By Benson Nyangweso
Harambee Sacco has been celebrating what it describes as a remarkable financial turnaround, reporting strong profitability, recovering from losses linked to the Kenya Union of Savings and Credit Co-operatives (KUSCCO) scandal, and unveiling an ambitious plan to grow its asset base to KSh50 billion. Behind these impressive headlines, however, lies a less-publicised challenge that continues to cast a shadow over one of Kenya’s largest deposit-taking Saccos: a persistently high level of non-performing loans.
The Sacco’s latest audited financial statements show a non-performing loan (NPL) ratio of 9.7 per cent, almost double the 5 per cent prudential limit prescribed by the Sacco Societies Regulatory Authority (SASRA) for deposit-taking Saccos. The figures raise difficult questions about the quality of Harambee Sacco’s loan book at a time when it is asking members to inject fresh share capital to strengthen its balance sheet and support future growth.
An NPL ratio of 9.7 per cent means that nearly one in every ten shillings lent by the Sacco is classified as non-performing. Left unaddressed, such a level can erode earnings through higher loan-loss provisions, reduce lending capacity, and expose members’ savings to increased risk. The figures also raise questions about whether Harambee Sacco’s credit risk management systems are adequately addressing loan recovery.
A SASRA inspection conducted a few years ago found that some directors, senior officers and employees held non-performing loans and irregular overdrafts. The regulator criticised the Sacco’s management at the time for weaknesses in governance and inadequate disclosure to the board.
There is no public evidence that the current management is involved in similar practices. Even so, the historical findings underscore why senior officials are expected to lead by example in meeting their financial obligations and promoting a strong repayment culture within the institution. Governance experts argue that confidence in any financial institution begins with accountability at the top, particularly where members entrust billions of shillings in savings to elected leaders and management.
The latest financial statements leave several important questions unresolved:
- Why has the Sacco’s NPL ratio remained almost twice the regulatory benchmark?
- Are delayed salary remittances by government employers contributing to the rise in bad loans?
- Has SASRA directed Harambee Sacco to implement specific corrective measures?
- How soon does management expect to bring the NPL ratio within the regulatory limit?
These are questions members are likely to press as the Sacco continues to pursue expansion. Despite the elevated level of bad loans, Harambee Sacco is pressing ahead with plans to raise additional member share capital while targeting an asset base of KSh50 billion. Financial experts warn that sustainable growth depends not only on increasing assets but also on maintaining a high-quality loan portfolio and robust credit controls. Without continued improvement in loan recovery, an expanding balance sheet could expose the Sacco to greater financial pressure in future.
The persistence of bad loans above the prudential threshold suggests that restoring long-term financial resilience will require more than strong profits and ambitious growth targets. For members, the real measure of success will be whether the Sacco can strengthen loan recovery, reinforce sound governance, and ensure that both management and members uphold the financial discipline needed to safeguard one of the country’s largest co-operative institutions.
