Why Sacco executives are predicting high dividend payouts this year

By Steve Umidha

Kenya’s top Savings and Credit Co-operatives Societies (Saccos) executives said Wednesday they are optimistic about their companies’ prospects for the year with a good number forecasting ‘generous’ member dividend payouts.

Those who spoke to this writer are forecasting an improved sector performance ahead of a busy period for Saccos, whose financial outcomes are likely to begin spilling from as early as next week.

Dr. George Ochiri, the Chief executive of Harambee Sacco – one of the largest Saccos in Kenya in terms of membership, yesterday confirmed the firm is lining up a 10 percent dividend offer to its members ahead of its financial results slated for next week.

“Results will be good. And going forward we are now seeing new priority areas in the housing agenda, agriculture, cottage manufacturing as well as education sectors which provide us with exciting opportunities,” offered Ochiri, who attributes the yet to be released results to the improved business confidence after the government eased lockdown restrictions in mid-2021.

Harambee Sacco offered dividends at 6 percent last year compared to 2019 when it paid both dividends and interest on member’s deposits at 6.5 percent.

The Sacco had last year embarked on a tedious process of selling off some of its multi-billion shilling real estate portfolio – valued at over Sh1.7Billion, to boost its cash flow as it continues implementing its turnaround strategy.

With 7an estimated over 76,000 strong membership largely drawn from the civil servants, the Sacco had an asset base valued at Sh29.5 Billion as at end of 2019.

Chairman of the Kenya National Police DT Sacco David Mategwa is also bullish for the year – with the Sacco, ranked the second largest in the country based on assets and third in terms of membership, keen to surpass its target of Sh 50 Billion total assets by end of 2022 as it marks its golden Jubilee.

“We are already reaping fruits from our members’ hard work despite the challenges brought by the pandemic which in all honesty had a minimal impact on our business, based on the fact that 99 percent of our members are police officers whose contributions were not affected. We are predicting a good outcome this year,” said Mr Mategwa.

Last year, the South African rating agency Global Credit Ratings (GCR) upgraded Sacco’s rating to BBB+ from BBB with a positive outlook citing good asset quality, healthy funding and sound liquidity.

The credit cooperative behemoth has over 67,000 members and an asset base of $390 million or about Sh42 Billion as of 2020 with data provided by the institution showing that 100 people join the Sacco each week, making it one of the fastest-growing credit unions in the country.

The Chief executive of Hazina Sacco Mr. Dickson Okungu is also predicting a bountiful year but remained non-committal on the percentage dividend rate offering, the Sacco will extend its members in late February or early March 2022 when the company is expected to announce its financial figures.

“Perhaps yes, perhaps no,” replied Mr. Okungu when asked whether Sacco will offer a higher dividend payout this year. Hazina offered a 10.3 percent dividend payout to its members last year.

“The auditing process is still underway and I may not want to pre-empt the outcome at this time. But last year was relatively a good period for us.” The Sacco celebrated 50 years of existence last year.

Other factors expected to boost the sector’s performance this year despite the looming August 9, 2022 general elections, is with the implementation of an inter-Sacco lending market and eventual integration into the National Payments and Clearing system.

Through Sasra, the industry regulator is working with a multi-agency team comprising the State Department of Co-operatives, the National Treasury, Central Bank of Kenya (CBK) and the Kenya Law Reform Commission (KLRC), and has drafted the legal framework for the operationalization of the Central Liquidity Fund (CLF) where Saccos can lend and borrow money from each other thereby cutting ties with Commercial banks whose loans are considered very costly.

Under the new regime, Saccos will run their own inter-Sacco market where they can lend and borrow from each other at reasonable interest rates to offset their financial positions which was not possible in the past.

New rules announced under the SACCO Societies (Non-Deposit Taking Business) Regulations, 2020, are also expected to bring sanity in the industry and will among other factors place the Non-DT Saccos specified above under the oversight of SASRA. Prior to this, they were under the oversight of the Commissioner of Cooperatives. There will also be a requirement for Non-DT Saccos to increase their capital base.