Sacco Societies Regulatory Authority (Sasra) smaller Saccos to merge as the top 20 entities control more than half of the total deposits.
The regulator noted that large Savings and Credit Cooperative Societies (Saccos) deepening the control of deposits – a key source of lending – as smaller SACCOs struggle to control deposits.
In the latest annual report, the regulator says mergers among deposit-taking (DT) Saccos will help bring stability and lower cost of operations
“A time has thus come for the Sacco subsector to start policy conversations and dialogues on voluntary consolidation and amalgamations of the many small DT-Saccos, for them to remain competitive and benefit from associated comparative advantages,” the regulator said.
The new proposal comes at a time when Sasra revoked licenses of several Saccos and placed some on restricted operational because of the liquidity constraints.
Saccos are experiencing skewed distribution of liquidity.
According to Sasra, the top 20 DT-Saccos controlled combined deposit of Sh224.75 billion in 2019, 59.08 percent of the Sh380.44 billion total deposit.
99 DT-Saccos whose deposits were below the 1billion controlled a paltry 8.4 percent of the overall deposits within the system.
The regulator has warned that as the market share of small Saccos continues to be under pressure from larger Saccos, they are at risk of closing down if they don’t merge.
Between 2015 and 2019, the regulator revoked the licenses of 14 DT-Saccos for failing to maintain the required level of core capital.
The data from Sasra show that there are 172 licensed DT-Saccos as opposed to 215 Saccos in 2012. This implies that 43 Saccos were dropped out during that time
Sasra wants that all DT-Saccos maintain at all times minimum core capital of not less than Sh10 million.
The also requires DT Saccos to maintain core capital to total asset ratio at not less than 10 percent Institutional capital to total assets and core capital to total deposits has been set at a minimum of each eight percent.