NON-REMITTANCE MENACE
County governments have played a significant role in exacerbating the problem of unremitted funds owed to regulated Saccos. According to SASRA data, county governments collectively owe Ksh865.12 million to various Saccos, which accounts for 33.41% of the total unremitted funds. While there has been a decrease from the Ksh1.35 billion owed in 2022, the financial burden on Saccos persists, especially for the ten county government-based regulated Saccos.
SASRA points to a disturbing trend affecting Saccos, with the majority membership from county government employees and county assemblies. These Saccos have experienced financial impairment, particularly in liquidity, as the county governments—the employers of Sacco members—have either failed or only partially remitted the employees’ deductions to their designated Saccos. This directly affects Saccos’ ability to maintain financial stability, further exacerbating their liquidity crises and ability to provide loans to their members.
Public universities and tertiary colleges also withheld the largest share of non-remitted deductions, totalling Ksh 958.07 million, a sharp increase from the Ksh 620.52 million owed in 2022. The spike in non-remittance has severely undermined the performance of the ten university-based regulated Saccos.
The growing non-remittance burden faced by Saccos has left them with massive numbers of loan defaulters. Non-remittance occurs when employers deduct contributions meant for Saccos from their employees’ salaries or other income but fail to forward those deductions to the respective Saccos. This has a ripple effect, as Saccos depend on these funds to maintain liquidity and lend to their members. Without these remittances, Saccos’ ability to operate sustainably is weakened, jeopardizing their financial health.
In its annual report, SASRA identifies several key issues that contribute to non-remittance by government institutions. These include:
Budget Constraints: Government institutions often face budgetary shortfalls, leading to delayed or missed loan repayments. Poor financial planning and inadequate revenue collection can worsen these challenges.
Inefficiency and Bureaucracy: Bureaucratic inefficiencies, such as long approval processes and lack of clear communication within government institutions, contribute to delays in making payments to Saccos. These bureaucratic hurdles make it difficult for Saccos to access the funds they are owed in a timely manner.
Over-reliance on Public Funds: Government institutions heavily rely on government disbursements to meet their financial obligations. Delays in these disbursements often result in defaults on SACCO loan payments.
Economic Challenges: Broader economic factors, such as inflation, currency devaluation, or economic downturns, can severely limit cash flow in government institutions. This, in turn, hampers their ability to repay loans to Saccos.
These structural issues have led to a weakening of Saccos’ liquidity and credit profiles, affecting their ability to meet their members’ needs.
Impact on Performance
The non-remittance crisis has negatively impacted the financial health of regulated Saccos across Kenya. In 2023, a total of 82 regulated Saccos were affected by the non-remittance issue, up from 80 Saccos in 2022. However, the number of individual Sacco members whose deductions were not remitted decreased slightly, from 66,452 members in 2022 to 57,721 members in 2023.
One of the most alarming aspects of the crisis is the amount of non-remitted funds intended for loan and credit facility repayments. In 2023, Saccos were owed Ksh 1.68 billion on account of loan and credit facilities, representing 64.88% of the total unremitted funds. Although this is an improvement from Ksh 2.01 billion in 2022, the situation remains dire for many Saccos reliant on these repayments.
Additionally, non-remitted funds earmarked for BOSA (Back Office Services Activity) deposits rose significantly in 2023, amounting to Ksh 909.49 million, or 35.12% of total unremitted funds. This was an increase from Ksh 680.16 million, or 25.28%, in 2022. The rise in non-remitted BOSA deposits reflects growing financial strain within Saccos, making it harder for them to maintain basic operational functions and meet member needs.
On a more positive note, the private sector has shown improvement in managing non-remittances to Saccos. Private companies owed a total of Ksh 377.39 million in 2023, down from Ksh 428.95 million in 2022. This drop signals better financial discipline and payment structures in the private sector, offering a glimpse of hope for the sustainability of Saccos reliant on these contributions.
SASRA highlights a series of measures aimed at mitigating the non-remittance crisis. These include improving financial planning within government institutions, streamlining bureaucratic processes, and strengthening Sacco governance structures to ensure better compliance with remittance obligations. Without swift action, however, the crisis could continue to worsen, further compromising Saccos’ ability to serve their members and eroding trust in the cooperative financial system.
The non-remittance persists despite concerted efforts by the Authority and the Commissioner for Cooperative Development to address the menace using the existing legal and administrative instruments.
