Saccos savings cross Sh1trn mark in struggling economy
Members of the Nation Staff Consumer Society follow proceedings during the Sacco’s 12th Annual General Meeting held at HH Plaza on April 2, 2022.
What you need to know:
- State Department of Cooperatives data shows savings grew by 15.6 per cent.
- The huge growth has been achieved at a time when some savers cashed out their money due to hardships.
Member deposits in savings and credit co-operative societies (Saccos) have crossed the Sh1 trillion mark for the first time, defying the economic hardships that had seen some savers cash out their money to meet daily needs.
Data from the State Department of Cooperatives shows savings grew by 15.6 per cent to Sh1.047 trillion in the year to June 2023 from Sh906 billion, marking a major milestone for the country’s cooperatives movement.
“The target was achieved as a result of improved member confidence and access to financial services through the adoption of digital channels by Saccos,” said the State Department.
The Sh141 billion growth in deposits helped cooperatives surpass the Sh950 billion that had been targeted for the year—pointing to the growing stature of Saccos in the economy as members accumulate savings for a rainy day and also tap loans for development.
The latest growth means that Saccos were mobilising an average of Sh11.75 billion in fresh deposits every month despite the prevailing economic hardships punctuated by elevated prices of goods and services and new government deductions.
The pace of growth in deposit mobilisation was faster than in the previous year when deposits grew by 7.1 percent or Sh60 billion. The growth in deposits reinforces the need for a Deposit Guarantee Fund (DGF) to protect savers from losses on their deposits in case any Sacco collapses.
Kenya’s Sacco Societies Act assented to in 2008, provides for a deposit insurance fund for credit unions, but the scheme has never been established to date. Sacco Societies Regulatory Authority (Sasra) started operations in June 2010.
Section 55 of the Sacco Societies Act sets the premise for the establishment of a DGF for the sector to protect members' deposits of up to Sh100,000, excluding shares, if a Society collapses due to liquidity challenges or governance. Savings in deposit-taking (DT) Saccos grew from Sh474.25 billion to Sh522.59 billion at the end of June, being above the Sh490 billion that had been targeted for the period. Savings in non-withdrawable deposit-taking (NWDT) hit Sh97.86 billion from 90.64 billion, surpassing the targeted Sh91 billion.
‘The target was achieved due to improved member confidence, branch expansion and adoption of alternative service delivery channels by regulated Saccos,” said Sasra.
This means that other cooperatives, apart from the DT and the NWDT ones that are supervised by Sasra, closed June with Sh426.55 billion, up from Sh341.11 billion or a growth of 25 percent. The growth in Saccos’s top deposits can be attributed to the higher returns when compared with commercial banks. For instance, while regulated Saccos paid an average interest rate of 6.92 percent on members’ deposits last year that of commercial banks averaged three per cent.
The returns on members’ savings cement the dual comparative edge of savings in Saccos since savers earn interest and also use the money as collateral to tap loans. Sasra data to the end of December last year had shown Sacco accounts with more than Sh1 million grew at 29.6 percent—the fastest pace in five years—from about 71,000 to 92,000, being more than double the 39,000 that were holding such amount five years earlier.
The 92,000 accounts—an equivalent of 0.63 per cent of the total 14.52 million accounts— were holding Sh163.28 billion or nearly a third (31.2 percent) of the Sh522.59 billion deposits held by 359 Saccos regulated by Sasra.
