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October 20, 2017

Saccos’ regulator blames rising rogue entities on licensing gaps

Bandari  SACCO trustees outside bandari Sacco offices on April 7,2016- PHOTO / JOHN CHESOLI
Bandari SACCO trustees outside bandari Sacco offices on April 7,2016- PHOTO / JOHN CHESOLI

The Sacco Society Regulatory Authority, the regulator of deposit-taking Saccos, yesterday blamed the rising number of rogue co-operative societies on existence of two licensing authorities.

 Sasra chief executive John Mwaka said that there has been confusion in the market in terms of licensing and registration of Saccos.

 Sasra licenses deposit-taking Saccos under the Sacco Societies Act, 2008, while Commissioner of Co-operative Development, under the Co-operative Societies Act, registers co-operative societies to mobilise savings from their members.

Saccos under the Co-operative Societies Act are not authorised to take withdrawable deposits.

 A survey by the UK Aid-funded Financial Sector Deepening in February suggested Saccos are largely insolvent, illiquid, devoid of effective accounting and control systems and systematically failing to monitor or report loan delinquency.

“…the challenges and weaknesses of the sector as a whole appear to be the same as identified back in 2005,” said Joe Huxley, the co-ordinator for strategic partnerships and opportunities at FSD Africa.

Mwaka said Saccos are first registered by the commissioner of co-operatives, and they only come under the watch of Sasra when they venture into Front Office Savings Activity – deposit-taking services.

 “There are very many registered Saccos, but only a few have been licensed by Sasra,” Mwaka told reporters in Nairobi. “The non-licensed Saccos are spread across the country and are not under the purview of Sasra; rather they are under the devolved government.”

 Sasra said there were 177 Saccos which operate Fosa services out of more than 5,000 co-operative societies in the country. The licensed deposit-taking saccos control about 80 per cent of the market share.

 “So far the deposit-taking saccos have mobilised over Sh400 billion in deposits with about 3.5 million members,” Mwaka said.

 This comes against the backdrop of media reports indicating that about 7,000 unsuspecting investors may have fallen prey to an alleged fraudulent housing scheme run by Ekeza Sacco, with losses estimated at more than Sh3 billion.

 “What we have is Saccos that have been mismanaged. I think that there are actions that have been taken on the Saccos that have been reported and there is already supervision work underway to identify the challenges,” Mwaka said.

 He said there was need for a review in the policy framework that would give Sasra the mandate to regulate all saccos in order to mitigate rampant cases of fraud.

 The FSD report recommended a raft of reforms, including establishment of appropriate, practicable regulations governing the Saccos and an enforcement mechanism.

 Another proposal was the development of a more professional Sacco sector capable of competing effectively with other providers and underpinned by a market for consultants able to advise and support this process.

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