The Sacco Societies Regulatory Authority (SASRA), in partnership with the Kenya Mortgage Refinance Company (KMRC) and FSD Kenya comprehensive market study on the role of SACCOs in affordable housing finance has revealed that many Savings and Credit Cooperative Societies (SACCOs) are increasingly separating their operations from affiliated housing cooperatives.
This shift is largely in response to regulatory requirements and strategic considerations aimed at mitigating financial and reputational risks.
According to the SACCO Societies Act, 2008, and its associated regulations, SACCOs are limited in how much they can invest in non-earning assets like property. Specifically, SACCOs are prohibited from acquiring land beyond what is necessary for their operations, with non-earning assets capped at 10% of total assets, and land and buildings limited to 5%, unless granted a waiver.
In compliance with these restrictions, 14 out of 19 SACCOs who participated in the survey have opted to form affiliate housing cooperatives to help members access land and housing at discounted rates.
However, housing cooperatives are not regulated by the SACCO Societies Regulatory Authority (SASRA), prompting SACCOs to pursue full operational separation from their housing arms.
This means that housing cooperatives now operate with distinct governance structures, strategies, and operations separate from their affiliated SACCOs. In many cases, this separation is also driven by concerns over the reputational and financial risks that could arise if the housing cooperative becomes involved in issues like fraud or land disputes.
While the regulatory separation helps safeguard member funds and reduce risk, it has inadvertently stifled the potential benefits that SACCOs and housing cooperatives could bring by working together.
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Housing cooperatives, which are ideally positioned to help SACCO members access land and homeownership, are often underutilized in practice. Despite this, the regulatory framework designed to protect members’ assets has led to missed opportunities for greater collaboration between SACCOs and housing cooperatives, leaving the latter under-leveraged.
Experts suggest that there is significant potential for SACCOs and housing cooperatives to collaborate as independent, aligned partners rather than being seen as conflicted affiliates. By doing so, they could create new pathways for expanding homeownership and provide greater value to their members while still complying with the regulatory framework.
To further support this, the survey recommends strengthening the regulatory oversight of housing and investment cooperatives, which are primarily supervised by the Commissioner for Cooperatives Development (CCD) and county cooperative officers under the Ministry of Co-operatives and Micro, Small, and Medium Enterprises (MSMEs) Development Capacity building and technical support are essential to ensure these cooperatives comply with upcoming reforms in the Cooperatives Bill, 2024.
Additionally, cooperatives are urged to improve internal controls, enhance governance, and implement strong risk assessments in their real estate investments. Ensuring transparency in transactions and tightening due diligence on land deals will further enhance the integrity of the sector.
The findings highlight the need for more strategic collaboration between SACCOs and housing cooperatives to maximize opportunities for affordable housing and land ownership for members, while maintaining the necessary regulatory safeguards.
By Obegi Malack
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