Dividends Policy and Mergers
The Government is considering introducing a dividend policy to guide Savings and Credit Cooperative Organizations (Saccos). This decision comes in response to concerns that some Sacco officials have been borrowing funds to provide high annual returns to appease members, which has contributed to financial struggles within many Saccos.
“We are going to issue a circular because many Saccos are either declining or struggling financially due to a poor dividend policy. As a ministry, we want to provide guidelines for paying dividends,” stated Dr. Wycliffe Oparanya, the Cabinet Secretary for the Ministry of Cooperatives and MSMEs Development.
He emphasized that the primary objective of a Sacco is to facilitate savings and provide affordable loans rather than paying out unreasonable dividends.
“The main aim of a Sacco is to serve its members and offer them loans at low interest rates, enabling them to create wealth and jobs for others. Most of these issues are included in the Cooperative Bill that is currently before the National Parliament,” Dr. Oparanya added.
Speaking during the Mwalimu National Sacco Golden Jubilee celebrations, he stressed the need for Saccos to adhere to their core mandates as savings and credit cooperatives.
“If you stray beyond the agreed-upon objectives, you make mistakes. As a ministry, we want to support self-regulation among Saccos, not impose strict regulations. A shilling in the cooperative movement should be as safe as a shilling in the bank,” he noted.
Sacco Mergers
Dr. Oparanya also raised concerns regarding the large number of unregulated smaller Saccos and suggested that they consider mergers and amalgamations.
“The Central Bank oversees all banks, but SASRA currently supervises only 357 Saccos, leaving over 13,000 smaller ones unregulated. Does that imply that a shilling in a smaller cooperative is less valuable than in a larger one? We need to ensure proper oversight at the ministry for all Saccos,” he stated.
He pointed out that merging Saccos could significantly impact communities and strengthen their financial capabilities. “In the United States, with a population of 300 million, there are relatively few cooperatives compared to Kenya, which has a population of around 50 million,” he remarked.
Dr. Oparanya warned that the current competition among many Saccos is unhealthy and can lead to poor decision-making. He suggested that if all teacher-affiliated cooperatives came together, they could form one giant Sacco, enhancing their ability to serve members effectively.
“I understand that some may resist, arguing about their roles as directors in separate entities. However, this mindset is backward. Coming together would make us stronger as members, allowing for larger loans at more affordable rates,” he emphasized.
