Savings and Credit Cooperative Society (SACCO) deposits grew by 22.5% in 2011 to stand at KES 180.0 billion from KES 157.5 billion in 2010. This is an indicator that the SACCO sector has been playing a big financial services provision especially in loan advancements for middle and low earning Kenyans who form the biggest shareholding.
According to The Financial Stability Report 2011, SACCOs serve largely personal loans market lending on a guarantee system, with credit risk perceived to remain high and hence posing the greatest risk to the industry. This is largely manifested in high external borrowing, which has resulted in low liquidity and solvency margins in many Sacco Societies. In terms of industry soundness and stability, Core capital to total assets and core capital to total deposit liabilities were were above required ratios, but institutional capital to total assets fell below required ratios.
The report says the Savings and Credit Cooperative Societies (Sacco) have continued to play a critical role in Kenya’s financial sector in terms of access, savings mobilization and wealth creation. Sacco societies are member-based organizations focusing on meeting financial needs of members for personal and enterprise development. The Sacco societies operating Front Office Savings Activities reflect near retail banking business operations.
The table shows improved performance of Sacco industry in terms of growth in 2011. In the year ending 31st December 2011, the total assets for Saccos subsector grew by 13% cent with member deposits rising 23%. Turnover was 12% up as loans to members rose by KES 28.2 billion or 15%, mainly driven by growth in FOSA savings.
Sacco societies have not been subjected to prudential regulation and supervision like commercial banks and deposit taking microfinance institutions. This makes it difficult to objectively analyze their financial statements, according to the report, saying these are key indicators of financial soundness and stability.
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