Mwalimu National Sacco is among the leading savings and credit cooperatives in the country that recorded poor financial health for the fiscal year 2023 according to a report filed by the Sacco Societies Regulatory Authority (SASRA).

The report indicates that Mwalimu Sacco posted an institutional capital to total assets (ICA) ratio of 7.7 per cent which is below the 8 per cent threshold mandated by the regulatory authority.

Institutional capital ratio represents the proportion of an institution’s capital and reserves relative to its total assets which allows it to weather future losses or decline in business due to market volatility or economic downturns while safeguarding the assets of its members.

According to SASRA, the poor ICA ratios indicated financial instability among some of Kenya’s top-tier Saccos.

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The newly released report indicated that Mwalimu National Sacco’s institutional capital ratio dropped by 2.47 per cent from 10.17 per cent in 2022 to 7.7 per cent in 2023. The fall was attributed to the collapse of Spire Bank which reduced the Sacco's financial flexibility.

The write-off allowed Mwalimu Sacco to streamline its books as the now-defunct bank had become a liability. This resulted in sheer reduction of the Saccos liquidity, but offered a lifeline to rebound.

By operating below the ICA ratio threshold, Saccos risk restricted operations and regulatory sanctions pending compliance.

SASRA also exposed the drop in other key financial ratios within Mwalimu Sacco, signifying wider fiscal challenges.

”Every institution shall, at all times, maintain minimum capital ratios; -A core capital of not less than ten (10) per cent of total assets, A core capital of not less than eight (8) per cent of its total deposit liabilities, and institutional capital of not less than eight (8) per cent of its total assets.”

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Sector Wide Challenges

The SASRA report indicated widespread challenges within the savings and credit cooperatives world with several other top-tier institutions recording a decline in their institutional capital ratios.

According to the report, Safaricom Sacco, Ukulima Sacco, Boresha Sacco, and Kimisitu Sacco also fell below the SASRA threshold. Safaricom’s ICA ratio dropped by 0.41 per cent, Ukulima by 0.56 per cent, Boresha Sacco by 2.44, and Kimisitu by 2.94 per cent.

These declines indicated the said Saccos may struggle to safeguard member savings and investments in the event of external economic pressures.

The report further revealed that the number of financial institutions which fell below the 8 per cent SASRA threshold rose from 30 in 2022 to 35 in 2023, indicating a worrying trend in the increment of financially vulnerable institutions.

On average, the 174 Saccos registered under SASRA recorded a drop in institutional capital ratio from 9.58 per cent in 2022 to 9.11 per cent in 2023. This indicates that several financial institutions are struggling to raise or maintain extra capital.