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 cooperatives 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.
While releasing the SACCO supervisory report, 2024 in Nairobi, the CS emphasized that the shared technological services platform will come in handy in assisting these small-sized SACCOs meet regulatory burden and withstand competition in the financial services space.
Oparanya stressed that such platforms provided solutions to the very many small and medium sized SACCOs across the country to come under the purview of prudential regulations, by enjoying the synergies associated with economies of scale under the common services.
He explained that the 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 to 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 today heavily runs on very robust ICT and technological platforms but which these SACCOs can hardly afford.
“A majority of societies have very smaller balance sheets and cannot generate sufficient resources or revenue required to comply with the prescribed prudential regulation standards, ability to deploy ICT in their operations, meet members’ needs, expand operations but also do not have the technical know-how to assure compliance with prudential regulatory parameters,” he added.
Despite these 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, and not all cooperatives, in order to take stock of the existing registered SACCOs and see where they are as well as assess their viability.
He however warned that non active SACCOs will 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 predicament.
“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 an 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 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 movement of cooperative, despite several concerted 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 in order to provide long-term solution to the affected SACCOs but in the meantime, 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 reliance on deductions by employer-institutions.
by Wangari Ndirangu
