SACCOs (Savings and Credit Co-operative Societies) were owed close to KSh 2.7 billion in non-remitted funds by various employer institutions.
According to the latest report by the Sacco Societies Regulatory Authority(SASRA), the unremitted funds were owed to 80- Regulated SACCOs amounted to KSh 2.70 Billion in 2022 compared to KSh 3.40 Billion in 2021.
The SASRA Annual Supervision Report 2022 notes that the perennial failure by various employer institutions to remit SACCO deductions continues to undermine the financial performance of these financial societies, despite various policy and administrative measures being put in place to address the problem.
Last year, the non-remitted funds belonged to a total of 66,452 members, either as loan repayment deductions or non-withdrawable (BOSA) savings deductions as at September 2022.
The bulk of the non-remitted deductions to financial societies amounting KSh 2.02 Billion which is equivalent of 74.78% of the total non-remitted funds related to loan repayment deductions, implying that loan portfolios of proportional amounts stood defaulted, besides undermining the liquidity position of the affected Regulated SACCOs to meet their financial obligations.
The failure by various employer-institutions to promptly remit the BOSA savings’ deductions on the other hand have the effect of reducing the borrowing capabilities of individual members of the regulated societies SACCOs, since most of the borrowing are pegged on the BOSA savings, which acts as collateral.
SACCOs with members from public sector organizations are most affected by the non-remittances problem
A large number of Regulated SACCOs which draw their membership from various employer-firms and organizations continue to operate largely on the strength of remittances from such employer firms and organizations.
These remittances are largely premised on the provisions of Section 35(1) of the Cooperative Societies Act which allows employees to instruct their employers to periodically deduct from the employees’ emoluments such sums as the employee may determine, and to remit such deductions to the employees’ designated societies or cooperatives.
There are two traditional forms of remittances from employer-firms and organizations. Firstly, are the remittances designated as non-withdrawable deposits (BOSA) deductions and are paid into the non-withdrawable deposits account held by the employee in the society.
These deposits are mainly utilised as collateral for borrowings by the employee from the SACCO but are refundable to the employee by the society upon exit.
Secondly, are the remittances designated for periodic repayment of loans and credit facilities issued to the employee by the society.
Analysis of the performance of the regulated societies during the year ended December 2022 showed that several employer-firms and organizations made deductions from the employees’ emoluments in accordance with instructions issued by the employees under Section 35 of the Cooperative Societies Act but failed to remit the same to the SACCOs duly designated in that regard by the employees.
The amount owed as non-remitted dues to these societies in 2022 however significantly dropped from the previous years in which a sum of KSh 3.40 billion and KSh 5.04 billion were reported in 2021 and 2020 respectively.
The drop in the amount of money owed to regulated societies, according to SASRA, is a testament that the implementation the Authority’s General Advisory Note on Non-Remitted Deductions Due to SACCOs from Various Employer-Institutions – Circular No. SASRA/800/2/2019 dated 11th June 2019 is bearing fruits towards the elimination of the non-remittance issue among the regulated financial societies.
Analysis by SASRA shows that the bulk of the non-remitted funds as of September 2022 were largely on account of loan repayments which amounted to KSh 2.02 Billion which is equivalent of 74.78% of the total non-remitted refunds.
The direct impact of these non-remittances is that the total loans’ portfolio among the regulated SACCOs was defaulted in an almost equivalent amount, besides occasioning liquidity crunch and pressures on the SACCOs to meet their financial obligations.
The non-remittances also had a direct impact on the regulated SACCOs reported interest income which is usually suspended once the loans become delinquent.
DT-SACCOs were the most affected segment by the non-remittances, with 57-DT-SACCOs reporting being owed deducted but not remitted funds by various employer-institutions on account of loan repayments, with the aggregated loan repayments owed amounting to slightly over KSh 1.75 Billion.
County Governments and Assemblies owed the highest amounts to Regulated SACCOs which stood at KSh 1.35 Billion and accounted for 49.97% of the total non-remittances and affecting a total of 43,139 members of regulated societies, who are principally employees of the County Governments and Assemblies.
The highest proportion of the funds owed by County Governments and Assemblies were due towards loan repayments, implicitly denoting poor quality of the loan portfolios of the regulated SACCOs drawing membership from County Governments and Assemblies.
Public Universities and Tertiary Colleges had the second highest amount owed to regulated SACCOs on account of non-remitted deductions which stood at KSh 620.52 Million accounting for 23.01% of all the non-remitted deductions.
The Private Sector Companies and the State Corporations (parastatals) owed the SACCOs KSh 428.95 Million and KSh 143.09 Million representing 15.91% and 5.31% of the total non-remitted deductions respectively.
The Public-owned companies, which includes public sector water companies owed regulated SACCOs a total of KSh 64.18 Million representing 2.38% of the total non-remitted deductions.
