Saccos warned against ‘abnormal’ dividends in bid to retain members
Savings and Credit Cooperative Societies (Saccos) have been cautioned against declaring abnormal dividends in a bid to retain membership.
The Kenya Union of Savings and Credit Cooperatives (Kuscco) managing director George Ototo noted that it is unsustainable for the financial institutions to pay out huge returns to members while struggling to meet their overhead costs.
“In the long run, a number of Saccos are being forced to resort to borrowing in order to stay afloat,” he said on Friday during the 45th annual delegates meeting of Invest and Grow (IG) Sacco.
“Saccos should self-regulate themselves and avoid plunging into a debt crisis which could lead to them collapsing,” he said.
Underlying the need to have Saccos retain cash in order to serve their members better, the boss of the umbrella body for Saccos raised concerns that the push for higher dividends is risking the survival and growth of Saccos.
Some thrift institutions have announced plans to keep a lid on the returns paid to members in order to strengthen their capital base.
Harambee Sacco, for instance, says it will pay higher dividends to members on share capital and cap payouts on deposits at eight percent for the next three years as the institution seeks to comply with capital requirements.
The Sacco has proposed the changes in a bid to entice members to increase their share capital as opposed to ramping up their savings whose dividend rate will now be capped at eight percent for the next three years.