Nairobi: The government intends to review the SACCO Societies Act and the regulations to explore ways of coming up with a shared technological services platform for all small cooperative entities. Cooperatives and MSME Cabinet Secretary, Wycliffe Oparanya, announced that a committee of experts was set to review related acts and regulations to allow the entrenchment of desired changes to streamline operations of SACCOs with a smaller asset base.
According to Kenya News Agency, Oparanya emphasized that the shared technological services platform will assist these small-sized SACCOs in meeting regulatory burdens and withstanding competition in the financial services space. He stressed that such platforms provided solutions to the numerous small and medium-sized SACCOs across the country, allowing them to benefit from economies of scale under common services.
He explained that grouping such societies was critical for their survival because, out of 355 regulated SACCOs in the country, at least 216 had relatively small balance sheets of less than Sh1 billion in assets, totaling Sh79.66 billion, which is only 7.40 percent of the total assets. Such small balance sheets, he said, undermine their competitiveness in the credit business, which heavily relies on robust ICT and technological platforms that these SACCOs can hardly afford.
‘A majority of societies have very small balance sheets and cannot generate sufficient resources or revenue required to comply with the prescribed prudential regulation standards, the ability to deploy ICT in their operations, meet members’ needs, and expand operations. They also do not have the technical know-how to ensure compliance with prudential regulatory parameters,’ he added.
Despite many milestones recorded in the SACCO industry in the last decade, the CS regretted that there were still more areas to be covered to fully secure and exploit the potential in the SACCO sector. Oparanya said the government had already issued a temporary moratorium on the registration of new SACCOs, not all cooperatives, to take stock of the existing registered SACCOs and assess their viability.
He warned that non-active SACCOs would be de-registered and liquidated by the Commissioner for Cooperatives as required by law, while those remaining will run under the supervision of SASRA to avert similar predicaments. ‘The moratorium on registration relates to SACCOs because of their financial mediation business involving collecting deposits from the public and intermediating the same as loans, which calls for government intervention to protect the said deposits,’ he said.
CS further added, ‘It is therefore in the same breadth that the Committee of Experts is expected to also revisit the current threshold for registration of a SACCO – which today is capped at just ten people. Is this sustainable?’ he posed. Oparanya also directed SACCOs with over 5,000 members to adopt the delegate system to ensure that the general meetings are forums for effective decision-making.
He also warned SACCOs that have been engaging in unhealthy financial competition in payments of dividends on shared capital and interests on deposits. ‘SACCOs are ‘for service entities’, and the key services offered are the provision of ‘savings’ and ‘credit’. They are not for profit, and should therefore not offer unsustainable dividends and interests. This trend has seen some SACCOs engage in unsafe and unsound practices, such as ‘cooking the books’ to inflate revenues; borrowing to pay dividends; failing to retain statutory reserves among others,’ Oparanya said.
He directed the Commissioner for Cooperatives and SASRA to ensure that no SACCO pays dividends or interest unless they have made sufficient surplus, met the capital adequacy requirements, and made provisions for statutory reserves. The CS observed that the non-remittance menace is still within the cooperative movement, despite several efforts to deal with it, noting that for the period ended December 2024, about 85 regulated SACCOs were owed a total sum of Sh3.49 billion, up from Sh2.59 billion in 2023, affecting a total of 55,602 members.
‘The most affected SACCOs are those that draw membership from County Governments and Assemblies, which owed over Sh1.69 billion, and the Public Universities and Tertiary Colleges, which owed over Sh762.27 million,’ he noted. CS Oparanya hopes that the Cooperative Bill 2024 will be fast-tracked to provide a long-term solution to the affected SACCOs. In the meantime, he urged SACCOs, especially the DT-SACCOs, to adopt and implement the Administrative Circular issued by SASRA in 2019 on recoveries of member deductions through FOSA channels, rather than relying on deductions by employer-institutions.
