The government has reiterated its commitment to protecting Sacco member’s deposits and is currently reviewing the Co-operative laws and regulations as it moves to seal existing loopholes and enhance the growth of the critical sector, which is currently the biggest in Africa and seventh in the world.
Co-operatives, Micro Small and Medium Enterprises (MSMEs) Development Cabinet Secretary (CS) Wycliffe Oparanya said that in recognition of the vibrant Kenyan co-operative movement, the government has prioritised co-operatives through the Bottom-Up Economic Transformation Agenda (BETA) due to the sector’s ability to pull resources together for purposes of national building.
“Kenya is currently reviewing its legislative and regulatory framework within the co-operative sector via the Co-operative Bill 2024 and the Sacco Society’s Amendment Bill 2024 that are currently in parliament,” said Oparanya.
The CS explained that it is their belief that these reviews shall enable the creation of a legal and regulatory framework that protects the most critical part of co-operatives, which is the member’s deposits.
Speaking during the award ceremony for Ushirika Day Celebrations held at a Nairobi hotel on Friday, Oparanya said that his ministry, together with other relevant government agencies, will ensure they hold to account those who mismanage and misuse members’ funds.
“Moving forward, we will intensify our efforts to ensure that such misconduct is not only called out but met with decisive legal action,” said the CS.
To enable this, Oparanya said that the Sacco Societies Regulatory Authority (SASRA) has issued a ‘Whistleblowing Policy’ to promote institutional integrity and transparency by encouraging whistleblowing on misconduct, fraud, and unethical behaviour, and it emphasises that every board member and employee is responsible for knowing and adhering to the policy, including reporting breaches.
The CS said that as we celebrate last year’s achievements, it is important to note that the recently released Sacco Supervision Annual Report of 2023 by SASRA highlighted a concerning trend on Capital Adequacy.
He explained that while the assets of Deposit-Taking (DT) Sacco’s have continued to grow, the rate of retention of their surpluses has remained static or declined.
“This is evident in the marginal drop in key indicators such as the core capital to total assets ratio, which fell from 16.36% in 2022 to 16.07% in 2023. Similarly, the core capital to total deposits ratio dropped from 23.90% to 23.26%, and institutional capital fell from 9.58% to 9.11% during the same period,” said Oparanya.
To address this, Oparanya said that Sacco’s must intentionally prioritise the growth of their capital from internally generated sources through the retention of surpluses.
“As co-operative leaders, we need to boldly communicate to our members that capital retention is healthy and only helps guarantee the longevity of our co-operatives by ensuring they are better prepared to absorb future shocks,” said the CS.
He at the same time called on employers to remit deductions to Sacco’s, saying that according to the Sacco Supervision Report 2023, there is a worrying trend where regulated Sacco’s are owed over Sh2.59 billion due to non-remittance by various employers.
Oparanya said that in competition to woo more members, a number of Sacco leaders have been borrowing heavily to pay huge dividends to their members, contrary to annual profits earned.
The CS said that this is not sustainable and might lead to the collapse of Sacco’s, as he warned that as a Fellow Certified Practising Accountant (FCPA), he will be looking at Sacco’s books of account to ascertain which ones have been falsifying their records and declaring non-existent profits so that they can give huge dividends.
Oparanya said that he is aware of a coffee co-operative whose records indicate that they sold their coffee at the auction for Sh80 per kilogramme, and they were paying their members Sh120 per kilogramme. The directors have been borrowing to pay famers the extra Sh40, leaving the co-operative with a debt of Sh.225 million from commercial banks, and now the same farmers have been left to pay the loan.
“As we look to the future, Co-operatives must embrace the principles of Environmental, Social, and Governance (ESG). This means not only focusing on financial sustainability but also taking deliberate actions to support clean energy initiatives, reduce carbon emissions, and promote environmental stewardship,” said the CS.
The National Council for Ushirika Day celebrations Chairman Macloud Malonza said that the Co-operative sector in Kenya continues to demonstrate strong resilience in challenging times witnessed this year.
Malonza said that Co-operatives remain stable as they have seen great strides in both agricultural and financial Co-operatives this year.
“Among the agricultural Co-operatives, we have seen increased production across all major crops where coffee farmers encountered better prices and the tea farmers are expected to earn the largest bonus ever,” said Malonza.
He explained that in financial co-operatives, they continue to see co-operatives growing in double digits while return to members has also been commendable.
“In the horizon, the forecast for the sector is very promising as we head towards the final quarter of the year as co-operatives start closing their books. The future of the co-operative sector is bright, and today’s awards aim to inspire even greater achievements,” said Malonza.
He highlighted that the adjudication exercise remains a cornerstone of the Ushirika celebrations, emphasising continuous learning and improvement.
Malonza added that this year, the National Ushirika Council commissioned an independent consultant who rigorously assessed Co-operative Societies across various categories, evaluating them based on their service excellence, adherence to co-operative principles, capitalisation, savings, credit and risk Management, innovation, and social impact.
Kenya National Police Deposit Taking (DT) Sacco emerged as the best managed Sacco countrywide.
By Joseph Ng’ang’a
