- SASRA urges Sacco members to look beyond high dividends when assessing financial performance.
- Regulator warns excessive payouts could weaken reserves and threaten members’ savings.
- Members encouraged to scrutinise financial statements and demand accountability during AGMs and ADMs.
The Sacco Societies Regulatory Authority (SASRA) has cautioned members against judging their Saccos by the size of dividends alone.
In a message issued as Saccos prepare for their Annual General Meetings (AGMs) and Annual Delegates Meetings (ADMs), the regulator said members should look beyond annual payouts. Dividends and interest on deposits matter, it said, but they should not overshadow the primary purpose of a Sacco. That purpose is to build a savings culture, provide affordable credit and improve members’ financial well-being.
SASRA argued that a big payout can hide a weak balance sheet. “A high payout may be attractive, but it does not necessarily mean your SACCO is financially healthy,” it said. A Sacco that gives away too much of its earnings may be left without enough money to lend, improve services or absorb unexpected losses. It may even turn to expensive borrowing to meet its obligations, which pushes costs back onto members.
The Authority put the risk plainly. “In simple terms, you could be enjoying higher returns today while weakening the institution that holds your savings,” it said. It asked members to weigh what they receive now against what the Sacco must keep to stay strong and guarantee the safety of savings in future. It also pointed out that a Sacco paying very high dividends may struggle to return members’ deposits when they are needed.
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Under the Co-operative Societies Act, Cap. 490, dividends must rest on audited financial statements and be approved through the proper cooperative processes. The Sacco Societies Act and its regulations also require regulated Saccos to hold adequate capital and meet set financial requirements. SASRA is further empowered to restrict payouts where that is necessary to protect members’ interests and financial stability.
For that reason, the Authority wants regulated Saccos to propose dividend and rebate declarations that reflect their actual performance. It does not want them competing to announce the highest rates. “The concern is not how much members receive, but whether the SACCO can afford to pay it without compromising its future,” it said.
Loan pricing is another factor members tend to overlook. SASRA gave the example of a member who receives Ksh 20,000 in dividends and interest on deposits, only for the Sacco to raise its loan prices to sustain such payouts. Such a member may not be better off at all. Retaining more from surpluses, the regulator explained, allows a Sacco to keep lending to members at lower rates. Higher dividends and rebates, on the other hand, can mean costlier credit. A financially strong Sacco is better placed to offer affordable loans and reliable services.
IN CASE YOU MISSED IT:
Members attending this year’s meetings were also urged to ask hard questions. These include whether members are repaying their loans and what action has been taken against those who are not. They should ask whether operating expenses are reasonable, whether adequate reserves are maintained and whether the Sacco is growing sustainably.
Members should also find out why the Sacco borrows externally and what the loan costs it. SASRA encouraged members to read the financial statements and hold leadership accountable. At the same time, it said they should support sustainable payouts where financial performance justifies them. Boards and management, for their part, must show transparency, accountability and prudent use of members’ resources.
Retaining part of the surplus, SASRA said, is sometimes the responsible choice. “Not every shilling earned should necessarily be distributed,” it said, adding that some resources must stay in the Sacco to protect it and its members against future difficulties.
Its closing message was aimed squarely at the voting floor. “A successful SACCO is not necessarily the one announcing the highest dividends or interest on deposits,” it said. It added that such a Sacco protects members’ savings, provides affordable credit and stays financially stable year after year.
“Remember, the true value of your SACCO is not just what it pays you today, but what it can continue doing for you tomorrow.”
By Benedict Aoya
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