By Staff Reporter
Savings and Credit Cooperatives Societies (Saccos) have been urged to change the criteria they use to measure their contribution to the country’s economic and social wellbeing.
Sacco Societies Regulatory Authority (SASRA) CEO Peter Njuguna noted that the annual performance based on growth of asset base, deposits, share capital and surplus is never enough.
Speaking during celebrations to mark Tembo Sacco’s 50th anniversary, Njuguna underscored the vital role Saccos play in Kenya’s economic and social landscape, hence the need to review their performance reporting tools.
“Saccos need to change how they report our finance performances since the dividend payout does not give a true measure,” he said.
Njuguna said there is a high possibility that a number of properties dotting major towns and villages are as a result of contributions from Saccos.
“Saccos have to measure how many billions they have given out to members to create wealth,” he said.
Njuguna urged Sacco members to elect good leaders as the Sacco Board members to entrench good governance practices.
“Sacco members who put good leaders to office gift themselves good leadership,” he said.
He added that successful and sound decisions are behind the stellar performance of the entities, hence the need to have good leaders in office.
Njuguna said that by electing good leaders into office, Saccos essentially regulate themselves.
Given the billions of member deposits within their vaults and asset base, societies have been identified as critical players in the country’s development.
As a result, the government encouraged them to play a key role in its Big 4 agenda where food security, housing, manufacturing and the universal health are the anchor projects.
However, a number of societies might differ with the regulator on the measurement of their role in the society saying that failure to report on the financial reports is an understatement.
With billions at their disposal, which they eventually cash out to members for a return, expectations are usually high on the dividend payout.
This is the tale in every Annual General Meeting or Annual Delegates Meeting when anxious members wait for dividend payouts to be announced.
Tembo Sacco Chair Peter Kiguru said that failing to announce dividend payout is not justifiable as Sacco uses members’ savings to issue loans.
Kenya Society of Professional Cooperators (KSPC) argues that competition by Saccos to pay super dividends and interest on deposits is affecting the pace of growth of the cooperative movement.
During their meeting in Mombasa in May 2022, the lobby led by acting CEO Symon Mburia stated that to maintain the high rates, Saccos will have to raise the cost of services hence become untenable.
“The focus of growth has now changed from the member personal growth to organizational profitability,” he said.
Mburia added that it is worrisome that persons endowed with large amounts of money are getting into Saccos as an investment avenue.
The Society noted that some societies offer higher rates of up to 20 per cent, arguing that this is not sustainable and it is self-defeating since Saccos were principally formed to offer credit.
It is also alleged that some societies borrow to pay dividends to create an impression that they are making profits when they are not.
In the process, the huge loans, which they are not able to service, eat into their balance sheets and consequently undermine their liquidity ratios.
The Sacco Supervision Annual Report, 2020, estimated that many Saccos reported an increase in asset base and deposits for the year ending 2020. The same was witnessed in the 2021 financial year.
The 2021 figure by Sasra places Saccos as key players in the country’s financial sector.
