INSURANCE

Sacco fund to insulate depositors underway - PS

Kenya has been toying around with the idea of setting up a guarantee scheme for Saccos since 2008

In Summary
  • Sacco asset base jumped to Sh622 billion in 2020 compared to Sh530 billion in 2019
  • Some of the leading Saccos like Mwalimu Sacco and Stima Sacco have more than 100,000 depositors, way above some of the third-tier commercial banks.
Alice Kosgei, CEO Kenya Highlands Sacco,Vincent Marangu director co-operatives banking Division at Co-operative Bank with Ali Noor Ismail, PS State Department of Co-operatives at the National Co-operative CEOs’ Workshop in Mombasa from 7th to 9th May under the theme ‘Technology and Innovation for Sustainable and Inclusive Development’.
Alice Kosgei, CEO Kenya Highlands Sacco,Vincent Marangu director co-operatives banking Division at Co-operative Bank with Ali Noor Ismail, PS State Department of Co-operatives at the National Co-operative CEOs’ Workshop in Mombasa from 7th to 9th May under the theme ‘Technology and Innovation for Sustainable and Inclusive Development’.
Image: courtesy

The government is finalising the National Cooperative Policy that will among other things create a Sacco Deposit Guarantee Fund. 

The planned guarantee fund is expected to mirror that of the Kenya Deposit Insurance Corporation (KDIC), which allows bank depositors to retrieve their cash in case of a bank failure.

The financial safety net is expected to provide protection to Sacco deposits up to Sh100,000 a member. Every registered Sacco is expected to contribute to the fund.

Speaking at the launch of Stima Sacco’s Shariah-compliant loans and savings products on Wednesday, Co-operatives PS Ali Noor Ismail said the fund would insulate Sacco depositors from unforeseen eventualities in case of Sacco collapse.

He said Saccos play a key role in financial inclusion noting that currently, the over 15 million member movement is giving commercial banks a run for their money hence needs an urgent safety net.

"Plans are underway and we hope to launch the insurance scheme very soon,’’ Noor said.

He did not give further details saying thais will  be in the National Cooperative Policy which has since been submitted to the Ministry.

Kenya has been toying around with the idea of setting up a guarantee scheme for Saccos since 2008, with Kenya’s Sacco Societies Act, assented to in 2008, providing for setting up a deposit insurance fund for credit unions.

Although the Sacco regulator identified a consultant in 2013 to help in setting up the fund, findings by Carlos Alba Prado were never made public.

The country revisited the idea in 2017, with the Sacco Societies Regulatory Authority (Sasra) floating a tender seeking for a consultant to help in setting up the guarantee scheme.

In February , Sasra released guidelines on the selection and nomination of trustees to the Deposit Guarantee Fund (DGF) Board of Trustees.

A trustee must be an active member of a Sacco Society for at least two years before the nomination date is eligible for nomination.

The person must also have a degree in relevant fields from a recognised University in Kenya and satisfy the requirements of Chapter six of the Constitution.

Besides, the nominated person should have knowledge and experience in matters relating to co-operative management, banking, finance, insurance, law, accountancy, or economics for at least ten years.

According to  Sasra chief executive officer John Mwaka, a nominated person should have financial integrity.

The Sacco has to consider gender balance, and equitable representation will be during the selection and nomination process.

Early this year, Sasra revealed that Sacco's asset base jumped to Sh622 billion in 2020 compared to Sh530 billion in 2019 despite the Covid-19 pandemic, amount to rivalling total assets of the third top bank in the country. 

Some of the leading Saccos like Mwalimu Sacco and Stima Sacco have more than 100,000 depositors, way above some of the third-tier commercial banks.

Last year, KDIC raised the amount bank depositors are entitled to in case of a bank failure from Sh100,000 to Sh500,000, covering almost 90 per cent of bank depositors in the country.