The Sacco Societies Regulatory Authority has cautioned SACCO members and management that high dividends and interest on deposits are not reliable indicators of an institution’s financial health, warning that aggressive payouts could come at the expense of members’ savings.
In an advisory directed at the sector, the regulator questioned whether members are being rewarded today at the cost of their future security. “Is your SACCO paying high dividends today at the expense of your savings tomorrow?” the authority asked.
SASRA argued that a SACCO’s strength should not be measured solely by its annual payouts, but also by its capacity to safeguard deposits, offer affordable credit and remain financially stable. The regulator said societies must strike a balance between rewarding members and retaining enough resources to sustain their operations.
The advisory does not announce a blanket ban on high dividend payments. Instead, it places the onus on members to take a more active interest in how their societies are run, rather than judging performance by the size of the annual dividend announcement.
Members were urged to use annual general meetings to question management on financial performance, dividend decisions, loan recovery, deposit levels and long-term sustainability. SASRA asked them to establish whether their SACCOs are strengthening their financial position or drawing down resources that could support future growth.
