Cooperatives Cabinet Secretary Wycliffe Oparanya reaffirmed the government’s commitment to bolstering the ability of Savings and Cooperative Societies (SACCOs) to offer loans, despite facing challenges such as mismanagement and corruption. This comes as part of the government’s broader effort to enhance the financial ecosystem and support economic growth.
The 2023 Annual SACCO Supervision Report, unveiled by Oparanya, reflects a dynamic yet challenging landscape for SACCOs in Kenya. The report reveals that the total amount of loans issued by SACCOs surged to KSh 758 billion in 2023, marking an 11.50% increase from the previous year. This growth rate, though slightly down from the 11.67% recorded in 2022, indicates a robust expansion in SACCO lending despite prevailing economic and policy constraints.
The report also highlights a notable increase in SACCO membership, which grew by 6.57% to reach 6.84 million in 2023, up from 6.42 million in 2022. This growth is a positive indicator of increasing financial inclusion, though it still represents just under 30% of Kenya’s adult working population. By international standards, Kenya’s SACCO penetration rate lags behind countries where over 40% of the population are members. This disparity underscores significant growth potential within the Kenyan SACCO industry.
Oparanya acknowledged the industry’s expansion but expressed concern over the persistence of mismanagement and corruption within some SACCOs. He emphasized that while the government has been active in reviewing the legal and regulatory framework governing SACCOs, these efforts have not fully eradicated these issues. The CS highlighted the necessity for a more collaborative approach to address these challenges, noting that tackling mismanagement is not solely the responsibility of the government.
The government’s strategic focus is on enhancing SACCOs’ operational capabilities and governance standards. The Cooperative Bill 2024, which proposes the establishment of a federation of SACCOs, is a key component of this strategy. Oparanya expects this federation to champion good governance, leveraging its legal and moral authority to promote transparency and accountability within the sector. The federation is envisioned as a self-regulatory body that will work towards maintaining high standards of governance, with the government stepping in only to enforce compliance when necessary.
In addition to strengthening governance frameworks, the ministry is exploring policy options to address dispute resolution more effectively. One such option is expanding the jurisdiction of the Cooperative Tribunal to handle disputes between cooperatives and employers, particularly concerning non-remittance cases. This move aims to expedite the resolution process and ensure that disputes do not hinder the effective operation of SACCOs.
Despite these challenges, the SACCO sector’s growth trajectory remains promising. The increase in deposit growth by 9.95% in 2023, though slightly behind the loan portfolio growth, suggests a solid foundation for future expansion. The financing gap for loans, primarily covered through member share capital and retained earnings, underscores the sector’s resilience and potential for further development.
In conclusion, the Kenyan government’s commitment to supporting SACCOs is pivotal in enhancing their ability to provide loans and contribute to economic development. By addressing governance issues, expanding regulatory frameworks, and fostering industry self-regulation, the government aims to unlock the full potential of SACCOs, ensuring they continue to serve as a vital component of Kenya’s financial landscape.
