By Jackson Okoth
A bill that the Sacco Societies Regulatory Authority (SASRA) to vet all top Sacco officials engaged in Deposit Taking business is currently before parliament.
The Sacco Societies (Amendment) Bill 2016, received unanimous support from Savings and Credit Co-operative Society industry bigwigs after two days of stormy debates at the Sarova Whitesands Beach Resort & Spa in Mombasa on September 20 and 21, 2016.
The workshop had been convened by the Sacco industry to enable it iron out any contentious clauses with the Parliamentary Committee members. This draft amendment Bill has now gone back to parliament for fine tuning before it is presented before the whole House and then forwarded to the President to be signed into law.
SASRA will vet all Deposit-Taking Sacco officers, based on their financial status, academic qualifications and ability to do honest work, reputation, financial integrity as well as reliability.
The Authority will also consider whether the said sacco officer has contravened provisions of any law due to dishonesty, incompetence or malpractice, has been convicted or is being investigated for an offence involving fraud, corruption or economic crimes or was a director of a Sacco that went under or placed under statutory management, has participated in fraudulent activities or has been associated with any business practice that casts doubt on their competence of soundness of judgment.
According to the Bill, dated June 9, 2016 and signed by National Assembly Leader of Majority Aden Duale, the Sacco Societies Regulatory Authority shall determine the suitability and propriety of every person seeking to serve as a director or other officer of a Sacco society and may bar or prohibit a person from serving in a Sacco society as a director or an officer based on its determination.
As matters stand, there is lack of effective mechanism for determining the suitability of officers in charge of Deposit-Taking Saccos.
According to Ali Noor Ismail, Principal Secretary, State Department for Co-operatives, Ministry of Industry, Trade and Co-operatives though there is no explicit provision in the Act to authorize vetting using the process to determine the suitability to serve in the management of a financial institution is now an international best practice.
“It now forms the first cornerstone of convincing the public policy makers that DT Saccos are just as good as any other deposit taking institutions (banks) if not better,” he stated during the two-day Sacco Stakeholders Workshop in Mombasa.
The meeting, which attracted CEOs and Board Chairs from all Deposit-Taking Saccos across the country, was organized by the Sacco Societies Regulatory Authority, Kenya Union of Savings and Credit Co-operatives Organization Limited (KUSCCO) and Kenya Rural Savings and Credit Corporative Societies Union (KERUSSU) Limited.
The workshop was also attended by members of the parliamentary committee on Agriculture, Livestock and Co-operatives, who were to collect views from the industry before finalizing the Bill for presentation before the National Assembly.
The Sacco Societies (Amendment) Bill 2016 has undergone the first reading and expectations are high that the stormy discussions in Mombasa dealt with all contentious clauses in the Bill, making it possible for it to be enacted into law.
“The Sacco Societies (Amendment Bill) 2016 is an outcome of the policy proposals that were shared with the DT Saccos through regional workshops in March 2016. The Bill proposes to among others entrench the Suitability Criteria for persons seeking to serve as directors and/or officers in DT Saccos in law. This will support the current initiatives by a number of you to use Nomination Committees in identifying persons to serve in Boards,” said Joseph ole Lenku, SASRA Chairman.
According to Section 48A(2) of the proposed law, the Authority shall in determining if a person is suitable and proper to serve as a director or an officer of a Sacco Society, consider the following:
(a) Financial status or solvency of the person (b) academic or other qualifications or experience, having regard to the nature of the functions which the person shall perform (c) the status of any other licence or approval granted to the person by any financial sector regulator,
(d) Ability of the person to carry on the regulated activity competently, honestly and fairly (e) Reputation, character and financial integrity and reliability of the person and (f) any other material information the Authority may consider necessary.
“Boards of DT Saccos need guidelines that will enable them recruit a suitable chief executive. As matters are, bad elements are moving from one Sacco to another and SASRA forms and templates are not adequate to stop this,” Peter Njuguna, Head of Supervision at SASRA said.
At present, he disclosed, there is no clear criteria that DT Saccos can use to determine suitability of senior directors or board members.
But while the industry is unanimous that vetting of Sacco leaders is necessary, there are those who feel that not all Saccos should be subjected to the fit and proper tests that SASRA is prescribing.
“We have an illiterate leadership within most rural Saccos and so the stringent vetting rules that will be enforced by the Sacco Societies Regulatory Authority may be unfair to these Saccos,” said Mercy Njeru, Chief Executive Officer of KERUSSU Limited while contributing in one of the plenary sessions in the Mombasa stakeholders’ forum.
A law that introduces vetting by SASRA for all those individuals seeking positions on the Board of Directors for Deposit-Taking Saccos comes at a time when there is confusion in the industry. For instance, there are no clear guidelines on who should be elected as a director to sit on the board.
Cases abound of boards that decide how many sittings they can have in a particular financial year and even fix their own sitting allowances and go ahead to create unnecessary workshops, all in an effort to swindle Sacco societies.
There are cases, in mostly rural-based Saccos, where a director sits on the board on the basis of the number of coffee stems or tea bushes that he/she possesses. There are Chief Executive Officers who have been reduced to mere figureheads due to the power and political influence of the Board Chairman.
“We do not fear the vetting process so long as there is a balance between interest of members and those of the regulator. Let us have the guidelines from SASRA to ensure that the right people are elected by members. The regulator should not abuse their mandate and so are members,” said Alfred Mulolwa, Chairman Quetu Sacco Limited, based in Taita Taveta County.
His sentiments are shared by Charles Ochieng Ngutu, Chairman Taraji Sacco Limited, formerly Siaya Teachers Sacco Society Limited, who has a slightly different prescription.
“SASRA must come up with the minimum required standards and insist that vetting must be incorporated in the by-laws of Societies who will then perform the vetting exercise,” said Mr Ngutu.
He said while standardized vetting is welcome, the rules should not apply uniformly across all Societies, especially in rural-based Saccos.
“In such exceptional cases, the annual general meeting should be the supreme organ in deciding who sits on the board,” said Ngutu.
“We will be vetting those who will serve as directors or officers of a DT Sacco to stop them from jumping from one Sacco to the other after running down the previous one. We also have long serving board members who rarely attend education and training courses or have no basic knowledge in governance,” said Roselyn Ragama, Head of Legal Affairs at SASRA.
It appears that when the new vetting laws are in place, gone will be the days when chaotic Sacco elections were presided over by District Commissioners, as compromised Ministry officials sitting in the nomination committees of these Societies, watched on the sidelines.