The Savings and Credit Cooperative Societies (SACCOs) will soon have a special trading counter at the Nairobi Securities Exchange (NSE), as the financial regulators continue to burn the midnight oil to ensure that the Societies are on boarded at the bourse.
This was revealed by Dedan Maina, an investment consultant at Ketu Capital, who said that projects and talks between SACCO groups, the NSE and Capital Markets Authority are ongoing to create formal frameworks.
“Regulators are planning a special SACCO share trading counter at the NSE so members can trade shares freely-even without full listing,” said Maina
He added that meanwhile, digital marketplaces like SaccoShares and SACCO Hisa Market are being used as Over-The-Counter platforms for buying/selling SACCO Share Capital.
The SACCO Hisa market is a platform that allows buying and selling of Sacco shares online. It operates in compliance with financial regulations and SACCO Society rules, providing a secure and transparent way to trade SACCO shares. Key features include Bank-level security for transactions, real-time market prices for SACCO shares, easy portfolio management with order tracking, quick settlement of share sales and is regulated by SASRA for safety.
“There was a time when the NSE was really pushing to have listings from SACCOs but the matter somehow fizzled out. This listing will not affect members access to liquidity when you consider the category of member contributions that would be listed. But I would venture to say that listing of SACCOs will enhance transparency and liquidity in the sector,” said Eric Musau, Director of Research, Standard Investment Bank(SIB).
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While listing Saccos at the NSE is a game changer, top executives in the industry agree that a lot of changes to the law must be made to make this happen.
“The Coop Act allows SACCOs to only raise capital from internal sources. So there is a lot of work to be undertaken before we can list at the NSE. SACCOs are members-only social enterprises made up of groups of individuals who have come together with a common goal. Therefore, going to the NSE for capital will change the cooperative business model entirely,” said David Mategwa, Board Chairman, Kenya National Police DT SACCO.
Mategwa added that while many initiatives are underway to enable Societies trade their shares at the NSE, including recommendations made by a Committee of Experts appointed by the Government, it is still early days.
“We will cross that bridge when we reach there. We will then have clear policy guidelines worked out to enable SACCOs to list,” said Mategwa.
This move has had top officials in the SACCO industry have divided opinions on whether it is the right time for SACCOs to list at the NSE.
“Listing at the NSE needs approval by members during the annual general meetings before any other considerations can be put forward. As at now, SACCOs do not see any benefits that will accrue from listing because it will not assist them in their core business of providing loans to their members,” said Isedorius Agolla Chairman of Kenya Association of Front Office Activity (KAFOSA) formerly known as Coast Association of front office services activities (CAFOSA). KAFOSA seeks to lobby and provide advocacy to Deposit-Taking SACCOs in Kenya.
Daniel Marube, Chief Executive Officer, Cooperative Alliance of Kenya(CAK), which provides training, advocacy and capacity building for its member societies, also weighed the move, saying that Listing will require amendments to the law to make SACCOs public, saying that the time not yet ripe.
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“At the moment SACCOs have not seen the need to list at the exchange because they are still a private-members only association, Listing will require amendments to the law to make SACCOs public. At the moment, there is work in progress towards establishing a separate desk at the NSE so that SACCOs can be able to trade their shares among themselves. We have not reached those stages where SACCOs can raise cash from the public or list at the exchange,” said Marube.
As matters stand, while SACCOs are best suited for the Growth and Enterprise Market (GEMS) segment of the NSE, owing to the little share capital of Ksh 40 million, the restrictive Cooperative Act is still a major stumbling block.
“The fact that the Cooperatives Act does not provide for transferability of shares owned by members, does not require full disclosures, quarterly financial statements or even regular audits makes SACCOs not eligible for listing at the exchange,” said an official from a leading investment and stock brokerage firm.
He said while SACCOs can list at the NSE; certain amendments must first be made to the Cooperatives Act for this to happen. The Cabinet Secretary for MSMEs and Cooperatives, can also give waivers to allow Societies to list.
The NSE said it has crafted a special team to specifically reach out to Societies through creation of awareness on the capital markets investments products and financial literacy programmes, in addition to laying the groundwork for the listing of SACCOs
“The endgame is that we want to have solutions, products and activities that are SACCO-centred and what will inform our biggest win as a nation and as an economy would be the day we are able to have SACCOs trading their shares in the open platform,” Jackson Kiminje, NSE’s business development leader in charge of retail, SACCOs and Chamas.
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According to the recent report by Standard Investment Bank(SIB), SACCOs hold strategic importance in the financial ecosystem due to their rural presence and community trust position. Even though they are powerful vehicles for inclusive growth, many remain constrained by outdated technology and governance gaps.
The Investment Bank recommends targeted support for SACCO digitisation, shared infrastructure, and supervisory reform so as to create an alternative inclusion pathway alongside mainstream banking.
The inability to raise cash in the debt market using instruments like commercial paper or bonds has a lot to do with the way SACCOs are structured and an outdated Cooperatives Act Cap 490 that has yet to be reviewed. For instance, it is difficult to list at the exchange when books of a SACCO are never closed, meaning it can recruit new members anytime.
For a trading platform at the NSE to be set up, a review of the SACCO Act must take place. A Society interested in listing at the NSE must change its Articles of Association and convert from a private members’ club to a public entity, before it can raise money from the public.
SACCO Society laws restrict membership to only those who own shares. This means a SACCO cannot list at the NSE, a prospect that could open up its shares to non-members.
Unlike commercial banks or microfinance institutions, SACCOs are limited in how far they can expand their operations, beyond the boundaries set out in the SACCO Act.
CMA is required to issue guidelines to allow Saccos to issue commercial paper or bonds- instruments that are non-tradable. At present, the law is restrictive on who should deposit or borrow from a SACCO.
By Okoth Jackson
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