Sacco borrowings are surging at a faster rate compared to deposits, leaving the savings and credit unions facing a negative wealth position and exposed to expensive debt to fund member lending.

The difference between the loans and deposits grew by a larger margin to Sh60 billion in 2022. This shows that members sought money from the cooperatives through loans and withdrawals at a faster pace than they made new savings in a period of economic challenges like high inflation.

Recent data from the Sacco Societies Regulatory Authority (Sasra) reveal that by the end of 2022, saccos held deposits worth Sh620.45 billion while they had loaned out Sh680.35 billion to members.

The loan book surged by 11.8 percent from Sh608.75 billion in 2021 while the deposits grew by 9.8% from Sh564.89 billion in 2021.

The Saccos regulator has been warning that the mismatch between deposits and loans leaves saccos with huge loan demands facing high finance costs as they borrow from other financial institutions to top up their lendable pool of funds.

Sasra cited high inflation and interest rates as factors that have reduced the ability of members to make savings, while the cost of external borrowing has also gone up.

While the saccos have been lending in excess of deposits for years, the gap increased by a wider margin last year, partly fuelled by the heightened withdrawal of saved funds by distressed members.

Additionally, the institutions lend to members in multiples of three to five times of savings, raising the prospect of a mismatch between deposits and savings.

The regulator’s revelation show that the withdrawable deposits (also known as Fosa savings), which are usually held by saccos as demand deposits, dropped by 26.9 percent to Sh83.78 billion from Sh114.59 billion.

This marked the second straight year of savers dipping their hands in their savings, having cashed out Sh10.46 billion the previous year.

Hard economic times also saw the number of dormant members in deposit-taking (DT) and non-withdrawable deposit-taking (NWDT) saccos jump from 1.18 million to 1.22 million.