Kenyan savings and credit cooperatives (Saccos) continue to generate profits despite challenges from digital financial services and evolving regulations, according to recent financial analyses. A review of audited results for over 100 Saccos revealed that only two reported losses in 2018, while 10 saw profit increases, including Kimisitu, Kenya Police Sacco Society, and Metropolitan National Sacco.
Profitability Amid Sector Challenges ¶
Metropolitan Sacco Chief Executive Francis Ng’ang’a emphasized that while the sector faces scrutiny following the Ekeza Sacco scandal, many Saccos remain financially stable. He noted that the organization, originally focused on teachers in Kiambu, expanded its membership to the public, bringing both financial strength and exposure to external economic factors.
The Sacco sector has also grappled with the implementation of IFRS 9 accounting standards, which require provisions for expected credit losses rather than incurred losses. This shift has impacted earnings, with Sheria Sacco provisioning Sh41.5 billion and Network Sacco setting aside Sh1.6 million for potential loan losses in 2018.
Regulatory and Market Pressures ¶
Saccos Societies Regulatory Authority (Sasra) Chair Sammy Ruto warned of intensifying competition from mobile lending apps and banks. The 2016 Banking (Amendment) Act, which set minimum deposit interest rates at 70% of the Central Bank of Kenya’s base rate, has further squeezed Sacco margins. Additionally, a 10% government levy on dividend payouts has raised concerns about member savings.
Despite these pressures, Metropolitan Sacco distributed Sh718 million in dividends to 101,057 members in 2019, with total assets reaching Sh13.9 billion as of December 2017. Stima Sacco, the second-largest Sacco, reduced deposit interest rates from 12% to 10.5% to comply with new reporting standards, while provisioning Sh800 million for loan losses.
Industry Outlook ¶
Industry experts suggest Saccos must adapt to digital competition and regulatory changes to sustain profitability. While mobile lending apps have eroded traditional lending markets, Saccos retain trust among members, particularly in rural areas. However, the sector’s reliance on teacher and public sector members makes it vulnerable to broader economic fluctuations, such as the 2018 collapse of Nakumatt and Uchumi supermarkets.
