County governments and public learning institutions accounted for almost three-quarters of the total Sh2.67 billion non-remitted funds owed to regulated savings and credit co-operative societies (Saccos) last year.
The net effect is that all the members’ loans stood defaulted, severely hindering the ability of the affected Saccos to meet their financial obligations while also leaving the borrowers at risk of paying stiff penalties.
According to the latest sector disclosure by the Sacco Societies Regulatory Authority (Sasra), county governments and public universities and colleges cumulatively failed to remit to Saccos a total of Sh1.97 billion or 73 per cent, with the devolved unit taking the highest default of Sh1.35 billion.
The unremitted funds, though a reduction compared to the previous 2021, coincides with the period when nearly all Ministries, Departments, and Agencies (MDAs) were grabbling with delayed disbursement from the National Treasury as the country battled acute cash strain.
“The fact that these employer institutions are funded by exchequer funds has made recovery of the non-remitted deductions owed them not only cumbersome and subject to availability of funds, but equally riddled with conflict of interest by the key actors in the recovery process,” Sasra said in the report.
Other than Saccos, the delays by counties have often affected nearly all the customers in the financial institutions including banks, pension schemes, and beneficiaries of health insurance.
In this regard, Sasra is considering putting in a framework to enable the recovery of such non-remitted Saccos’ deductions through the National Treasury directly from the exchequer grants or funds appropriated in favour of these governmental institutions.
The defaults come at a time when Saccos are grappling to replenish their capital levels as Kenyans deposited less money during the period but withdrew more, an imbalance signalling reduced disposable incomes amid economic hardship.
In 2022, total deposits (savings) among the 359-Regulated Saccos witnessed a sluggish growth rate of just 0.04 per cent or Sh5.13 billion to Sh620.45 billion, coming at a time when the high inflations raided a significant portion of workers’ thin salaries. Non-withdrawable deposit-taking (NWDT) Saccos contributed significantly to the sluggish growth rate of deposits.
“The decreased rate of growth in deposits mobilised by NWDT-Saccos during the period is evidence of reduced disposable incomes among persons patronising the NWDT-Saccos, thus reduced savings,” said Sasra.
Yet, Kenyans cashed out about Sh30.811 billion in the same period, leaving a 26.89 per cent drop in withdrawable deposits to hit Sh83.78 billion from the previous Sh114.59 billion. It happened even as the number of savers lining up to get loans also increased to reach Sh680.35 billion last year.
The high loan appetite, together with the imbalance where withdrawals have outpaced fresh deposits, further reveals the challenges in building capital buffers among Saccos and could shake their financial health should the trend persist.
“This growth rate is faster than growth rate in deposits registered by NWDT-Saccos, thus a challenge to NWDT-Saccos to put effort in improving on their savings mobilisation to be able to meet the loaning needs and avoid future challenge should the trend continue,” noted Sasra.
The Deposit-taking (DT) Saccos segment registered the highest growth rate of gross loans compared to NWDT-Saccos.
