This analysis provides an in-depth look at Non-Withdrawable Deposit-Taking Savings and Credit Cooperative Societies (NWDT-SACCOs) in Kenya, focusing on crucial performance indicators across different tiers (Large, Medium, and Small). We have analysed data provided by SASRA.
1. CAPITAL ADEQUACY
Institutional Capital to Total Assets Ratio
This ratio measures the financial strength and stability of a SACCO, representing the proportion of assets funded by its own capital.
- Regulatory minimum: 8%
Top performers:
- Lompasago (Small): 383.49% in 2023
- Bamburi Wananchi (Small): 200.27% in 2023
- Co-operative Bank (Large): 155.40% in 2023
- Lowest performer: Digital Media (Small): -4.62% in 2023
The wide range indicates significant disparity in financial strength across the sector, with some small SACCOs showing exceptional capital adequacy.
External Borrowing to Total Assets Ratio
This ratio indicates a SACCO’s reliance on external funding sources compared to its total assets.
- Regulatory maximum: 25%
- Most SACCOs report 0.00%, indicating primary reliance on member deposits
Notable exceptions:
- Forward (Medium): 217.65% in 2023
- Royal Media (Small): 23.03% in 2023
- Airlink (Small): 11.54% in 2023
Some SACCOs, particularly smaller ones, show concerning levels of external borrowing above the regulatory limit.
2. ASSET QUALITY
Non-Performing Loan (NPL) Ratio
This ratio measures the quality of a SACCO’s loan portfolio by comparing non-performing loans to the total loan portfolio.
Best performers (lowest NPL ratios):
- Multiple SACCOs across tiers: 0.00% in 2023
- Amref (Medium): 0.31% in 2023
- Ukaguzi (Medium): 0.89% in 2023
- Worst performer: Digital Media (Small): 97.92% in 2023
There’s a significant variation in loan quality across the sector, with some SACCOs maintaining excellent asset quality while others face severe challenges.
Gross Loans to Total Assets
This ratio indicates the proportion of a SACCO’s assets that are tied up in loans. A higher percentage suggests more aggressive lending practices, which can potentially lead to higher returns but also increased risk. It’s noteworthy that all three top performers in this category are large-tiered SACCOs, indicating that larger institutions tend to have a higher proportion of their assets in loans.
- Highest: Mhasibu (Large): 80.38% in 2023
- Lowest: Digital Media (Small): 37.37% in 2023
Best performers (lowest NPL ratios):
- Mhasibu (Large): 80.38% in 2023
- United Women (Large): 83.82% in 2023
- Njiwa (Large): 75.48% in 2023
Larger SACCOs tend to have a higher proportion of assets in loans, indicating more aggressive lending practices.
3. EARNINGS
Total Income to Total Assets Ratio
This ratio measures a SACCO’s ability to generate income from its assets.
Top performers:
- Rembo Shuttle (Small): 53.60% in 2023
- Transwest (Small): 111.65% in 2023
- Bamburi Wananchi (Small): 34.95% in 2023
Interestingly, smaller SACCOs show higher income generation relative to their asset base.
4. LIQUIDITY
Total Deposits to Total Assets Ratio
This ratio indicates the proportion of a SACCO’s assets funded by member deposits. Higher percentages suggest strong member confidence but potentially higher liquidity risk.
- Highest: Mhasibu (Large): 77.95% in 2023
- Lowest: Digital Media (Small): 97.73% in 2023
Large SACCOs generally show a balanced deposit-to-asset ratio, while some smaller SACCOs have very high ratios, potentially indicating liquidity risks.
Top performers:
- Mhasibu (Large): 77.95% in 2023
- Njiwa (Large): 78.82% in 2023
- United Women (Large): 84.83% in 2023
5. GROWTH AND MARKET POSITION
Total Assets
Total assets represent the overall financial resources controlled by each SACCO and are a key indicator of a SACCO’s size and market position.
- Leader: Mhasibu (Large): KShs 9,779.73 billion in 2023
- Smallest: Digital Media (Small): KShs 55.61 billion in 2023
The sector shows a wide range in asset sizes.
Top performers:
- Mhasibu (Large): KShs 9,779.73 billion in 2023
- Njiwa (Large): KShs 7,397.30 billion in 2023
- Kenya Medical Association (Large): KShs 6,256.81 billion in 2023
CONCLUSION
The NWDT-SACCO sector in Kenya demonstrates significant variability in performance across all key indicators.
While some large SACCOs like Mhasibu show strong overall performance, several small SACCOs excel in specific areas such as capital adequacy and income generation.
However, the sector also faces challenges, particularly among smaller SACCOs, with issues of high NPLs, excessive external borrowing, and potential liquidity risks.
SASRA may need to focus on improving capital adequacy and asset quality in underperforming SACCOs, especially in the small and medium tiers, to ensure sector stability and growth.
