By Malachi Motano
The government is in the process of implementing the Savings and credit co-operative societies (Saccos) deposit guarantee fund to insulate depositors from unforeseen eventualities.
“We are finalising the National Cooperative Policy that will allow the creation of the Sacco Deposit Guarantee Fund (SDGF), a scheme which will provide protection to Sacco deposits. It is meant to enable a member have a soft landing or a fall back in case a Sacco collapses,” said Principal Secretary (PS) for Co-operatives Ali Noor Ismail.
According to the PS, the planned guarantee fund is expected to mirror that of the Kenya Deposit Insurance Corporation (KDIC) that allows bank depositors to retrieve their cash in case of a bank failure.
SDGF is expected to provide protection to Sacco deposits up to Sh100, 000 a member. Every registered Sacco is expected to contribute to the fund.
The PS was speaking at the launch of Stima Sacco’s Shariah-compliant loans and savings products where he emphasised that the fund would insulate Sacco depositors from unforeseen eventualities in case of Sacco collapse.
According to the PS, Saccos play a key role in financial inclusion noting that at the moment, the over 15 million member movement is giving commercial banks a run for their money hence needs an urgent safety net.
“Plans are underway and we hope to launch the insurance scheme very soon. This financial safety net will be in the National Cooperative Policy which has since been submitted to the Ministry,” he said.
The Country has been playing around with the idea of setting up a guarantee scheme for Saccos from 2008, with Kenya’s Sacco Societies Act, assented to in 2008, providing for setting up a deposit insurance fund for credit unions.
The Sacco Societies Regulatory Authority (Sasra) identified a consultant by the name Carlos Alba Prado in 2013 to help in setting up the fund however, his were never made public.
The idea was revisited in 2017, with the regulator floating a tender seeking for a consultant to help in setting up the guarantee scheme.
The Regulator in February released guidelines on the selection and nomination of trustees to the Deposit Guarantee Fund Board of Trustees.
The trustees must be an active member of a Sacco Society for at least two years before the nomination date is eligible for nomination. He or she must also have a degree in relevant fields from a recognised University in Kenya and satisfy the requirements of Chapter six of the Constitution.
The nominated person should have knowledge and experience in matters relating to co-operative management, banking, finance, insurance, law, accountancy, or economics for at least ten years. The nominated person should have financial integrity.
During the selection and nomination process, the Sacco has to consider gender balance, and equitable representation.
At the beginning of the year, the regulator revealed that Sacco’s asset base jumped to Sh622 billion in 2020 compared to Sh530 billion in 2019 despite the Covid-19 pandemic, amount to rivalling total assets of the third top bank in the country.
At least some of the leading Saccos like Stima Sacco and Mwalimu National have more than 100,000 depositors, way above some of the third-tier commercial banks.
In 2020, KDIC raised the amount bank depositors are entitled to in case of a bank failure from Sh100, 000 to Sh500, 000, covering almost 90 per cent of bank depositors in the country.