One major hindrance to efficient service delivery among Saccos in Kenya is delayed remittances from some employers.
Unfortunately, delayed remittances happen despite the fact that under Section 35 of the Cooperative Societies Act, Cap 490, there are clear legal provisions intended to ensure recovery of delayed remittances upon expiry of seven (7) days of the preceding month.
Delayed remittances may attract a penalty of not less than five percent compound interest and, if deemed necessary, the Commissioner for Cooperatives may appoint agents, including but not limited to commercial banks, to recover and remit the delayed remittances to the affected Saccos.
This section of the law applies equally to producer-based cooperatives that may hold members’ dues beyond allowable durations.
However, exactly 25 years after Parliament enacted the current Cooperative Societies Act and dedicated Section 35 to provide remedy for effecting recovery of delayed remittances from employer-based Saccos, the situation persists, with the worst defaulters being public sector institutions.
In some instances, commercial banks appointed to recover funds on behalf of affected Saccos have been reluctant to take measures which they deem drastic.
At times, invocation of Section 35 has been used to scare the defaulters who then opt to mediate between the employers and the affected Saccos.
By and large, this latter approach has borne more fruit compared to the use of agents in recovery.
That aside, one may want to know whether or not employers are under any legal obligation to remit deductions to Saccos.
This is so because to the best of my knowledge, no Sacco has ever entered into any agreement obligating (their) employers to remit deductions to them once registered by the Commissioner of Cooperatives.
In practice, promoters of employer-based Saccos are required to append Letters of Undertaking from the employer(s).
It’s important to note that at that point in time, the Saccos are yet to be registered hence lack the capacity to enter into any legally binding contracts with third parties.
In my view therefore, Saccos need to formalize this relationship with their respective employers once they acquire the legal capacity upon registration.
What amendments to the laws are necessary to ensure effective recovery of Sacco deductions from employers who fail to remit in time?
My considered view is that stakeholders need to petition Parliament to amend the Employment Act Cap 226 of the Laws of Kenya.
Section 19(1) (g) of the Employment Act Cap 236 reads as follows; “Notwithstanding Sec 17(1), an employer may deduct from the dues of his employee any amount the employer has no direct or indirect beneficiary interest and which the employee has requested the employer in writing to deduct from his wages”.
This section of the law could be amended accordingly to include Sacco deductions. The net effect of such an amendment would be that employers would be obligated to deduct and remit Sacco dues without delays.
Such an amendment, if made, would substantially expedite the process of effecting timely remittances that would then translate into timely service delivery to members.
Such a move would go a long way towards restoring members’ confidence in Saccos as preferred sources of affordable credit facilities.
It is therefore necessary for key Sacco stakeholders to devise alternative methods than can guarantee seamless service delivery to members.
Those in charge of reviewing cooperative laws should ponder over this possibility since the Employment Act Cap 226, is applicable to all employers existing in the country.
By Fred Sitati
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