Mwalimu National Sacco, one of Kenya’s largest savings and credit cooperatives, has recorded a drop in its institutional capital ratio, which now stands at 7.7 percent.

This is below the level required by the Sacco Societies Regulatory Authority.

According to SASRA, each institution shall maintain an institutional capital of not less than 8 percent of total assets.

Institutional capital, a critical measure of financial health that determines a Sacco’s ability to absorb potential losses, has been hit hardest by the bank’s poor performance.

The regulator, SASRA, mandates that Saccos must maintain a minimum institutional capital ratio to safeguard members’ savings and ensure operational stability.

Falling below this threshold puts Sacco at risk of regulatory sanctions, including the possibility of restricted operations until compliance is restored.

In addition to institutional capital, other key financial ratios have also seen a sharp decline, signalling wider financial challenges for Sacco.

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

The decline comes on the back of the full write-off of Mwalimu Sacco’s investment in Spire Bank, which has had a substantial impact on Sacco’s financial stability.

The Spire Bank write-off, which was aimed at streamlining Mwalimu Sacco’s financial standing, effectively wiped out its capital, leading to a drop in all its capital ratios.

The capital write-off marks a critical moment for Mwalimu Sacco as it now faces the task of restructuring and restoring its financial health to meet regulatory obligations.

Mwalimu Sacco’s investment in Spire Bank had long been a contentious issue, with concerns about the bank’s performance and its impact on the Sacco’s overall financial health.

The full write-off represents the culmination of these challenges, leaving the Sacco with the difficult task of rebuilding trust among its members while complying with SASRA’s stringent regulations.