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Explained: Reasons For Declining Mwalimu Sacco Dividend yields

In the recent past, mwalimu Sacco was ranked among the best saccos any one would imagine of joining. The interest rates on loans were affordable and the returns on investments were attractive. In those years, members got value for their shares and had reasons to invite more members and to invest more with the sacco in terms of shares. The percentage on shares and deposits was so good that members of other saccos wished that the leadership of mwalimu sacco was transferred to their saccos.

Recently, mwalimu sacco has subscribed into the looting spree that harbors a good number of financial institutions. It doesn’t need wisdom to predict that the sacco is likely to torture its members more in two years’ time. The share percentage has been dwindling steadily for the last three years and might even hit below 8.0 % next year, with increased capital on investment for spire bank, increased interest rates on loans, increased risk fee, increased benevolent fee, increased prorata on share contribution, and increased silence on all these concerns, despite teachers noise.

One would wonder why the CEO had to quit in 2019 and why everything is heading south for the once ‘giant’ sacco and why they rush to take own the first ksh. 20,000 of a teachers share saving.

Sources have revealed the reasons why mwalimu sacco has persistently failed its members and why the mess will worsen in the coming years. Delayed recapitalization on white elephant projects has been cited as one of the factors that have pushed the sacco to its deathbed.

Currently, mwalimu sacco lacks financial sustainability despite its deposit mobilization efforts and the huge amounts members remit monthly. The deposits held at the bank are largely for working capital and are very short term. The customers use the funds on a daily basis.

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There is also falling interest income from dwindling lending, leading to shrinking margins, increase in losses and capital erosion. The lender’s Sacco business model is at risk of compromising its business continuity, unless more capital is deployed.

A reducing and deteriorating balance sheet and mounting losses could easily lead to “solvency challenge” and subsequently liquidation.

Customer deposits net growth has been on a rising trend yet  the shareholder deposits (Sacco) have consistently been on a downward trend.

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