The Savings and Credit Cooperative Organizations (SACCOs) sector is demonstrating notable resilience in 2024, with improvements in capital adequacy ratios—a key indicator of their ability to weather economic challenges.
The DT-SACCOs segment reported a substantial enhancement in their capital profiles. Their Core Capital to Total Assets Ratio surged from 16.07% in 2023 to 17.28% in 2024, surpassing the regulatory minimum threshold of 10%. This points to sound financial practices.
Further illustrating this positive trajectory, the Institutional Capital to Total Assets Ratio for DT-SACCOs rose to 11.97%, a jump from 9.11% in the previous year. This growth is largely attributed to a remarkable 23.28% increase in retained surpluses, contrasting sharply with the 1.86% decline seen in 2023. Such a trend is indicative of a strategic pivot towards bolstering institutional capital, retained earnings, and reserves over more costly share capital.
As a reflection of this success, 171 DT-SACCOs achieved core capital exceeding Kshs 10 million, up from 167 in 2023. 172 DT-SACCOs are now compliant with the 8% Core Capital to Total Deposits Ratio, an improvement from 168 last year. Notably, only five DT-SACCOs fell below the halfway mark of 4%, and these institutions are currently under stringent regulatory scrutiny. The number of DT-SACCOs with a core capital to total assets ratio below 5% has also decreased from seven in 2023 to five this year, highlighting the positive effects of regulatory support without necessitating license revocations.
On the other hand, the Non-Withdrawal Development SACCOs (NWDT-SACCOs) have also showcased impressive progress despite operating under lower capital requirements due to a less risky profile. Their Core Capital to Total Assets Ratio climbed to 10.87% in 2024, up from 10.40% in 2023, and significantly improved from 6.72% in 2020. The Core Capital to Total Deposits Ratio further rose to 14.26%, up from 13.51% the previous year. Additionally, retained earnings and disclosed reserves to core capital reached 66.89%, an increase from 62.49%.
A commendable 172 NWDT-SACCOs met the required Kshs 5 million minimum core capital, while 136 adhered to the 8% Core Capital to Total Assets Ratio—an improvement from 122 in 2023. However, 42 BOSA SACCOs still fell short of this benchmark, with 31 between 4% and 8% and 11 below 4%, necessitating stricter supervisory measures.
On retained earnings, 116 NWDT-SACCOs maintained ratios above 50%, 47 ranged between 25% and 50%, while 15 fell below 25%, which may result in sanctions like restrictions on dividend distributions.
The SACCO Societies Regulatory Authority (SASRA) is restructuring the capital frameworks of SACCOs, with a clear focus on prioritizing institutional capital over share capital. This ongoing initiative aims to ensure the long-term sustainability and resilience of the sector.
Looking ahead, SASRA envisions:
– Continued retention of surpluses to foster free capital buildup.
– A reduced dependence on share capital, which often entails higher return expectations.
– Capacity-building efforts tailored for underperforming SACCOs to achieve compliance without punitive repercussions.
– Enhanced regulatory oversight for SACCOs that consistently fail to meet compliance standards.
The 2024 SACCO Supervision Report portrays a promising SACCO sector, highlighting an embrace of prudent financial management practices and robust capital positions that will serve as a foundation for future growth and stability.
