In Kenya, the calculation of Savings and Credit Cooperative Organisation (SACCO) dividends is a structured process governed by the Sacco Societies Regulatory Authority (SASRA) to ensure transparency and fairness to members.

Dividends are payments made to members based on the shares they hold in the Sacco and are distributed from the surplus generated at the end of the financial year.

Notably, Dividends are calculated based on shares held, not ordinary savings deposits, and Compliance with SASRA guidelines is mandatory, including maintaining reserves and risk funds.

The process involves several steps, starting with determining SACCO’s net surplus.

Determining SACCO’s net surplus

At the close of the financial year, SACCO assesses its total income, which includes interest earned from loans, fees, and other revenue streams.

From this income, SACCO deducts all operational costs, such as salaries, administrative expenses, loan loss provisions, taxes, and mandatory reserves.

The remaining amount constitutes the net surplus, which is available for distribution to members as dividends.

The formula is straightforward:
Net surplus = total income – total expenses

Allocating the surplus

Once the net surplus is established, the SACCO board decides how much will be distributed as dividends and how much will be retained as reserves for future growth, risk management, or regulatory compliance.

SACCO’s constitution and policies usually guide the allocation of dividends, and the percentage designated for distribution can vary depending on financial performance and strategic objectives.

Calculating the dividend rate

Dividends in Kenyan SACCO’s are generally paid on members’ shares, not on their savings deposits, unless the deposits are share-based.

The dividend rate is determined by dividing the total dividend amount by the total number of shares held by all members, then multiplying by 100 to express it as a percentage:
Dividend Rate ( percentage) = (Total dividend declared ÷ total member shares) × 100

Computing individual member dividends

Each member’s dividend is calculated based on the number of shares they own. The formula is simple:
Member dividend = Number of shares × dividend per share
For example, if a member holds 1,000 shares and the Sacco declares a dividend of Ksh5 per share, the member receives Ksh5,000.

Special dividends

Some SACCOs may also distribute bonus dividends, which may be based on factors such as the interest paid by members on loans or the balances in special savings schemes.

These are typically specified in SACCO’s rules and are meant to reward active participation and loyalty.

Approval and payment

Before any dividends are paid, they must be approved at the Annual General Meeting (AGM), where members review the financial performance and ratify the proposed payouts. Once approved, payments are made directly to members’ Sacco accounts or through other authorised channels.

This structured approach ensures that all SACCO members receive fair returns on their investments while maintaining the financial stability of society.