colleges owed Saccos a sum of Ksh620.52 million, or 23.01 per cent of the total non-remitted funds.
State corporations owed Saccos Ksh143.1 million over the same period, while public sector companies have a debt of Ksh64.2 million.
Others were: national government ministries (Ksh27.7 million), public schools (Ksh12.5 million), and constitutional bodies (Ksh24.36 million).
Ranguma argued that since it’s the exchequer that funds these employer-based borrowers, Saccos’ recovery of non-remitted deductions becomes subject to availability of funds and is riddled with conflict of interest by the key actors in the recovery process.
“To that end, the Authority is considering putting up a framework to enable the recovery of Saccos’ non-remitted deductions through the National Treasury directly from the exchequer grants or funds appropriated in favour of these governmental institutions,” he said, adding that non-remittance continues to undermine the stability, resilience and growth of Saccos.
Data from SASRA shows that as at December 2022, employer-based institutions owed 80 Saccos Ksh2.67 billion.
From the amount, Ksh2.02 billion, or 76 per cent, was meant to repay members’ loans, the delay thus fuelling defaults in the sector.
“The net effect is that all these members’ loans stood defaulted and the ability of these 80 Saccos to meet their financial obligations was severely hindered,” said Ranguma.
Failure by various employer-based institutions to promptly remit the BOSA savings’ deductions reduces the borrowing capabilities of individual members of Saccos, which is mostly pegged on savings.
SASRA has been working with Saccos to aggressively pursue the non-remitted cash, a move that is gradually paying off considering that the figure stood at Ksh3.4 billion in 2021 from Ksh5.04 billion in 2020.
The regulator has also been asking Saccos to fully implement the 2019 advisory that requires them to utilize their members’ FOSA savings account as the mandatory payment channel for processing of their members’ emoluments or income.
Such a channel would secure upfront recovery from the members’ accounts rather than relying on the employer for direct deductions.
By Sammy Chivanga
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