At least five of the top-tier savings and cooperative societies, including Mwalimu National and Safaricom, have exhibited poor financial health after failing to maintain the required capital levels, a new report by the sector regulator showed.
The breach of critical supervisory and regulatory requirement means that the five may not withstand economic shocks in the short-term.
Sector regulator, Saccos Societies Regulatory Authority (Sasra) requires that the Institution Capital to Total Assets ratio (ICA) remains above eight per cent, at which point the organisation’s capital surplus is considered large enough to absorb losses in case of economic shocks hence a sign of financial health.
A review of the ICA of the five Saccos including Mwalimu National, Ukulima, Safaricom Sacco, Boresha, and Kimisitu shows that the entities face some financial struggles.
For example, data from the sector regulator shows that in 2023, Mwalimu National’s ICA fell by 2.47 per cent from 10.17 per cent in 2022 to 7.7 per cent in 2023, when it let go of the loss-making Spire Bank, reflecting a major drop in surplus assets.
The ICA ratios of Ukulima, Safaricom Sacco, Boresha, and Kimisitu also dropped by 0.56, 0.41, 2.44, and 2.94 percentage points respectively. The number of Saccos below the threshold increased from 30 in 2022 to 35 last year, causing a general drop in the average ratio.
“This calls for measures by DT-Saccos to put in place strategies aimed at not just making surpluses, but retaining more from the surplus in order to cushion them from emergent economic shocks that may arise in the course of their operations,” said Sasra in a newly released annual report.
An institution’s ICA ratio may fall due to several reasons, most of which do not reflect well on the financial sustainability of the organisation.
Aside from the five top credit societies whose ICA ratio fell below standard, other tier one Saccos such as Harambee, Afya, Kenya Bankers, Magereza, and Amica have a below-threshold ICA ratio, having failed to grow it since 2022.
Generally, the average ICA ratio for all the 174 deposit-taking groups in the country fell from 9.58 per cent in 2022 to 9.11 per cent last year, indicating an overall drop in surplus capital stock held by the societies.
Other measures of financial stability such as core capital to total assets ratio, core capital to total deposits ratio, and external borrowing to total assets ratio, have remained within recommended levels by the regulator.
