Sacco remittances halve to Sh900m

Saccos rely on employers to make deductions. FILE PHOTO | NMG

By LYNET IGADWAH
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Summary

• Delays in sacco remittances disrupts the financial base of the credit unions meaning that they may struggle to lend to members.

The amount of outstanding dues remitted to saccos halved to Sh900 million in the year to June compared to the similar period a year earlier, indicating the effect of liquidity challenges facing individuals and organisations in a tough economy.

Data from the National Treasury collated from the sector reports shows the amount has dropped from Sh1.8 billion the previous year.

Saccos usually rely on employer/institutions to directly make periodic deductions from members’ earnings and remit these directly to then.

However, some struggling entities make deductions such as monthly savings and loan repayments but fail to remit to saccos, leading to cash flow challenges.

“Amount of outstanding sacco remittances recovered in the financial year 2019/2020 was Sh900 million,” said the Treasury in the General Economic and Commercial Affairs sector report.

Delays in sacco remittances disrupts the financial base of the credit unions meaning that they may struggle to lend to members.

The economy has been battered by the Covid-19 pandemic this year, with tourism and small and medium-size businesses hit hardest.

County governments, parastatals, and institutions of higher learning are also among the top defaulters of employee deductions that also includes sacco dues.

The recovered remittances in the last financial year fell short of the Sh1 billion that had been targeted during the period.

Many saccos’ operations are hampered by the growing number of employers who deduct contributions from employees but fail to remit the money.

The first category of deductions are those meant to build members’ non-withdrawable deposits—popularly known as the BOSA deposits.

These are the deposits which the member may use as collateral to obtain credit facilities from saccos.

The second category are those meant to periodically repay any loan or credit facilities –popularly known as the loan repayment deductions.

The Sacco Societies Regulatory Authority (Sasra) report for 2019 shows a total of Sh3.87 billion was owed to 38 deposit-taking saccos during the period.