Harambee Sacco now caps interest returns at 8pc as it eyes compliance


Harambee Sacco CEO Dr George Ochiri during the Sacco's Annual General Meeting held at Hilton hotel on July 10, 2021. PHOTO | JEFF ANGOTE | NMG

Harambee Sacco will pay higher dividends to members on share capital and cap payouts on deposits at eight percent for the next three years as the institution seeks to build its capital base to comply with the law.

The Sacco has proposed the changes in a bid to entice members to increase their share capital as opposed to ramping up their savings whose dividend rate will now be capped at eight percent for the next three years.

The move comes at a time when theSacco, which is majority owned by civil servants, remained in breach of the legal requirement where the institutional capital should not fall below eight percent of the total assets.

Harambee Sacco’s ratio of institutional capital to total assets stood at 5.3 percent in the financial year ended December, up from 5.1 percent in 2021.

“The management is proposing an incremental rate of dividends on share capital and a ceiling of eight percent on interest on deposit for the next three years in order to be able to retain and build reserves to meet this critical ratio,” the sacco says in its latest annual report.

Institutional capital refers to the core capital of a Sacco that no individual member can claim. It acts as a buffer against economic shocks besides being a cheaper source of cash for the Sacco as there are no conditions imposed on how it is used.

The Sacco declared dividends on member deposits at a rate of eight percent for the year that ended in December 2022, up from seven percent in 2021 while payouts on share capital will jump to 10 percent at eight percent.

Harambee Sacco has also been on an aggressive campaign to woo members to ramp up their share capital in return for higher returns to boost the institution’s liquidity in the coming years.

Asset base closed the financial year ended December at Sh37.01 billion, a seven percent rise from Sh34.62 billion in 2021.

Member deposits grew five percent to Sh23.7 billion in the period that ended December while revenues hit the Sh5 billion mark for the first time.

Harambee Sacco reckons that it needs to grow the asset base to at least Sh40 billion in order to meet institutional capital requirements.

The Sacco has 79,641 members, making it one of the biggest in the country and targets 86,502 members in the next two years in what will also boost its finances in the form of deposits and increased lending.

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