The analysis shows that SACCOs continue to have a competitive edge in the returns earned by the members with the average rate of interests paid by DT-SACCOs on members’ deposits increasing from 6.01% in 2020 to 6.88% in 2021. Despite giving their membership comparatively good returns, it is important to emphasize the fact that returns to members are dependent on the individual performance of each SACCO, and whether any surplus was declared or not
The Non-Withdrawable DT-SACCOs paid an average interest rate of 6.83% in 2021 compared to an interest rate on the deposits of 5.63% in 2020. These rates by far exceeded the interest rates paid by banks over the same period which stood at 4.02%.
Besides interests on deposits, members of SACCOs also earned returns on their shares in the form of dividends which were paid at a high of 9.44% by DT-SACCOs in 2021 compared to a rate of 8.26% paid in 2020.
The Non-Withdrawable DT-SACCOs on the other hand paid dividends at the rate of 10.55% in 2021 compared to a dividend rate of 8.16% paid in 2020.
The greatest comparative advantage that the Kenyan SACCO lending model has over other financial institutions is the fact that a substantial proportion of their lending is usually based on the collateral of non-withdrawable savings of the members.
These non-withdrawable savings are legally not available to the member for withdrawal, except when the member is exiting the SACCO Society’s membership.
Even though the non-withdrawable savings are usually collateralized as security for loans granted, these deposits usually attract interest whenever a SACCO declares surpluses and is used as the basis of the prorated distribution of the surpluses in accordance with the Cooperative principles.
Figures from the SASRA database show that while commercial banks offered an interest of 4.02% on savings in 2021, this is lower than an average of 6.88% given by DT Saccos to their members and 9.44% as the average dividend rate on a member’s share capital
The average interest on non-withdrawable deposit-taking Sacco Savings was at 6.83% while the average dividend rate paid to members of non-withdrawable deposit-taking Saccos is the highest at 10.55%.
Despite SACCOs giving their membership comparatively good returns, these returns to members are dependent on the individual performance of each SACCO, and whether any surplus was declared or not.
While SACCOs offer better returns to members than what banks offer, any of those Societies with liquidity problems usually resort to external borrowing funds that are usually expensive and subject to vagaries of interest rate changes.
Data from SASRA shows that more and more SACCOs are funding their assets from internally generated funds as opposed to externally sourced funds. Â
