30 out of 355 regulated Savings and Credit Cooperative Societies (Saccos) have been placed on high alert for capital inadequacy, meaning they may not withstand economic shocks in the short term.
These Saccos do not meet the required minimum core capital of Sh10 million or adhere to the capital adequacy ratios, the sector regulator has revealed. These include core capital to total assets (10 percent) and core capital to total deposits (8 percent).
The Savings and Credit Cooperative Societies Regulatory Authority(Sasra) has also cautioned that Saccos are not sharing enough information with it and credit reference bureaus.
“Out of 355 Saccos we regulate, we have 30 institutions that we have put on heightened supervision for failing to meet the minimum capital requirements, primarily when capital is being eroded you’ll find there are other issues, which talk to the credit risk among others,” said Sasra Chief Executive Officer Peter Njuguna.
Core capital is the total amount of members' shares, issued capital, reserves, retained earnings, grants, and donations that are not meant to be spent except in the event of the liquidation of the Sacco.
The core capital to total assets (CCA) ratio measures how much capital a Sacco has compared to its assets, with a higher ratio indicating better financial health as the institution is better able to withstand economic shocks and financial difficulties.
Last year, Sasra said that Metropolitan National, Shoppers, Jitegemee, Jumuika, Lamu Teachers, and Ndosha Saccos have a core capital to total assets ratio of less than five percent, well below the regulatory threshold of 10 percent, and have a core capital of less than the required Sh10 million.
“At an industry level, we have set a 10 percent minimum but we have Saccos above the threshold going up to 17 percent but others are dragging behind,” added Mr Njuguna.
In the 2023 Sasra annual report, there were marginal drops in capital ratio for deposit-taking saccos from 16.36 percent in 2022 to 16.07 percent in 2023 for core capital to total assets and in core capital to total deposits from 23.90 percent in 2022 to 23.26 percent in 2023.
“The foregoing marginal drops showed that Saccos grew their total assets and deposits at faster rates than the rate at which they grew their core capital,” said Sasra in the annual report.
The regulator said the drop in the capital adequacy ratios calls for measures by deposit-taking saccos to put in place strategies aimed at not just making surpluses, but retaining more from the surplus to cushion them from emergent economic shocks that may arise in the course of their operations.
