Stakeholders in the savings and credit co-operative sector are reviewing a report by a team of experts proposing far-reaching reforms that could reshape regulation, governance and operations of Saccos in Kenya.
The proposals, which are now at the validation stage, come amid growing pressure to strengthen oversight, protect member savings and address emerging risks in the fast-growing sector.
The committee was appointed by the Ministry of Co-operatives and MSMEs Development to review the legal and regulatory framework governing the sector and recommend reforms aimed at strengthening stability, governance and member protection in Saccos.
Stakes are high as the sector players settle down to validate the report and agree on the way forward. Sacco Societies Regulatory Authority and officials from the Ministry of Co-operatives as well as sacco leaders were in Mombasa last week for the process.
Sasra chairman Jack Ranguma said many of the proposals contained in the report are aligned with its strategic focus on protecting member funds, strengthening the sector, and enhancing the overall resilience of the Sacco movement and would like to see the proposed reforms deliver lasting benefits to the sector.
Cabinet secretary in the Ministry of Co-operatives and MSMES Wycliffe Oparanya said the recent challenges in the sector, including the Sh13.3 billion heist at Kuscco, served as a reminder that effective regulation is not optional.
“Saccos mobilize the resources of ordinary Kenyans, and that places a heavy responsibility on both the institutions themselves and the regulator. We must therefore strengthen supervision, enhance accountability, support digitization, and ensure that reforms are implemented fully and without compromise,” said Mr Oparanya after the validation meeting.
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“The future of the cooperative movement depends on the decisions we make now. We must work together to build a stronger, more stable and future ready sector for the benefit of members and the country,”
In its recently released report, the team noted that the sacco sector faces significant structural weaknesses including fragmented regulation, governance failures, insider lending and limited access to modern financial infrastructure despite being one of the most important pillars of financial inclusion in the country.
The members of the committee of experts included CEO of Capital Credit Union (Scotland), Marlene Shiels as the chairperson, African American Credit Union Coalition (AACUC) and US Supreme Court Bar Member Maurice Smith and Advocate Odhiambo Collins Harrison. Others were CEO of Stima DT Sacco, Gamaliel Hassan and the chairperson of CIC Insurance Nelson Kuria.
The experts estimate that more than 5,000 Saccos remain outside formal regulation despite the existence of a prudential oversight framework, exposing members to potential risks and undermining sector credibility.
The committee proposes sweeping regulatory reforms including harmonising laws governing Saccos and expanding the mandate of the Sacco Societies Regulatory Authority (Sasra) so that all Saccos eventually fall under a unified supervisory framework.
Under the proposal, the current dual system where some Saccos are regulated by Sasra while thousands operate under county-level oversight would be phased out through a tiered regulatory structure based on the size and risk profile of institutions. The experts argue that bringing all Saccos under a stronger regulatory framework is key for protecting members and ensuring the long-term stability of the sector.
A key recommendation in the report is the establishment of a Sacco Deposit Guarantee Fund (DGF) to protect members’ savings in the event of institutional failure. The committe recommends that the fund be incubated under the Kenya Deposit Insurance Corporation, which already manages deposit protection for banks.
“A DGF needs to be operationalised as a matter of priority with the aim of matching the cover to the same as banks. This will create ideal public messaging that a shilling in the bank is safe as a shilling in a sacco,” said the committee in the report.
According to the committee, the proposed guarantee scheme would enhance public confidence in Saccos by ensuring that members’ deposits are protected in a similar manner to those held in commercial banks.
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The report also proposes the creation of a Central Liquidity Fund to help Saccos manage temporary liquidity shortages and stabilise the sector during periods of financial stress. Through the facility, participating Saccos would contribute to a central pool of funds that could be accessed by institutions experiencing short-term liquidity challenges, reducing the need to rely on expensive borrowing from commercial banks.
The committee further recommends the establishment of a Stabilisation Protection Scheme to support struggling Saccos through restructuring, mergers or orderly resolution.
“The objective of stabilisation protection scheme/fund is to allow a sacco to trade through its difficulties, or to support and facilitate an orderly transfer of engagements (merger), thereby maintaining services to members,” reads the report.
Such a mechanism, the report notes, would help prevent sudden institutional failures that could lead to loss of member savings and undermine confidence in the sector.
The experts are also calling for sweeping governance reforms to improve accountability within Sacco leadership structures. Among the proposals is the introduction of a mandatory code of corporate governance that would set minimum standards for board competence, ethical conduct and oversight responsibilities.
The committee is also proposing the creation of an “approved persons regime” under which individuals seeking to hold key leadership positions such as board chairpersons, chief executives and finance heads would be vetted and approved by the regulator.
This would ensure that only individuals who meet professional and integrity standards are allowed to manage member funds.
Another key proposal is on insider lending, politicised boards and weak internal controls, which have been cited as major governance challenges in the sector. The experts propose the development of shared services platforms that would allow Saccos to pool resources for functions such as technology systems, compliance, audit services and training.
The report also calls for consolidation in the sector, noting that the current large number of small Saccos has led to fragmentation and weakened financial sustainability.
By Sammy Chivanga
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