By Our Reporter
It will soon be possible for Savings and Credit Co-operative Societies (Saccos) to share both positive and negative credit information of their members with Credit Reference Bureaus (CRBs).
This is if a Bill to amend the relevant statutes, now before a departmental committee of the National Assembly is passed into law.
The Sacco Societies (Amendment) Bill, 2016, dated 9th June, 2016 and signed by Aden Duale, Leader of the Majority Party in Parliament seeks to expand the current credit information sharing mechanism to include Sacco Societies with other licensed financial institutions.
This is intended to align the Act with the Banking Act and the Microfinance Act, 2008, thus bring credit information under a single regulatory framework.
“The current legal framework on credit information sharing (CIS) is limited to inter-Sacco sharing of negative information only and with the Sacco Societies Regulatory Authority. It, therefore, excludes the sharing of positive information or sharing with other financial institutions. This is contrary to the prevailing policy direction in which the sharing of credit information has been expanded to both negative and positive i.e. full file sharing,” said Ali Noor Ismail, Principal Secretary, State Department for Co-operatives, Ministry of Industry, Trade and Co-operatives.
The Sacco Societies (Amendment) Bill, 2016 seeks to insert a provision under Section 54 of No. 14 of 2008 that will allow Saccos, in the ordinary course of their business as prescribed under the Banking Act, exchange information on performing and non-performing loans as may the prescribed by the regulator from time to time.
“Saccos continue to share Credit Information as third parties because of legal limitation denying the Industry the full benefits of credit reference bureaus,” said Joseph ole Lenku, Sasra Non-Executive Chairman.
He said proposed amendments to the law provides for mandatory sharing of credit information by all Deposit-Taking Saccos to cure current challenges of voluntary sharing.
When Saccos enter the CRB platform, it will be difficult for unscrupulous individuals with the habit of borrowing from their societies with the sole intention of not repaying, to ply their trade.
After acrimonious exchanges at their Annual General Meetings, many Saccos have been publishing notices informing members about listing their credit information with CRBs and warning defaulters that they will be blacklisted. Now, this process will be mandatory once the law is in place.
In the past few months, a growing list of Saccos have been publishing notices in the media, informing members of this development and warning about blacklisting of defaulters. Thus, the door is slowly closing on individuals who have run away from commercial banks and microfinance banks to hide in Saccos.
At present, regulations allow Saccos to share credit information only as third party data providers.
Available figures indicate that the Sacco sector has a whooping Sh 7 billion in non-performing loans.
By Our Reporter