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SASRA urges Sacco leaders to embrace cooperation, mergers to strengthen financial sector completion

Sacco Societies Regulatory Authority (SASRA) is advocating for cooperation and mergers among the SACCO subsector players, in a bid to stem financial competition.
The regulator cited major collaboration happening in the baking and microfinance subsector, adding that they have spearheaded the subsector growth and competition.
“Stiff competition in the national financial sector driven by heavy capital expenditures in marketing, competitive pricing, digital financial products, and service, means that only large and well-resourced financial institutions which enjoy economies of scale shall survive in the long run,” read SASRA’s Annual Supervisory report in part.
SASRA Chief Executive Officer Peter Njuguna pointed out that Sacco leaders should recognise that to achieve greatness, there has to be some degree of collaboration amongst the different players as they do with service providers.
“We have realized that Sacco collaborates significantly with various service providers because Sacco alone cannot provide the services. Courtesy of the collaboration we have had so far, you will note that we have grown and indeed we are doing well every year both in deposits and our asset growth despite the Covid-19 pandemic,” said Njuguna.
Sacco sector growth
He added that the cooperative movement presently boasts over 14 million, adding that there is still a huge potential for the movement to reach to reach out to more members.
Njuguna noted that this could be achieved if SACCOs come together, cooperate and collaborate, setting up benchmarking models that can best meet the varied needs and expectations of different members.
SASRA noted that the number of small SACCOs in terms of assets is overwhelming, and plans need to be set to allow them to come together and improve their operation and service delivery.
“Other than Government-based SACCOs, it can be concluded that on average other clusters of SACCOs are relatively small in their respective asset sizes and deposits, and cognizant of the assets being the principal revenue stream for SACCOs, it goes without saying that the respective incomes and revenues generated by these SACCOs were on average quite low thus affecting their stability and sustainability.
“To enjoy economies of scale, these small SACCOs can amalgamate, merge, or consolidate with each other based on similarities of fields of membership or common bonds, to enjoy economies of scale and compete effectively, not just within the SACCO subsector space but also within the national financial sector space,” the report continued.

SACCO sector collaboration
The CEO noted that the cooperative movement makes strides to come together with other service providers to empower members through training, education and provision of quality, relevant and responsive products and services.
He pointed out that even as Saccos expand through the establishment of Sacco branches, deployment of agency banking and exploitation of mobile and internet platforms to reach new members, the Sacco’s needed to measure their growth relative to the GDP to establish whether or not they are developing.
Njuguna encouraged delegates to look into the level, intensity and strategy used to accelerate development and find effective means to sustain growth even as they join hands by attending training and education forums such as KUSSCO’s leadership convention and others.
He ruled out society seeing others as competitors, saying they should partner as a distinctive advantage to reinvent their relationship as a powerful tactic approach to different issues and understanding the underlining needs of members as they endeavour to serve them.
“Sacco should seek alliances that enhance their stability, efficiency and deep inclusion that meet their visions and long-term goals as institutions,” he said.
Small-tiered SACCO performance
The SASRA CEO expressed concern that certain Saccos were recording stunning growth each year while others were performing dismally.
In its report, SASRA also raised concerns about shrinking small-tiered DT SACCOs, saying this will impair their competitiveness and sustainability.
The regulator warned that in the absence of consolidation, smaller SACCOs shall feel the heat of competition with their larger counterparts eating into the market share.
“Since the larger SACCOs can meet the member demand at competitive prices, the smaller SACCOs will always remain in a disadvantaged position to effectively compete.”
The data showed that the average growth rates of DT-SACCOs with total assets below KSh 1 billion continued to shrink over three years in comparative periods, resting with an average growth rate of 5.2% in 2020.
Meanwhile, DT-SACCOs recorded the highest proportion of total assets amounting to KSh 691 billion, representing 85% of the total assets’ portfolio.
The sector’s total assets grew by 9.93% in 2021 to reach KSh 807billion from KSh 734 billion in 2020. The 185 Non-Withdrawable Deposit Taking SACCOs’ share of assets was a paltry 14.3%.
“The total assets of DT-SACCOs grew at 10.10% in 2021 compared to a growth rate of 12.75% recorded in 2020; while their total deposits grew by 9.92% in 2021 compared to a growth rate of 13.41% recorded in 2020,” the report continued.

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