Data from the State Department of Cooperatives reveals savings and credit cooperative societies (Saccos) in Kenya witnessed a 15% growth in member deposits, reaching KES 1.047 billion this year compared to the previous year’s KES 906 billion.
This significant achievement underscores the confidence Kenyans continue to place in Saccos despite the challenging economic landscape.
Saccos typically operate based on the principle of individuals with a common bond, such as a shared profession, community, or workplace, pooling their resources in savings. In return, members can access credit, sometimes up to three times their savings amounts.
The surge in deposits to the $1 trillion mark signifies an improved ability of Saccos to provide credit for businesses and ventures throughout the year.
Kenya faces challenges in private sector credit access, with private sector credit as a percentage of GDP standing at 31.5%, a figure notably lower than that of thriving economies such as the United States (216.6%).
China (182.9%), Mauritius (79.5%), and South Africa (112%) on the continent. The data reveals that 99% of credit in Kenya is supplied by local banks, with only 1% coming from other sources.
In addressing the need to diversify private credit sources in the country, the progress made by cooperatives and Saccos is welcomed. Several factors contribute to this growth, including higher returns on deposits, with Saccos offering an average interest rate of 6.9%, surpassing the average of commercial banks at 3%.
Additionally, the flexibility of withdrawal options has made Saccos a preferred choice, especially given economic uncertainties and rising living costs.
However, the rise in Sacco deposits raises concerns, including the necessity for enhanced protection of these deposits. Efforts by the Kenya Deposit Insurance Corporation and other government stakeholders are crucial to ensuring the safety of investors’ funds in Saccos.
Moreover, the data highlights a wealth gap issue, with less than 1% of accounts in Saccos contributing to nearly a third of all savings.
Stakeholders must address this inequality, as it appears the rich have disproportionately benefited from the challenging economic conditions, while some Saccos, including the National Hospital Insurance Fund SACCO, are reported to be on the verge of collapse due to financial challenges.
The surge in Sacco deposits represents a promising development for Kenya’s private sector credit growth, reflecting enduring trust amid economic challenges. To sustain this progress, focused attention is necessary to enhance deposit protection and address wealth disparities within Saccos.
