Saccos optimistic on NPLs fall as recovery efforts see sector hit record numbers in 2024

By Steve UMIDHA

The quality of regulated saccos’ loan portfolios marginally declined last year, with the aggregated non-performing loans (NPLs) ratio for both deposit-taking (DT) saccos and non-withdrawal DT saccos, lessening by 10 basis points from 8.66% in 2023 to 8.56% in 2024.

 

Latest industry data by the Sacco Societies Regulatory Authority (SASRA) shows that of the 556 Saccos managed by SASRA, sixty-eight (68) DT Saccos had an NPL ratio of below 5 percent in the year under review, with 28 DT Saccos having an NPL ratio of an impressive 2 percent.

It is a figure the regulator termed “highly commendable” in its Sacco Supervision Annual Report for 2024, which measures the industry’s financial performance and activities.

Sasra attributed the drop in the NPLs to the successful restructuring of loans and loan write–offs by its member Saccos, with the restructured ones then reclassified as ‘performing’, while those written-off covered by provisions.

Non-performing loans (NPL) are loans that are in default or are unlikely to be repaid by the borrower, typically because they are past due or the borrower has experienced significant financial difficulties.

A high volume of NPLs can negatively impact a Sacco’s profitability and its ability to lend, while a low NPL ratio indicates a financially healthy Sacco and fosters members’ confidence.

The decline comes despite a period of higher interest rates and economic uncertainty that rocked the country in 2024 – particularly in June, when a powerful wave of youth–led protests swept through the country, angered by the skyrocketing living costs, unemployment, and inefficiencies by the government.

Performance

Undeterred by the protests, the cooperative movement maintained strong capital and liquidity buffers, advancing loans totaling Sh 542.75 billion, up from Sh 460.47 billion in 2023, with real estate, education, and agriculture being the biggest beneficiaries.

Under the real estate and construction sector, Sasra–governed saccos disbursed a total of Sh 137.12billion, with land acquisition or purchases totaling Sh 69.79 billion, while Sh 67.33 billion was disbursed towards housing purchases or construction.

The industry’s total membership increased from 6.84 million in 2023 to 7.39 million last year, with deposits growing from Sh 682 billion in 2023 to Sh 749 billion in 2024.

Speaking during the report’s launch on Thursday, the acting Chief Executive Officer (CEO) of SASRA, David Sandagi, said the decline in the NPLs ratio by the industry was a testament to the feat achieved by players in a year that saw the sub-sector surpass the elusive Kes 1 trillion mark in total assets – a record Kes1.08trillion during the year under review, up from Kes 972million the industry managed in 2023.

“These indicators reflect stability and progressive achievement within the regulated SACCO sector, a sign that Kenyans are saving and borrowing more from Saccos than ever,” said Sandagi.

The sector was, however, hit by a growing number of saccos reporting accounts dormancy, which grew by 7.9 percent to 1.7million inactive accounts in 2024, up from 1.4million a year before, something that Sasra blamed on “operational dynamics” by various saccos.

 

“In part, this arises due to a couple of operational dynamics…number one, the methodology Saccos use to draw in membership seems to attract them to a certain financial product or service, but to ultimately patronize that product or service, they need to have members within that Sacco for a certain period of time as defined by their by-laws,” he said.

Adding, “so you find right from the onset, there is a heavy influx of membership, so their ability to fully transact and access a full bouquet of products and services is consequent on their length as a member.”

The other reason cited for the rise in the accounts dormancy witnessed last year is a result of members fleeing rival saccos where they feel their needs are efficiently met in terms of products and services offered.

In addressing such concerns, the Cooperatives Cabinet Secretary, Wycliffe Oparanya, urged all the regulated SACCOs with fewer members to merge with their larger counterparts if the sector is to enhance its financial stability and sustainability.

He observed that the few active BOSA-only SACCOs were struggling, with limited membership numbers making them financially uneven and untenable in the long term, and therefore making it hard to even regulate them.

“We must come to the reality that there are so many BOSA-only SACCOs spread across the country, but which are inactive and only exist on paper. The few active ones are neither stable nor financially viable because they serve just a few members,” said Oparanya, who also called on the public to desist from transacting with unregistered entities such as the public service vehicles (PSVs) mimicking a ‘Sacco’ as a designation.

“I call upon the public to desist from undertaking or transacting SACCO business with unregulated and pyramid-styled entities purporting to be SACCOs when they are not,” he said.