Harambee Sacco plans raise at least Sh4billion in the short-term to boost its capital reserve and cut on external borrowing.
The Sacco has rolled-out a share-capital drive that seeks to mop up the targeted amount with a timeline of between two and three years, with its existing membership being the main focus in the drive.
Its institutional capital to total assets ratio went up to 6.2 per cent in the period ended December 2023, from 5.3 per cent the previous year according to its financial statement for the period, but this still falls short of the statutory requirement.
Deposit taking Saccos are required by law to maintain an institutional capital to total assets ratio of at least eight per cent.
The Sacco closed 2023 with Sh3.05 billion worth of external borrowing compared to Sh3.53 billion in 2022.
Harambee Sacco chairman Macloud Malonza said the shortfall is the “only one area of concern”, as it reported a strong performance in the period ended December.
“Something drastic needs to be done to address this gap. In essence, the success of this shares drive will help the society reduce its reliance of external borrowings which last year stood at Sh3.05 billion,” Malonza said during the Sacco’s Annual Delegates Meeting in Nairobi, on Monday.
He said the board and management have come up with a strategy to address the concern.
“It will also buoy-up the society’s liquidity position thus making a great saving especially when it comes to loan interest payment,” Malonza said.
He said at 15,600 salary accounts, the society still has miles to go before sitting comfortably and claiming success.
"Every effort must be put to hit the target of 150,000 members with over half the number processing their salaries through the society,” Malonza said.
The capital shares drive involves members buying in into the Sacco’s shares, which CEO George Ochiri says comes with a guaranteed return of 15 per cent for the next five years.
“An investor shall have recouped 75 per cent of the amount invested and perpetual annual income…this will lead to healthy liquidity and compliance,” Ochiri said.
Harambee’s asset base increased to Sh38.5 billion in 2023 up from Sh37.01billion in 2022.
Loans and advances to members went up to Sh29.13 billion compared to Sh27.23 billion extended to members the previous year.
This piled pressure on the cashbook where member deposits and savings closed the period at Sh24.6 billion, up from Sh23.7 billion, even as the share capital grew by eight per cent to stand at Sh2.34 billion, against Sh2.17 billion in 2022.
Net surplus grew by 73 per cent from Sh532 million in 2022 to Sh919 million in 2023, its financial statement for the period indicates.
The society announced a payment of dividends to shareholders of 12 per cent against 10 per cent that was paid out in 2022. This literary translates to Sh12 per share.
It also proposed to pay out of 8.5 per cent interest on deposits, setting a new record for the Sacco.
Harambee, which draws most of its membership from the civil service, plans to grow its membership in tandem with salary processing accounts.
It targets to increase membership to at least 87,000 in the medium-term, from 79,000 members.
