Regulator pushes Saccos to merge for stability

John Mwaka
Sasra chief executive John Mwaka. FILE PHOTO | NMG 

The regulator wants small Savings and Credit Cooperative Societies (Saccos) to merge as top 20 entities control more than half of the total deposits.

Sacco Societies Regulatory Authority (Sasra) says that large Saccos are deepening the control of deposits— a key source of lending— as small ones struggle to mobilise deposits.

The regulator says in latest annual report that mergers among deposit taking (DT) Saccos will help bring stability and lower costs of operation.

“A time has thus come for the Sacco subsector to start policy conversations and dialogues on voluntary consolidation and amalgamations of the many small DT-Saccos, in order for them to remain competitive and benefit from associated comparative advantages,” says Sasra.

This comes at a time Sasra has revoked licences of several Saccos and put some on restricted operations due to liquidity constraints.


Saccos are experiencing skewed distribution of liquidity just as in the banking sector where over 70 percent of the deposits is in the hands of eight out of the 40 entities.

Sasra says that the top 20 DT-Saccos controlled combined deposits of Sh224.75 billion in the last year, being more than half (59.08 percent) of the Sh380.44 billion total deposits.

A total of 99 DT-Saccos whose total deposits were below the Sh1 billion controlled a paltry 8.4 percent of the total deposits within the system.

Sasra warns that as the market share of small Saccos continues to comes under pressure from large Saccos, they are at risk of folding up in the absence of mergers.

“In the absence of such consolidation and amalgamation initiatives, a time will come in the medium to long term when the market share of these small DT-Saccos will be wiped out, thereby rendering them financially unviable,” warns Sasra.

Between 2015 and last year, Sasra has revoked licenses of 14 DT-Saccos on account of failing to maintain the required levels of core capital.

Sasra data shows that there are now 172 licensed DT-Saccos in contrast with 215 Saccos in 2012. This means 43 Saccos have dropped out during this period.

The regulator requires among other things that all DT-Saccos maintain at all times minimum core capital of not less than Sh10 Million.

DT Saccos are also required to maintain core capital to total assets ratio at not less than 10 percent. Core capital to total deposits, and institutional capital to total assets has been set at a minimum of eight percent and eight percent respectively.

Deposits account for over 90 percent of the funding for the loans and other credit facilities issued to members.