County governments have been highlighted as some of the biggest defaulters on loans to Savings and Credit Cooperative Organizations (SACCOs), with non-remitted funds totaling Ksh 865.12 million in 2023. This represents 33.41% of the total amount owed to regulated SACCOs across the country, according to the latest SACCO Societies Regulatory Authority (SASRA) report.
While the amount of non-remitted funds by county governments has decreased from Ksh 1.35 billion in 2022, the reduction has not been sufficient to prevent financial damage to SACCOs. SACCOs affiliated to county governments have continued to suffer liquidity challenges due to the employers, in this case, county governments, either not remitting or only partially remitting the deductions made from employees’ salaries to their designated SACCOs.
Public universities and tertiary colleges on the other hand owe SACCOs a staggering Ksh 958.07 million, accounting for 37% of the total non-remitted deductions.
The report revealed a sharp increase in the amounts owed by public universities, rising from Ksh 620.52 million in 2022 to Ksh 958.07 million in 2023. This substantial rise has severely impacted the performance of SACCOs affiliated with universities, undermining their financial sustainability.
Underlying causes for the non-remittance problem.
Budget Constraints: Many government institutions face budgetary shortfalls that result in delayed or missed payments to SACCOs. In many cases, poor financial planning or challenges in revenue collection exacerbate the issue, leaving SACCOs in a precarious position.
Inefficiency and Bureaucracy: The slow pace of government operations and bureaucratic inefficiencies contribute to payment delays. The long approval processes required within public institutions, coupled with poor communication channels, often result in missed payments to SACCOs.
Over-Reliance on Public Funds: Government institutions typically depend heavily on disbursements from the national government to service their debts. When these disbursements are delayed, loan repayments to SACCOs are often deferred.
Economic Challenges: Broader economic challenges such as inflation, currency devaluation, and economic downturns also contribute to the non-remittance crisis. These factors strain the cash flow of government institutions, making it difficult for them to keep up with their financial obligations.
Impact on SACCOs
SACCOs depend on a steady stream of remitted contributions to maintain liquidity and meet their members’ financial needs. When these funds are not remitted, they face liquidity challenges that limit their ability to offer loans to members damaging their credibility and long-term sustainability.
The SASRA report indicated that 10 county government-affiliated SACCOs and 10 university-affiliated SACCOs have been severely affected by non-remittance issues over the past two years. This financial impairment threatens to further destabilize these SACCOs.
Private Sector Shows Improvement
In contrast to the public sector, private companies have shown an improvement in their remittance practices. Private sector institutions owed a total of Ksh 377.39 million in non-remitted deductions to SACCOs in 2023, down from Ksh 428.95 million in 2022. This reduction represents a positive shift and indicates a trend towards better financial management in the private sector.
Overall SACCO Impact
SASRA’s 2023 SACCO Assessment Report highlighted that the total number of SACCOs affected by non-remittance issues increased slightly, from 80 regulated SACCOs in 2022 to 82 in 2023. However, the number of individual SACCO members affected dropped, from 66,452 members in 2022 to 57,721 in 2023.
The largest proportion of non-remitted funds in 2023 was related to loan repayments and credit facilities, amounting to Ksh 1.68 billion, which represents 64.88% of the total non-remitted funds. This is an improvement from the Ksh 2.01 billion owed in 2022.
However, non-remitted funds intended for BOSA deposits increased, reaching Ksh 909.49 million in 2023, representing 35.12% of total non-remitted funds. This marks a significant rise from the Ksh 680.16 million (25.28%) reported in 2022.
Addressing the Challenge
In response to the ongoing non-remittance issue, SASRA has proposed a range of measures aimed at improving remittance practices and stabilizing the financial health of SACCOs. These measures include increased regulatory oversight, better financial planning within public institutions, and efforts to streamline communication and payment processes.
