A SACCO announcing a 20% dividend can easily excite you.
But before moving your money, ask one question:
What Is Supporting That Dividend?
Because a high dividend does not automatically mean the SACCO is financially strong.
Sometimes, it may simply be an attractive number hiding serious weaknesses underneath.
Here is what you must examine:
- Regulatory Status
Confirm that the SACCO appears on SASRA’s current list of licensed or authorised SACCOs where applicable.
Do not rely on logos, advertisements or verbal promises.
Verify.
- Audited Financial Statements
Ask for at least three to five years of audited accounts.
Look at whether:
- Assets are growing sustainably.
- Member deposits are increasing.
- Surpluses are consistent.
- Capital reserves are strengthening.
- Auditors have raised serious concerns.
One impressive year proves very little.
- Loan Quality
A SACCO earns much of its income by lending to members.
Therefore, rising loan defaults can damage liquidity, profitability and future payouts.
Do not only ask how much the SACCO has lent.
Ask how much is being repaid.
- Liquidity
A SACCO may appear profitable on paper but still struggle to meet withdrawals and loan requests.
Delayed refunds and unexplained payment restrictions are warning signs.
- Corporate Governance
Investigate the board and management.
Watch for:
- Frequent leadership battles.
- Unexplained resignations.
- Related-party transactions.
- Fraud allegations.
- Poor communication.
- Repeated regulatory concerns.
6. Dividend Sustainability
Compare dividends with actual earnings and reserves.
A sustainable SACCO balances member payouts with retaining enough capital for growth and stability.
Do not choose a SACCO merely because it paid the highest dividend last year.
Choose one that still has the financial strength to serve you ten years from now.
High dividends may attract you.
Strong governance, healthy loans, adequate liquidity and sustainable profits should keep you there.
Alex Mwangi | The Cent Warrior | WhatsApp: 0703472299
