SACCOs emerge as the most Preferred Loaning Institutions by Savers-Report

Savings and Credit Co-operative Societies (SACCOs) loans and advances outweigh the deposits, an indication that SACCOs are the preferred loaning institutions by savers due to their competitive rates, and social collateral (guarantee) model.

This is compared to commercial banks and microfinance banks that offer lower savings rates and place stiffer conditions including a title deed before disbursing their costlier credit facilities.

According to the latest Sacco Societies Regulatory Authority(SASRA) Supervision Report, the average interest rates paid by regulated Saccos on member deposits in 2022 marginally increased to 6.92% in 2022 from 6.86% paid in 2021.

The Deposit Taking SACCOs’ segment paid the highest rates on their members’ savings at 7.11% in 2022 compared to the NWDT-SACCOs which paid a mean interest rate of 7.10%.

SACCO comparative advantages against other credit providers

These returns on members’ savings were higher than the interest rates paid by commercial banks on savings which averaged 3% during the year 2022.

This cements the dual comparative edge of savings in SACCOs which not only earns interest but is also applied as collateral against loans advanced to members.

In addition, SACCOs paid their members a return on their share capital at a mean rate of 10.47% in 2022 compared to a mean rate of 9.87% in 2021.

Deposit-Taking SACCOs paid dividends on the members’ shares at a rate of 10.41% in 2022 compared to a rate of 9.44% in 2021; while the Non Withdrawable Deposit-Taking SACCOs segment on the other hand paid a return on the members’ shares as dividends at a rate of 10.92% in 2022 from a rate of 10.55% in 2021

SACCO has also continued to record a lower Non-Performing loan at 8.40% in 2022 compared to 13.80% for Commercial Banking Institutions and 31.78% for Microfinance Banks in the same period.

It is notable that SACCO loans are funded by members’ savings and to a small extent external borrowing, unlike the case of commercial banks and microfinance firms which rely on external borrowings.

Commercial banking institutions dominated the deposit-taking institutions with total assets of KSh. 6.59 Trillion in 2022 followed by the Regulated SACCOs at KSh 890.30 billion while the Microfinance Banks’ total assets stood at KSh 70.43 billion.

In addition, Customer deposits in Commercial banking institutions stood at KSh 4.8 trillion compared to the SACCOs whose members’ deposits stood at KSh 620.45 billion while those of Microfinance institutions stood at KSh 46.49 billion in 2022 respectively.

Commercial banking Institutions led in loans disbursed, totaling KSh 3,630.25 Billion in 2022 followed by SACCOs with KSh 680.35 Billion while the Microfinance Banks stood at KSh 39.33 Billion in the same period.

The SASRA analysis shows that the balance sheet size of financial societies in 2022 accounted for 11.79% of the entire balance sheet of deposit-taking financial institutions in Kenya. This reflected a marginal increase from a proportion of 11.69% of the total assets of the deposit-taking financial institutions in 2021.

Commercial banks still have the largest share of the deposit-taking financial institutions’ balance sheet with a proportion of 87.28% in 2022 but representing a small decline from a proportion of 87.24% in 2021.

The Micro-Finance Banks accounted for the least amount and proportion of the total assets of the deposit-taking financial institutions in 2022 at 0.93% which is a drop from a proportion of 1.07% reported in 2021.

On the deposits front, the financial societies market share stood at 11.43% in 2022 compared to commercial banks at 87.71% while the Micro-Finance Banks had a market share of 0.86% of the deposits among the deposit-taking financial institutions.

The commercial banking sectors’ total assets to the national GDP remained the most dominant within the financial sector space accounting for over 48.90% of the national GDP in 2022 with the pensions and insurance industry’s following at 11.79% and 7.06% respectively.

The contribution of the regulated SACCOs coming at 6.66% is quite significant to the economy and cements the critical role that Regulated SACCOs play in national development.  And since most of the regulated SACCOs serve household economies especially those in the lower echelons of the economic pyramid, policymakers are urging the Government to do more to further deepen their contribution.


Leave a Reply

Your email address will not be published. Required fields are marked *