The annual supervision report by Sacco Societies Regulatory Authority (Sasra), shows the average interest rate paid by regulated Saccos on member deposits in 2022 was 6.92 per cent, compared to the three per cent offered by commercial banks.
The Sacco regulator says yields on funds invested in Saccos grew marginally from 6.86 per cent in the previous financial year.
This means a person who saved Sh10,000 in a Sacco earned an interest of Sh700 compared to Sh300 earned by those who stashed the cash in a commercial bank, a difference of Sh400.
“Deposit Taking Saccos paid the highest rates on their members’ savings at 7.11 per cent compared to the Non-Withdrawable Deposit Taking Saccos which paid a mean interest rate of 7.10 per cent,” the report reads.
In addition, Saccos also paid their members a return on their share capital at a mean rate of 10.47 per cent in the period under review compared to a mean rate of 9.87 per cent the previous year.
Returns through dividends also recorded an increase as deposit-taking Saccos paid dividends on the members’ shares at a rate of 10.41 per cent, up from 9.44 per cent in 2021.
On the other hand, Non Withdrawal Deposit Taking Saccos paid a return on the members’ shares as dividends at a rate of 10.92 per cent from 10.55 per cent the previous year.
Apart from better return offings on savings, the Saccos also attracted more consumers on the credit front.
The report shows regulated Saccos gross loans accounted for 15.60 per cent of the gross loans issued by all the deposit-taking financial institutions.
It represents a marginal increase in the proportion of gross loans in 2021 which stood at 15.54 per cent.
Although the report fails to give reasons for the huge disparity in the yield curve between the two financial institutions, analysts are attributing the exodus from commercial banks' rigidity and high lending rates.
"Saccos and microfinance have gained preference in loan applications due to quick access to credit facilities and lenient investment options that speak to day-to-day challenges of those at the middle and bottom of the economic pyramid,'' financial risk analyst George Mulusa told the Star.
Furthermore, Saccos gives a sense of community as most members have similar social economic settings.
"Unlike banks, Saccos give members a sense of belonging with the majority either working in the same institution, or industry or residing within a similar geographical space.''
The sector has been growing at a faster rate compared to the traditional banks, with membership growing at a sustained average of more than five per cent in the past decade.
According to Sasra, the total membership of regulated Saccos grew from 5.99 million in 2021 to 6.42 million in 2022 representing an increase of 7.02 per cent.
The DT-Sacco segment recorded the highest increase in membership by 7.34per cent to reach 5.96 million last year compared to the membership in the NWDT-SACCOs segment which increased by 3.14 per cent to 475,270 members in 2022.
The total number of dormant members decreased to 19.01 per cent of the total membership of regulated Saccoss in 2022 compared to a proportion of 19.7 per cent the previous, thus showing improved patronage.
However, the non-remittance menace continues to undermine the stability, resilience and growth performance of the Saccos, with the rates of defaulting surpassing commercial banks'.
The default rate for banks stood at 13.86 per cent while Saccos's was at 16.39 per cent.
The report shows that several employer-institutions owed a total of Sh2.67 billion in 2022 affecting 80 regulated Saccos and 66,452 individual members of the organisations.
Out of this, a sum of Sh2.02 billion was meant to repay members’ loans.
"The net effect is that all these members’ loans stood defaulted, and at the same time the ability of these 80 organisations to meet their financial obligations was severely hindered," the report says.
Like in the previous years, the county governments and assemblies owed the highest proportion of non-remitted funds to the Saccos which stood at 49.97 per cent amounting to Sh1.35 billion.
They were followed by public universities and tertiary colleges which owed a sum of Sh620.52 million accounting for 23.01 per cent of the total non-remitted funds.
“Commercial banking sector however remains the most dominant in credit provisioning, with a market share of 83.25 per cent in 2022,” the report says.
On the deposits front, Saccos' market share stood at 11.43 per cent compared to 11.15 per cent in 2021, whereas commercial banks' stood at 87.71 per cent.
The report covered a total of 359 regulated organisations, made up of 176 Doposit Taking Saccos (DT-SACCOs) and 183 Non-Withdrawable Deposit Taking SACCOs (NWDT-SACCOs).
Their total assets increased by 10.31 per cent to reach Sh890.31 billion in 2022; while the total deposits grew by 9.84 per cent to Sh620.45 billion over the same period.
Loans and other credit advances issued amounted to Sh680.35 billion, representing an increase of 11.76 per cent from 2021.
