What is Capital Adequacy?
Capital adequacy is the prudential requirement that a regulated institution hold capital in proportion to its assets and the risks it carries, so that losses are absorbed by capital rather than by members' deposits. For SACCOs within SASRA's mandate, the specific capital ratios and how they are calculated are set in the regulations and revised.
A real Kenyan example
A SACCO reports its capital position against the required ratios in its periodic returns, and a shortfall is a supervisory matter rather than an internal management preference.
Why it matters
Capital is the buffer between a bad year and members losing money. It is the reason prudential regulation exists at all, and it is why licensing brings ongoing requirements rather than being a one-off approval.
FAQs
What capital ratios must a Kenyan SACCO meet?
The required ratios are set in the regulations made under the Sacco Societies Act and are revised. Confirm the current requirements with SASRA rather than relying on a figure published elsewhere, including here.
What counts as capital for a SACCO?
Broadly, core capital and institutional capital as defined in the applicable regulations, which distinguish permanent capital from balances that members can withdraw. The definitions matter and are set by regulation.
Why can a SACCO not just count member deposits as capital?
Because capital has to absorb losses, and deposits are a liability to members rather than a buffer protecting them. That distinction is the point of the requirement.