30 saccos put on notice over capital ceiling demands
A woman counts money. Sasra says up to 140 deposit-taking saccos have met requirement. FILE
What you need to know:
Authority says deposit-takers have to meet condition in four months or be shut down.
At least 30 Savings and Credit Societies (saccos) face closure if they do not meet statutory capital requirements in the next four months.
The Sacco Societies Regulatory Authority (Sasra), the industry regulator, said that 140 of the 220 deposit taking Saccos had raised their capital to 10 per cent of their assets as required.
“About 140 have met the requirements, 50 are struggling but look like they will make it; 30 look like they will not make it,” said Sasra Manager Sacco Supervision Peter Owira.
Mr Owira was speaking at the Nation Sacco’s 38th Annual General Meeting (AGM) held at the Holy Family Basilica, Nairobi on Saturday.
Sasra requires all saccos to raise their core capital by at least 10 per cent of total assets and the societies had in 2010 June been given four years to comply with the regulatory ratios.
Saccos are required to raise institutional capital to at least eight per cent of their total assets.
Institutional capital is the portion of core capital that cannot be claimed by members or savers because it’s established from retained earnings, reserves, grants and donations.
Another two per cent of assets have to be injected into the business by members as shareholding.
Mr Owira said that there would be no extension meaning that Saccos that fail to meet the set targets will be shut down.
Nation Sacco is on course to comply within the deadline after it ploughed back Sh25 million from last year’s surplus back into operations. The Sacco only has a deficit of 1.7 per cent to meet the institutional capital threshold.
The capital requirements are meant to protect members’ deposits by reducing the credit, liquidity and other risks the financial institutions face.
To meet the capital requirements Saccos have had to sacrifice their dividend payouts and have carried out cash calls from members ahead of the June 2014 deadline.
As at December 31, 2013 Nation Sacco had Sh925 million in total assets, a 25 per cent increase from Sh739 million a year earlier while the surplus more than tripled to Sh38 million from Sh11.2 million on the back of membership growth, cost management and uptake of new products.
Active membership increased to 2,214 members from 1,835 members in 2012.
Nation Sacco has been going on an aggressive membership recruitment drive, a strategic move meant to marshal funds that are large enough to diversify into other businesses such as real estate.
NMG chief executive Linus Gitahi said the sacco needed to mobilise funds for real estate investments, returns have outpaced those of equities and government securities over the past decade.
“The only way that can be enabled is if we have a greater capacity,” said Mr Gitahi, who was the chief guest.
Nation has already formed the Nation Housing Co-operative for its members.
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