As the season for releasing financial statements and holding Annual General/Delegates Meetings (AGMs/ADMs) continues, the Commissioner for Co-operative Development, David Obonyo, reminded Sacco leaders to prioritize the long-term health of their institutions over short-term popularity. He urged strict adherence to the Sacco Societies Regulatory Authority (SASRA) prudential guidelines to ensure Saccos remain vibrant in both good and bad economic times.
Dividends vs. Core Mandate
Obonyo also warned against the obsession with high dividends at the expense of liquidity. He cautioned boards against “creative accounting” used to declare unrealistic returns to appease members.
“Saccos are not formed primarily for dividends,” Obonyo clarified. “We join Saccos to create a pool of resources so we can access affordable credit to enhance our economic well-being. The dividends you receive at the end of the year are secondary to the value of a loan accessed at one percent interest per month to grow your business.”
He noted that the pressure to declare high dividends has, in some cases, negatively impacted cash flows, threatening to take the industry back to the struggles of two decades ago.
“Let us not return to the days when Saccos would stop issuing loans in January, February, and March just to pay out dividends. We have matured beyond that,” he said.
Obonyo urged leaders to do the right thing to ensure Saccos remain strong enough to meet the aspirations of their members. “Let us focus on our core mandate and strengthen our financial foundations so that the movement can continue to thrive.”
He was speaking during the 11th Annual Sacco Leaders Convention in Mombasa—an event organized by the Kenya Union of Savings and Credit Co-operatives (KUSCCO).
