Saccos remain profitable despite digital disruption
SEE ALSO :Use saccos to fight poverty, corruptionOnly two Saccos slid into losses. This was a far cry from ten that saw their profits increase. The profit-makers in the year to December 2018 included Kimisitu, Kenya Police Sacco Society, Mudete Factory Growers, Mwalimu National and Stima. Other Saccos in the list that returned a profit in 2018 were Boresha Sacco Society, Gusii Mwalimu Sacco, Metropolitan National Sacco and Imarisha Sacco Society. The loss-makers included Afya Sacco and Kenversity Sacco Ltd. Saccos are struggling with a vote of confidence after the Ekeza Sacco scandal that has seen members lose their hard earned cash — while Mwalimu and Stima Saccos have been latched with doubtful investments with industry players saying the malaise seeps deep in the sector. But Metropolitan Sacco Chief Executive Francis Ng’ang’a says there is nothing to worry about. He says there are many Saccos facing challenges, including dealing with a membership that comes from outside the traditional pool. Metropolitan Sacco, for example, was supposed to be a co-operative society for teachers, particularly from Kiambu. It opened its membership to the public, which he reckons brought some positivity in terms of financial strength, but also exposed it to external factors.
SEE ALSO :Maize farmers setting the pace“The Sacco sector must brace itself for stiff competition from other financial service providers; particularly, with the growth in popularity of the digital credit services that principally specialises in unsecured micro-credit loans, a forte hitherto associated with Saccos,” Mr Ruto said. Inadvertently, Saccos also came into competition with banks for deposits after the Banking (Amendment) Act, 2016 set the interest rates payable on deposits held by commercial banks to not less than 70 per cent of the CBK base rate. Treasury Cabinet Secretary Henry Rotich has dipped his hands into pockets of the small savers with a 10 per cent charge on dividends. “The government is trying to find revenue one way or another, and because predominantly people trust Saccos more than banks then the government may make substantial amounts from this,” said Kunal Ajmera, Chief Operating Officer, Grant Thornton Kenya. Already, Stima Sacco, the second largest in the country after Mwalimu Sacco, was forced to reduce interest on deposits from 12 per cent to 10.5 per cent as it sought to be compliant with the new standards. Stima Sacco new Chief Executive Chris Ngeta Useki said the Sacco provisioned in excess of Sh800 million, noting that they might be beginning to get the hang of the Reporting Standards (IFRS 9). Stima Sacco has over 114,000 members. Sheria Sacco provisioned close to Sh41.5 billion after the introduction of IFRS 9 with effect from the year 2018. “In line with the regulator’s guideline to comply with IFRS 9, the society made a provision of Sh41.55 million, being one per cent of the performing loans (Sh4.2 billion),” said Sheria Sacco in its statement. Network Sacco provisioned for a loss of Sh1.6 million in the financial year ending December 2018. The provision of loan loss was at the rate of one per cent of loan balances as of December 31, 2018.
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