Why your Sacco struggles to refund your money

The regulator says for the third year running the largest proportion of complaints related to members who were seeking a refund of their savings and deposits or transfer of shares.

Sasra notes that Regulations 2010 for Deposit Taking -Saccos and Regulations 2020 for Non Withdrawable Deposit Taking -Saccos provide that a sacco shall refund a member the savings or deposits (less any outstanding dues owed to the SACCO Society) within 60 days after the member has served a notice of withdrawal.

Adequate liquidity

"The complaints analysis however shows that these legal provisions are never honoured by the saccos in respect of which the complaints relate, as evidenced by the fact that out of all the complaints received and processed by the Authority in 2021, a proportion of 55.76 per cent of them are related to claims for refunds and savings by members," the report by Sasra reads.

In 2020, the proportion of similar complaints to the authority was 41.84 per cent.

"The main reason for delayed settlement of claims for refund of savings and deposits of members within the prescribed time, is perennial liquidity challenges," Sasra says.

It adds that saccos are thus called upon to ensure that they have adequate liquidity management plans that caters for the unexpected applications by members for refund of their savings and deposits. This should avoid the backlashes and supervisory enforcement actions associated with failure to make timely refunds of savings and deposits.

"Indeed, delayed refund of savings and deposits to members exiting saccos can trigger a liquidity run-in by other members," the report adds.

But where do these liquidity challenges come from? Most saccos operate through check-off system where the deposits by the members are deducted at source (by finance office) and remitted to the sacco's account by the employer.

Those who take loans, are majorly also employees and servicing is also done via check-off system.

In such a case, any sacco member who has applied to have their shares transferred or deposits refunded finds it frustrating when they are taken round in circles.

A member of a teachers-based sacco shared their frustrations with Money Maker.

"They (the sacco in question) had allowed a weekly withdrawal of savings of Sh5,000 only to be done in Nairobi and all of a sudden they backtracked," said the complainant.

According to the 2021 Sasra supervision report, saccos are owed Sh3.4 billion in unremitted cash. Last year the figure was Sh5.05 billion.

Sasra chair George Murathe said the non-remittance menace was noted to continue undermining the performance and competitiveness of saccos during the year ended December 2021.

"This was evidenced by the fact that a total of Sh3.40 billion was reportedly owed by various employer institutions to the 361 regulated saccos in operation in the country," he said. "Even though there was a general reduction in the non-remitted amounts which had stood at Sh5.05 billion in 2020, the owed sum of Sh3.40 billion is still too high."

He said these are the funds which would have improved the liquidity in the sacco system, boost loaning to membership leave alone the opportunity costs lost.

"The fact that 63.34 per cent of the non-remitted funds owed is related to loan repayments means that the subject loans have since been classified as non-performing by the saccos and provisions made in respect thereof thereby reducing the surpluses and profitability of the saccos," said Mr Murathe.

He said statistical analysis shows that the public universities and tertiary colleges continued being the greatest defaulters in terms of non-remitted funds which amounted to Sh1.30 billion in 2021 representing 38.03 per cent of the total non-remitted funds.

"Cognisant that there are 10 regulated saccos whose membership are primarily drawn from the public universities and tertiary colleges, it is clear that a sum of Sh1.30 billion being owed to just ten saccos has the potential of greatly undermining their performance," he said.

County Governments and assemblies owed the third highest amount of the non-remitted funds accounting for 18.81 per cent of the total non-remittances.

"This is ironic because it would have been expected that since the cooperative sector being a constitutional devolved function of the county government, the county governments ought to have been at the forefront of promoting the Saccos by ensuring that the members' deductions from their payrolls are promptly remitted to the respective Saccos," added Mr Murathe.

Rethink of the measures

The Sasra report says public universities and tertiary colleges owe saccos Sh1.29 billion in unremitted deductions followed by private sector institutions at Sh839.5 million, county government and assemblies coming third with arrears of Sh640.2 million.

National government ministries and constitutional commissions have not remitted Sh127.8 million while government parastatals and State corporations owe their saccos Sh277.6 million.

Mr Murathe said over the last two years, the Government has been employing a multi-thronged policy, legal and administrative measures aimed at reducing the problem of non-remitted funds owed by government institutions to the sacco subsector.

These initiatives included the presidential directive issued in November 2019 designating such non-remitted Sacco funds as pending bills which government entities are required to budget for and give priority in paying.

"It is however evident that the measures being taken are bearing fruits but at a very slow pace, not sufficient to spur the growth of the Sacco subsector, thereby calling for a rethink of the measures," said Murathe.

He said it is encouraging to note that some of the proposals aimed at addressing the problem were incorporated in the draft Cooperative Bill, which was subjected to a stakeholder consultations process and validation in the course of 2021.

"The Authority thus looks forward towards the final approval of the draft Bill, its legislation into law and implementation, as the measures therein will go a long way in reducing the non-remittance problem in the Sacco subsector," said Murathe.