The Society’s position as the second largest deposit taking savings and credit cooperative society (Sacco) in Kenya, with a market share of c.6% relative to total assets of the 164 registered deposit taking Saccos, is of further consideration. [Photo/LinkedIn]
Global Credit Ratings (GCR) has affirmed Stima Sacco Society Limited’s long-term and short-term national scale ratings of BB+(KE) and B(KE) respectively; with the outlook accorded as Stable.
The ratings are valid until May 2018. They reflect the Sacco’s diversified membership, as well as its established heritage, supported by operations that began in 1974.
The Society’s position as the second largest deposit taking savings and credit cooperative society (Sacco) in Kenya, with a market share of c.6% relative to total assets of the 164 registered deposit taking Saccos, is of further consideration.
In a bid to enhance its risk management structure in line with best practices, the society established a risk management and compliance department in November 2016 as part of its Risk Management Transformation Program.
The society’s core capital, institutional capital, and total capital and reserves increased by 18.6%, 23.5% and 15.6% at FY16 to KES2.9bn, KES2.1bn, and KES3.1bn respectively. Consequently, Stima was in compliance with all the capital requirements of the Sacco Act.
However, the society reported a lower core capital to total assets ratio of 11.9% in the year under review compared to 12.1% in 2015, against a regulatory minimum of 10%, mainly as a result of strong (20.8%) growth in total assets.
From a gearing perspective, external borrowings at 2.6% of total assets were within the statutory cap of 25%.
Meanwhile, Stima Sacco maintained an acceptable asset quality profile, reporting a lower gross non-performing loan ratio of 1.7% in 2016 down from 2% the previous year, below the prudential benchmark of 5% despite a challenging financial environment.
Net profit before tax grew by 89.5% to a five year high of Ksh547.4 million in 2016, supported by an increase in net interest income (due to high loan growth), despite increases in impairment charges and operating expenditure.
The net interest margin increased to 7.2% in 2016 (5.1% in 2015) and the cost ratio decreased to 64.6% last year compared to 73.1% in 2015 .The society’s return on assets and return on equity increased to 2.2% and 17.1% respectively.
Member deposits, the society’s main source (89.9%) of funding, grew by 19.7% in the 2016 financial year to KES19bn supported by a 57.8% increase in members. Moreover, Stima has consistently maintained its liquidity ratio above the prudential requirement of 15%, registering 23% at FY16.
The society’s ratings could be positively impacted by significant improvements in capitalization, a positive earnings trend, improved risk management oversight, sound credit protection factors, the success of the society’s ambitious growth strategy, business reorganization and capital/fund raising initiatives.
Stima’s ratings could however, be negatively impacted by downward pressure on earnings and capital adequacy, increasing liquidity risk and asset quality problems, as well as a breach of any prudential benchmarks (capital, asset quality, liquidity etc).