The Ministry of Co-operatives and MSME development is worried about the long-term stability and financial integrity of Kenyan SACCOs, prompting strict regulatory requirements for dividend payouts.
- The notice stated that SACCOs can only pay out dividends and interest when they have no loan arrears, pending bills, or other pressing obligations.
- The ministry is concerned that such cash outflows could pose risks to the SACCO’s liquidity status and upset their financial status.
- The government has also noted that some SACCOs are prioritising some members – offering unrealistic bonuses that could potentially imperil the business’ performance.
“SACCOs are directed to observe prudence in the determination of dividends, bonus, honoraria, and interest paid to members. Payment must be commensurate to their performance,” the notice reads.
SACCOs have been asked to desist from borrowing loans to pay out dividends and interest to members. The ministry is concerned that such acts could lead to unethical accounting practices that factor in exaggerated income and interest on non-performing loans when calculating surpluses.
“Dividends and interest are only paid from surpluses or retained earnings and when declaring interest or dividends, these should not be financed from external borrowing,” the notice enumerates.
SACCOs are also expected to hold their Statutory Reserve Funds should be held in separate accounts and can only be invested in low-risk portfolios.
The latest SASRA report shows that membership in these institutions grew from 6.42 million in 2022 to 6.84 million in 2024. The preference for loans also grew from 9.6% to 11.25%. SACCOs have been under scrutiny from regulators over prevalent cases of mismanagement and unprocedural financial practices.
