Savings and credit cooperatives (saccos) cut the average dividend rate on share capital to 10.46 per cent in the year ended December 2024, the first decline in three years, as they shifted focus to strengthening capital buffers amid regulatory pressure.
Fresh data from the Sacco Societies Regulatory Authority (Sasra) shows the average dividend rate dipped from 10.92 per cent in 2023, reversing an upward trend that had held since 2021. At the same time, the average interest on deposits fell to 7.14 per cent from 7.45 per cent.
Despite the reduced rates, saccos still outperformed commercial banks, which offered an average 4.14 per cent on deposits. The cooperatives also increased total payouts in absolute terms, with disbursements rising 8.5 per cent to Sh59.74 billion, up from Sh55.06 billion the previous year.
Sasra attributed the cutbacks to a deliberate effort by regulated saccos to retain more surpluses and build institutional capital. “The decline was largely a result of increased regulatory pressures on regulated saccos towards retention of surpluses to build institutional capital rather than increased payout,” the regulator said in its Sacco Supervision Annual Report 2024.
The report further noted that 2024 marked the first time in three years that saccos paid interest on deposits below the Central Bank Rate (CBR), which averaged 12.6 per cent compared to 10.13 per cent in 2023.
Even with the conservative approach, saccos maintained a significant edge over banks, paying about 6.32 percentage points higher in dividends and three percentage points more in deposit interest.
The strategy yielded stronger balance sheets, with capital reserves and retained earnings jumping 17.55 per cent to Sh197.54 billion in 2024, compared with a slower growth of 6.92 per cent the year before.
Sasra chairman Jack Ranguma said the shift was necessary given recent financial turbulence. “The past two years have seen saccos face uncertainties linked to impairment of some of their financial investments in unregulated entities,” he said.
Sasra oversees 177 deposit-taking and 178 non-withdrawable deposit-taking saccos, all of which are under increasing pressure to strike a balance between rewarding members and safeguarding financial stability.
