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Saccos cut dividend pay for first time in 3 years
Sacco Societies Regulatory Authority CEO Peter Njuguna.
What you need to know:
- Fresh data by Sasra shows that the mean rate of dividends on share capital dropped from the prior year’s 10.92 per cent.
- Sasra chairman Jack Ranguma said the past two years had seen saccos experience financial turbulence and uncertainties.
Saccos cut average rate of dividends on share capital to 10.46 per cent in the year ended December 2024, marking the first chop in three years as they prioritised building stronger capital buffers over higher payouts to members.
Fresh data by the Sacco Societies Regulatory Authority (Sasra) shows that the mean rate of dividends on share capital dropped from the prior year’s 10.92 per cent, marking the first reduction in payout since 2021.
The reduced distribution on share capital came in the period when saccos also cut average interest on deposits to 7.14 per cent from 7.45 per cent in the previous year. They, however, remained ahead of banks on returns on deposits, given that latter averaged 4.14 per cent.
Despite the drop in distribution to members in percentage terms, there was a growth in payout in absolute terms, with the figure rising by 8.5 per cent to Sh59.74 billion last year from Sh55.06 billion in 2023.
Sasra said the reduction in the average rate of dividends on share capital and interest on dividends was a move by saccos to fortify their capital strength, coming on the back of increased pressure to balance stability and rewarding members.
“The decline was largely as a result of increased regulatory pressures on regulated saccos towards retention of surpluses to build institutional capital, rather than increased payout, and indeed marks the first time in three years that the rate of dividends on members' share capital was reducing,” says Sasra in the Sacco Supervision Annual Report 2024.
“It was also observable that regulated saccos paid interest on members’ deposits at a lower rate than that of the CBR [Central Bank Rate] for the first time in three years.”
The data relates to the 177 deposit-taking and 178 non-withdrawable deposit-taking saccos under the watch of Sasra.
Last year, the CBR averaged 12.6 per cent compared to the previous year’s 10.13 per cent. Sasra noted that despite saccos slowing down on payouts, they remained above commercial banks by about 6.32 per cent in respect of dividends and three per cent in respect of interests on members’ deposits, underscoring their competitive advantage on this front.
The conservative approach to dividend and interest payment resulted in a marked increase in the capital reserves and retained earnings, which grew by 17.55 per cent in 2024 to reach Sh197.54 billion compared with a growth rate of just 6.92 per cent in 2023.
Sasra chairman Jack Ranguma said the past two years had seen saccos experience financial turbulence and uncertainties associated with the impairment of some of their financial investments, which they had made in the securities of some unregulated entities.
