By Jackson Okoth.
Intense lobbying by the Sacco industry has succeeded in ensuring that the Sacco Societies Regulatory Authority (SASRA) will not be merged into the yet to be constituted Financial Sector Authority (FSA).
The National Treasury has proposed the creation of a merged financial services regulator that will amalgamate the Retirements Benefits Authority (RBA), Capital Markets Authority (CMA), Insurance Regulatory Authority (IRA) and the Sacco Societies Regulatory Authority (SASRA).
The Financial Services Authority Bill, 2016 is still under deliberation. “We are grateful to President Uhuru Kenyatta for listening to our concerns when key members of the Co-operative Alliance of Kenya made a visit to State House in December last year.
He assured us that SASRA will not merge with the FSA and will run its affairs independently, owing to the unique nature of the Sacco movement where members own the society,” said Ali Noor Ismail, Principal Secretary-State Department for Co-operatives, Ministry of Industry, Trade and Co-operatives.
He made the disclosure during Mwalimu National’s 39th Annual Delegates Meeting (ADM) which took place on February 18, 2017 at the Society’s Head Offices at Mwalimu Towers at Upper Hill, Nairobi. A powerful lobby led by Co-operative Alliance of Kenya (CAK) and Kenya Union of Savings and Credit
Co-operatives (KUSCCO) have been at the forefront of seeking to be excluded from the FSA Act. Interestingly, a number of directors within the SASRA Board have been pushing for this merger proposal. According to the Draft Financial Services Authority (FSA) Bill 2016, which has already been published, all organizations that provide financial services, except commercial banks, will be supervised by one single regulator. This means that with the exception of Saccos, all Stock brokerage firms and Investment banks, Central Depository and Settlement Corporation, Insurance Companies and Pension Funds will be licensed, supervised and regulated by one body, to be known as the Financial Sector Authority.
Thus, Capital Markets Authority, Insurance Regulatory Authority and the Retirement Benefits Authority will all be collapsed into one super regulator.
While this proposed law has been welcomed by various players in the Financial sector, the Sacco industry has been uncomfortable from the onset. Sacco executives had warned that bringing the weaker Back Office Service Activity (BOSA)-based Saccos under the FSA could have dire consequences on these societies.
“The Back Office Service Activity-based Saccos are under great threat. We need a transition period of not less than four years for the BOSA-based Saccos to give us time to walk them through this new path of regulation,” said George Ototo, KUSCCO Managing Director said during the lobby group’s 29th Annual General Meeting held on May 20, 2016.
Under the proposed regulations, to be enforced by FSA, it would have been mandatory for all BOSA members to have a license from the Authority. This is in addition to a heap of rules and regulations set out by the Commissioner for Co-operatives.
“We anticipate that bringing Saccos under the watch of FSA will force these Societies to up their game in order to meet higher targets and standards. Since the customer for Saccos, the bourse, insurance firm and pension funds is the same, we will have to strengthen our operations to compete with the rest in the financial market,” said Boniface Muthama, Chief Executive Officer- Wanandege Sacco Society Limited in an earlier interview.“We are likely to have a scenario where the core capital for Saccos will be raised. What this implies is that weaker Saccos will have a huge chunk of their member savings tied up to the disadvantage of members who need financial assistance,” he stated.
With SASRA now out of the FSA radar, it remains to be seen how fast the Ministry of Industry, Trade and Co-operatives sets up a central liquidity fund to facilitate access to funds by Saccos. There is also a plan to create a Sacco deposit protection fund.
