The number of dormant members in savings and credit cooperative societies (saccos) grew 18.6 percent to 1.45 million in the year ended December, pointing to deeper job cuts and squeezed pay in Kenya’s soft economy amid fears the co-operatives would struggle to mobilise deposits for lending.
Latest data from the Sacco Societies Regulatory Authority (Sasra) shows 226,893 members in deposit-taking (DT) and non-withdrawable deposit-taking (NWDT) saccos became dormant last year, adding to the 1.22 million that a year earlier failed to contribute or borrow on their accounts.
Accounts that have remained idle for six months in DT-Saccos are termed dormant while those in NWDT-Saccos have a longer period of a year.
The 1.45 million dormant members or 21.2 percent of the 6.84 million members in the Sasra-supervised saccos matches the 2020 numbers when Covid-19 economic hardships triggered layoffs and pay cuts.
The economy last year grew 5.6 percent compared with 4.9 percent in the previous year, creating 848,100 new jobs amid the struggle to create quality formal jobs that provide saccos with new members.
The informal sector, which accounts for more than three quarters of all employment in the country, accounted for the bulk of the new jobs, with 720,900 openings created.
Real wages—earnings adjusted for inflation—fell 4.1 percent last year, continuing the trend that started in 2020.
The latest figure is nearly six times the 38,602 additional dormant members the saccos reported in 2022 and marks the third year in a row of growing idle accounts in saccos.
This coincided with the period when new deductions such as housing levy and increased compulsory savings for retirement and rising inflation squeezed workers, hurting their ability to save in voluntary platforms like saccos.
The rising pace of dormant members contrasts with the falling pace of growth in active members, signalling that workers freshly employed in the formal sector are snubbing saccos.
The regulated saccos last year added 194,923 active members to close at 5.39 million compared with 2022 when it had added 382,315 active members and 2021 when this grew by 442,285.
Sasra is concerned that the dip in new members could hurt the pace of accumulating deposits, which is a key source for lending.
“The foregoing shows that the rate at which the regulated saccos are either recruiting new members or re-activating dormant members remains slower than the rate at which the existing members are becoming dormant,” says Sasra in the latest supervision report.
“Regulated saccos thus need to take measures in order to reactivate their dormant members, even as they recruit new members, such as the development and implementation of appropriate savings and credit products for their membership.”
During the year, the Sasra-regulated saccos’ loans grew by 11.50 percent to Sh758.57 billion, reflecting increased demand for credit.
The loans were mostly funded by savings and deposits, which increased by 9.95 percent to reach Sh682.19 billion, meaning that the pace of loan growth outweighed that of mobilising deposits.
Aside from the dormant accounts, some members opted to exit saccos, hurting the deposit base of the cooperatives.
Sasra says 76 saccos under its supervision posted a negative growth in membership, with 29 being DT-taking and 47 being NWDTs.
They cumulatively shed 131,347 members, with the DT-Saccos losing 128,337 members.
The exit suggests withdrawal of deposits in line with the cooperative principle of open and voluntary membership.
Sasra warns that the trend threatens the existence of some saccos.
“The board and management of these regulated saccos ought to put in place adequate measures to stem the haemorrhage of members in order to avoid the imminent collapse and eventual revocation of their licences or authorisations,” says Sasra.
The regulator says saccos hit with exits could take measures such as voluntarily merging with stronger balance sheets for survival.
Saccos whose deposits cannot match loan appetite are sometimes forced to tap costly loans from banks for onward lending.
