By Sammy Chivanga
Savings and Credit Co-operative Societies (Saccos) withdrawable deposits rose by Sh57.55 billion amid an environment of Covid-19 economic hardships, pointing to increased confidence of members in the stability of the sub-sector.
Latest data from the Sacco Societies Regulatory Authority (SASRA) shows that withdrawable deposits—an equivalent of transactional deposits in the banking sector and usually accessed any time by savers— grew by 85.26 percent to Sh125.05 billion, up from Sh67.5 billion in the previous year.
The Sh57.55 billion added in a single year is 18.3 times more than Sh3.15 billion that was added between 2018 and 2019. It is also more than the Sh28.12 billion that had been added in four years to 2019.
The analysis shows an exponential increase in the proportion of withdrawable deposits to total deposits from 17.7 percent recorded in 2019 to 29 percent last year.
“The proportion of the non-withdrawable deposits to total deposits declined to 66.58 percent in 2020 compared to 77.07 percent recorded in 2019, implying that more and more members are making uncollaterised savings with deposit-taking Saccos than before,” said Sasra.
The growth in withdrawable deposits came in the period non-withdrawable deposits—usually used as collateral for loans—dropped 2.03 percent to Sh287.27 billion while fixed term deposits dropped by 2.92 percent to Sh19.14 billion.
This shows that some of the people who lost jobs on the back of coronavirus-induced economic fallout turned to non-withdrawable deposits and fixed term deposits to settle their loans.
The Sh57.55 billion rise in withdrawable deposits—equivalent to Sh157.67 million savings daily—came in the period many savers were seeking higher liquidity as opposed to locking their money for long term gains in an environment of Covid-19 uncertainties.
“Withdrawable deposits are like the normal savings found in banks for transactional accounts. This increase shows that there is a lot of confidence in Saccos now compared to the previous years,” said Martin Muhoho, chief executive at Unaitas Sacco.
“There is general confidence that Saccos are now properly managed and so people don’t fear that they will lose deposits as was the case before.”
The withdrawable deposits are accessed by a member-depositor at any time, such as through teller withdrawal transactions, mobile money withdrawals, ATM platforms or internet and therefore readily tapped into for emergencies.
Another characteristic of these deposits is that a Sacco member may withdraw a portion or all of these deposits at any time and at will, and still remains a member.
The growth in the figure is a win for Saccos since it shows savers are trusting them with more money as opposed to putting it in banks.
Many savers have for long only given Saccos non-withdrawable deposits to earn dividends or use for collateral but put more savings in bank accounts.
A slowdown in business activities and the uncertain future caused by coronavirus had force many people to hold onto cash, instead of investing, leading to a pile up in Sacco and bank accounts.
Many Saccos have been feeling liquidity squeeze since many members could borrow loans and immediately transfer the money to banks from where they would draw in bits to fund their projects.
The impact was that Saccos would see a drop in liquidity while that of banks would rise immediately since it is unusual for the entire sum of development loan to be consumed at once.
“But there has been a shift and many are now keeping this loan money in Saccos instead of moving it to banks. This can help Saccos on short-term lending since the borrowers may never come for the money at once,” said Mr Muhoho.
The growth in withdrawable deposits is also a vote of confidence in the Sacco movement which has been aggressively investing in technology and strengthening oversight in order to woo more members and deposits.
Many Saccos are now able to offer services such as cheque services, agency banking and ATM withdrawals—services which for long were a preserve of banks.
Saccos have been launching their own e-banking services to enable customers to transact at the palm of their hands and match the competition from other financial service providers such as banks and microfinance institutions.
The mobile banking platform enables members to transact through their mobile phones at the comfort of their work places or homes.
Among the key services offered on mobile platform include cash withdrawal, deposit, transfer of funds, application of loans, paying bills, purchasing airtime and making general inquiries such as checking balances.
The case for mobile and internet banking in the financial sector has been strengthened by the Covid-19 pandemic after government announced that cashless transactions and remote working were among the key initiatives to lower risks of contracting the virus.
Sacco leaders say that the shift is helping them cut costs while at the same time helping members to enjoy convenience and also bring in additional income through transactional fees.
