Sacco members divided over dividends directive

Tuesday, March 31st, 2020 00:00 |
Sacco savings.

 Lewis Njoka @LewisNjoka

A recent directive by the government instructing Saccos to issue dividends before the proposed figures are approved by members has elicited heated debate among stakeholders with some supporting and others opposing the move.

Ordinarily, dividend proposals must be approved by members in an annual general meeting (AGM) before being paid as per the law.

Many saccos were unable to conduct AGMs this year after the commissioner for co-operatives suspended all meetings in a March 16 circular in line with an earlier presidential directive requiring all Kenyans to observe social distancing as a way of combating Covid-19.

In a second circular dated March 26, the acting commissioner for co-operatives Geoffrey Njang’ombe directed saccos, whose statements have already been audited, to pay dividends and interests awaiting ratification in the next AGM.

Office holders

He further directed that all Sacco leaders, whose term was to expire before the just suspended AGMs, to continue holding office until the crucial meeting is held. The law requires Saccos to have held their AGMs on or before April 30.

“Sacco societies are hereby allowed to pay dividends and interests on deposits as long as their financial statements have been audited and submitted to the commissioner as per section 25(7) of the Cooperative Societies Act,” says Njang’ombe in a statement.

“Dividends and interests paid will eventually require ratification of the members in the next annual general meeting.

It should also be noted that those officials whose term of being in office expires before the AGMs are held should continue to hold office till the next AGM,” he adds.

Members’ opinion is divided on whether the move by the commissioner is legal and suitable for the co-operative movement considering that there exists mistrust between some Sacco leaders and members.

“The directive is against the law. Dividends must be approved through an AGM,” said Harran Githae, a social media user. 

Fighting coronavirus

“Dividends must be approved through the AGM, huyu Njang’ombe alete suluhu ingine (Njang’ombe should provide an alternative solution),” said Titus Kipngetich, also a social media user.

“We know the politics in Saccos, we would rather have an AGM first,” said another social media user identified as Ythera Ythera.

Some, however, feel the move was helpful and justified considering that the world is at war with the Covid-19 pandemic.

“We see companies paying interim dividends, hence, Saccos can also pay interim dividends that will be ratified later,” said Wakake Unyadoho.

Even as the debate rages on, some Saccos have gone ahead to comply with the commissioners’ directive. 

“The board had proposed to pay dividends to members at the rate of 15 per cent and interest on deposits at 8.15 per cent.

We shall proceed to make payments to members in line with the above circular,” reads a statement sent by Mhasibu Sacco to its members.

Saccos’ umbrella  union supported the commissioner’s directive saying it would help ensure members with low income can afford basic necessities during the pandemic.

Kenya Union of Savings and Credit Cooperatives (Kuscco) chief executive George Ototo called on saccos with audited statements to issue dividends and ratify them later as instructed by the commissioner.

“I see no problem with the directive. We are in an unprecedented situation. People need liquid cash so that they do not suffer,” said Ototo. 

He said while the law requires dividends and honoraria to be approved in an AGM, interests can be distributed prior. 

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