The government has slapped a new tax on non-withdrawable deposits in savings and credit co-operative societies (Saccos), exerting a squeeze on savers as it seeks to boost revenues to fund the sector regulator’s operations.

Non-withdrawable deposits mean that the share capital paid by a member cannot be reduced or removed.

A schedule by the Sacco Societies Regulatory Authority (Sasra) shows that all saccos registered under the Sacco Societies (Non-Deposit Taking Business) Regulations, 2020, would from January 1, 2024, pay a varied annual levy over the next four years to December 31, 2027.

The annual levy, to be known as the Annual Sacco Societies Levy, is set at 0.10 percent of the non-withdrawable deposits between January 1 and December 31, 2024, before climbing to 0.13 percent in 2025, 0.14 percent in 2026, and 0.15 percent in 2027.

“The levy paid under subparagraph (1) shall be based on the total non-withdrawable deposits held by the Sacco society as indicated by the audited financial statements of the Sacco society for the immediately preceding financial year,” Sasra chairman Jack Ranguma and chief executive officer, Peter Njuguna said in a joint brief seen by The BusinessWeek.

“Notwithstanding any other provision of this order, the maximum levy payable shall not exceed six million shillings,” the officials added.

Fresh data from the State Department of Co-operatives shows that non-withdrawable deposit-taking (NWDT) savings hit Sh97.86 billion by the end of June 2023 from 90.64 billion in a similar period of the previous year, surpassing the targeted Sh91 billion.

“Target achieved due to improved member confidence, branch expansion, and adoption of alternative service delivery channels by regulated Saccos,” Sasra said.

Going by the latest data on NWDT, it means that Sasra is targeting to raise at least an extra Sh100 million annually through its new levy.

For example, the 0.10percent levy rate set for the period January 1 to December 31, 2024, would translate to an extra Sh97.86million revenue toward Sasra operations when calculated against the Sh97.86billion NWDT deposits for the period that ended June 2023.

Using the same base, NWDT collection of Sh97.86 billion as of June 2023, Sasra would net some Sh127.2 million from the 0.13 percent levy rate that it has set for 2025.

The revenue collection would rise to Sh1146.79 million in 2027 going by the same base NWDT collection of Sh97.86 billion as of June 2023 and deducted at a 0.15 percent rate set for that year.

“The essence of the new levy is to create some financial independence for Sasra. Opening new revenue streams has become critical to wean off dependence on the Exchequer,” a source at the regulator told the Business Daily.

The stature of saccos in the economy has grown exponentially over recent years as members accumulate savings for a rainy day and, also tap loans for development.

Sh1.047 trillion savings

Data from the State Department of Co-operatives shows that member deposits in saccos crossed the Sh1 trillion mark for the first time in June 2023.

The savings grew by 15.6 percent to Sh1.047 trillion in the 12 months to June 2023 from Sh906 billion, marking a milestone for the country’s cooperative movement.

“Target achieved as a result of improved member confidence and access to financial services through the adoption of digital channels by Saccos,” said the State Department.

The Sh141 billion deposit growth helped co-operatives surpass the Sh950 billion target for the year.

The data further shows that savings in deposit-taking (DT) Saccos grew from Sh474.25 billion to Sh522.59 billion at the end of June, being above the Sh490 billion targeted for the period.

This means that other co-operatives, apart from the DT and the NWDT ones that are supervised by Sasra, closed June with Sh426.55 billion, up from Sh341.11 billion translating to a growth of 25 percent.

The growth in saccos’ top deposits is attributable to the higher returns compared to commercial banks.

For instance, while regulated saccos paid an average interest rate of 6.92 percent on members’ deposits last year, that of commercial banks averaged three percent.

The returns on members’ savings cement the dual comparative edge of savings in saccos since savers earn interest and use the money as collateral to tap loans.

Sasra data to the end of December last year showed that sacco accounts with more than Sh1 million grew at 29.6 percent—the fastest pace in five years—from about 71,000 to 92,000, being more than double the 39,000 that were holding such amount five years earlier.

The 92,000 accounts—an equivalent of 0.63 percent of the total 14.52 million accounts— were holding Sh163.28 billion or nearly a third (31.2 percent) of the Sh522.59 billion deposits held by 359 saccos regulated by Sasra.