New law set to beef up sacco regulators roles
Sacco Societies Regulatory Authority CEO John Mwaka during the sixth Kenya Union of Savings and Credit Co-operatives leaders conference in Mombasa February 24, 2021.
The long-awaited reforms in the co-operative sector have moved a step closer after parliament opened the draft National Cooperatives Development Policy to public scrutiny ahead of debate.
The policy will bring all financial societies into the umbrella of the Sacco Societies Regulatory Authority (Sasra), raising hopes of taming of financial improprieties that have characterised non-deposit taking saccos that are currently not under Sasra oversight.
The lax oversight has seen rogue saccos take clients’ money only to fold after a while going under with savings running into hundreds of millions of shillings at times.The new policy will, however, also beef up of the role of Commissioner for Cooperative Development whose ability to provide effective regulation has been hampered by inadequate workforce.
Under the current laws, Sasra regulates deposit-taking Saccos, while non-deposit taking cooperatives are overseen by the Commissioner for Cooperative Development.
“To avoid duplicity in the regulatory regime of financial cooperatives and allow for smooth transition of sacco societies as they expand their services from back office to front office operations, the role of Sasra will be expanded,” read the draft regulations in part. “The government recognises the need to strengthen enforcement and, therefore, proposes to restructure Sasra to allow it regulate all financial cooperatives. It will also create a Cooperative Regulatory Authority for non-financial cooperatives.”
An increasing number of Kenyan saccos are reeling under the weight of mismanagement, fraud and bad loans that have put the sector on a path of instability that if not reversed could have damaging contagion on the entire economy.
Experts and government officials say the absence of a robust regulatory framework opens an avenue for officials to embezzle and run down cooperative societies while escaping prosecution.
At stake are hundreds of billions of shillings of members’ savings that have either been lost or are at risk of being lost as more and more cases of financially troubled saccos come to the fore.
