Only 12 per cent of Kenya’s 175 deposit-taking savings and co-operative societies (DT-Saccos) can comfortably fund loans from members’ savings, the industry regulator has said, raising concern over costly lending through cash borrowed from other sources such as commercial banks.
The Sacco Societies Regulatory Authority (Sasra) said only 21 DT-Saccos met the statutory requirement for total loans to total deposits ratio of 70 per cent in 2016.
“This dicey situation is a hindrance to the growth, performance and competitiveness of DT-Saccos, as they are forced to borrow from external sources in order to fund the shortfall from the deposits,’’ the regulator warns in the Sacco Supervision Annual Report 2016.
A ratio above 100 per cent means a financial institution is lending out more than what it is mobilising in deposits.
Although the number of compliant DT-Saccos improved from 14 in 2015, the regulator warned that the industry’s total loans to deposits ratio of 108.39 per cent recorded in 2016 is not sustainable.
“For DT-Saccos to remain comparatively competitive and as alternative financial service providers, they must have ability to mobilise and retain deposits from their members on a much higher ratio than the demand for credit,” Sasra said.
The ratio is far off the 75 per cent internationally recommended for deposit-taking financial institutions.
Data showed that gross loans issued by DT-Saccos in 2016 grew 15.27 per cent year-on-year to Sh297.60 billion, while deposits climbed 14.80 per cent to Sh272.58 billion. Active membership of saccos also grew to 3,143,485 in 2016 compared to 2,675,050 in 2015.
The overall wealth of saccos expanded by Sh50.65 billion year-on-year to Sh393.5 billion in 2016.