Six savings and credit co-operatives (Saccos), including the once giant Metropolitan National, are to have their licences revoked by the industry regulator for failing to meet minimum capital requirements.
The Sacco Societies Regulatory Authority (Sasra), which regulates deposit-taking (DT) and large non-withdrawable deposit-taking saccos, said that Metropolitan National, Shoppers, Jitegemee, Jumuika, Lamu Teachers, and Ndosha Saccos have a core capital to total assets ratio of less than five percent, well below the regulatory threshold of 10 percent, and have a core capital of less than the required Sh10 million.
“Only seven DT-Saccos did not comply with this ratio, six of which are operating below the five percent threshold and thus their respective licences are due for revocation,” Sasra said in a newly published annual supervisory report.
“There are obtaining circumstances that makes the revocation inexpedient and unfair to the membership,” the regulator, however, added, indicating the affected Saccos may continue to operate for some time before their licences are revoked and forced to wind up.
Besides the six entities operating below the five percent threshold, Joinas Sacco is also operating below the regulatory requirement of 10 percent, and is currently on a probationary licence, giving it a grace period to improve its core capital.
Core capital is the total amount of members’ shares, issued capital, reserves, retained earnings, grants and donations that are not meant to be spent except in the event of the liquidation of the Sacco.
The core capital to total assets (CCA) ratio measures how much capital a Sacco has compared to its assets, with a higher ratio indicating better financial health as the institution is better able to withstand economic shocks and financial difficulties.
Sasra has set a threshold of 10 percent for the CCA ratio, meaning that a Sacco’s core capital should be at least 10 percent of its assets, including loans and fixed assets.
The latest Sasra regulatory report further shows that at least five of the top-tier Saccos, including Mwalimu National and Safaricom, are in poor financial health after failing to maintain the required capital levels.
The breach of this critical supervisory and regulatory requirement means that the five Saccos may not withstand economic shocks in the short term.
Sasra requires that the institution capital to total assets (ICA) ratio remains above eight percent, at which point the organisation’s capital surplus is considered large enough to absorb losses in the event of economic shocks, an indication of financial health.
The ICA is the ratio of an institution’s capital and reserves to its total assets.
A review of the ICA of the five Saccos, including Mwalimu National, Ukulima, Safaricom Sacco, Boresha, and Kimisitu, shows that the entities are facing some financial difficulties.
For example, data from the sector regulator shows that in 2023, Mwalimu National’s ICA fell by 2.47 percent from 10.17 percent in 2022 to 7.7 percent in 2023, when it divested the loss-making Spire Bank, reflecting a significant drop in surplus assets.
The ICA ratios of Ukulima, Safaricom Sacco, Boresha and Kimisitu also fell by 0.56, 0.41, 2.44, and 2.94 percentage points respectively.
Apart from the top five credit societies whose ICA ratio fell below the threshold, other tier one Saccos such as Harambee, Afya, Kenya Bankers, Magereza, and Amica also have ICA ratios below the threshold.
In general, the average ICA ratio for all the 174 deposit-taking Saccos in the country fell from 9.58 percent in 2022 to 9.11 percent last year, indicating an overall decline in surplus capital stock held by the societies.
The number of Saccos below the threshold increased from 30 in 2022 to 35 last year, resulting in a overall drop in the average ICA ratio.
