Demand prudence in sacco management


Members of savings and co-operative societies (saccos) should demand better performance from the managers of the institutions whose returns have been found to have dropped drastically to trail those of other financial sector players by a large margin.

The saccos’ return on assets (ROA) dropped to 1.59 percent in the year ended December 2021, down from 2.65 percent the year before. It marks the first decline below 2.0 percent in seven years.

In contrast, banks' ROA nearly doubled over the same period to 3.3 percent from 1.7 percent. This is despite banks facing the same challenges brought by the Covid-19 pandemic while shouldering higher capital burdens.

Saccos are critical vehicles through which households build savings and wealth and their lacklustre performance should be addressed.

It is members themselves who need to lead the charge for better governance and more prudent management of their funds.

Saccos' assets are primarily composed of loans, cash, financial investments, prepayments and sundry receivables, and property and equipment.

But most of the assets are in the form of loans to members. A sharp decline in returns, therefore, points to either rising defaults or reckless lending, among other problems that can be fixed through more prudent management and accountability checks.

There is not much difference in the interest rates that saccos charge on their loans. This means that the institutions posting the lowest returns are largely suffering from management problems.