By Our Reporter
Sacco Societies Regulatory Authority (SASRA) has advised smaller Deposit-Taking Savings and Credit Cooperative Societies (Saccos), whose market is shrinking, to consider mergers or consolidation as possible survival options.
This comes after the Authority this year, withdrew Front Office Service Activity (FOSA) licenses for eight Deposit-Taking Saccos after they failed to meet the statutory capital adequacy or liquidity ratios.
Most of those affected have had to both shut down their FOSA wings and revert to Back Office operations or are under liquidation.
While SASRA issued licences to 184 Deposit-Taking Saccos in 2015, this number has declined to 176 in 2016.
The Authority had issued ‘temporary licenses’ to a number of Deposit-Taking Saccos and were given a timeline of up to June 2016 to meet the required statutory capital and liquidity requirements.
The list included Airports Sacco Society Limited, Ainabkoi Sacco Society Limited, Eco-Pillar Sacco Society Limited, Good Faith Sacco Society Limited, Comoco Sacco Society Limited and Telepost Sacco Society Limited.
Others were Nandi Hekima Sacco Society Limited, Nitunze Sacco Society Limited, Transnational Times Sacco Society Limited, Moi University Sacco Society Limited, Nyamira Sacco Society Limited and Banana Hill Sacco Society Limited.
The Authority is yet to gazette the names of those Saccos whose FOSA licences have been revoked or not renewed. As at December 31, 2015, the Authority had revoked the FOSA licences for Transcom Sacco Society Limited and Ufundi Sacco Society, both located in Nairobi, Maono Daima Sacco Society of Bomet, Greenhills Sacco Society of Kericho and Nest Sacco Society Limited of Kiambu.
A Sacco engaged in the deposit-taking business provides evidence of having minimum core capital of Sh10 million by way of a bank statement in the name of the Sacco Society. This amount must be maintained at all times.
“We have the existence of small Saccos that cannot benefit from economies of scale. These small Deposits-Taking Saccos face challenges in meeting regulatory requirements such as capital adequacy and liquidity among others,” said Ali Noor Ismail, Principal Secretary, State Department of Co-operatives, Ministry of Industry, Trade and Co-operatives.
He told a recent Sacco stakeholders meeting held at Sarova Whitesands Beach and Resort in Mombasa, that these Saccos struggle to meet their members’ needs because of their size and cannot therefore benefit from the economies of scope and scale.
“We have to think about new policy and business strategies required within the context of financial co-operatives to deal with this challenge. Some of the possible solutions include conversion of Deposit-Taking Saccos into commercial banks or mergers and consolidation of Saccos,” said the PS.
So far, only Mwalimu National Sacco has acquired a commercial bank and thus has a banking licence. But not all Deposit-Taking Saccos have the financial muscle to take this route.
“Small Saccos are struggling and have a challenge in attracting deposits. Perhaps it is time for some of these Saccos to consider mergers so as to acquire the benefits of economies of scale. We are already preparing a paper for discussion that will allow for these Saccos to convert into commercial banks or merge,” said Peter Njuguna, Head of Supervision at SASRA.
He also advised smaller Saccos to think about having shared services to enable them deliver to members in a most efficient and cost effective manner.
While Saccos remain the preferred choice for many households after mobile phones, Saccos are faced with stiff competition from other financial services providers.
This is not to mention other informal players such as shopkeepers, relatives, investment clubs and friends who dominate the low-income segments of the credit market.
The Economic Survey 2016 shows that Central Province has the highest usage of Saccos at 25 per cent access while it is virtually non-existent in North Eastern (0.7 per cent).
Access to Saccos is at 15.8 per cent in Nairobi, 9.7 per cent in Mombasa, 10.3 per cent in Nyanza, 7.1 per cent in Western region and 5.8 per cent in the North Rift region. Access to Saccos has a national average of 12.9 per cent.
The assets of Deposit-Taking Saccos grew by 12.2 per cent to stand at Sh338.2 billion in December, 2015. This is according to provisional figures and key performance indicators of the Deposit-Taking Savings and Credit Co-operatives(DTSs), contained in the 2016 Kenya Economic Survey Report.
Small Saccos told to merge or perish
Mombasa Port Sacco top officials led by CEO Dedan Ondieki after receiving an award for the Best Managed Parastatal Society in the Country during Ushirika Day.
By Our Reporter