The Deposit Guarantee Fund aimed at cushioning Sacco members will be in place before August, PS Ali Noor Ismail has said.
The fund will enable for the compensation of members in the event a Sacco collapses
This follows last year's Cabinet approval, on amendments to the Savings and Credit Cooperatives (Sacco) Act of 2008, which seeks to infuse a deposit protection scheme for members.
According to the Co-operatives Principal Secretary, the legislation has gone through the National Development Implementation and Communication Cabinet Committee (NDICC), and is headed to the Attorney General’s office before being taken to Parliament.
It will operate along the same lines as the deposit protection fund in the banking sector under the Kenya Deposit Insurance Corporation (KIDC), which ensures banks don’t go down with depositors cash.
Meanwhile, the government is also working on a Central Liquidity Fund system, with support from the World Bank, that will enable Saccos to borrow amongst themselves.
“Kenya has made great strides in economic progression courtesy of co-operatives. Their contribution towards economic growth and employment creation cannot be overstated,” the PS said.
Saccos offer services cutting across financial services, housing, insurance, transport, hospitality and agriculture among others.
Saccos have continued to mobilise savings among the low-income households who have limited access to mainstream banking.
The co-operative sector commands an asset base of Sh1.3 trillion and Sh885 billion in savings and deposits, contributing about 32 per cent of the national savings in the country. The loan portfolio currently exceeds Sh860 billion.
Saccos are most vibrant and fast-growing co-operative societies in Kenya, according to the ministry, with membership of Saccos standing at above 5.47 million, in 2020.
Value of total assets for the sub-sector stands at Sh627.7 billion.
Deposits have grown over years to Sh431.5 billion and total loans grew by about Sh474.8 billion as at the end of 2020.
Instances of Saccos collapsing with members' savings have however continued to raise concern.
Two years ago, mismanagement at the Moi University Cooperative exposed members to a loss of their life savings, with an approximate value of Sh4 billion.
“We have a lot of money for depositors in the Sacco sub-sector but unfortunately sometimes even the best-managed Saccos, just like in the banking sector, occasionally have issues. We must protect depositors,” PS Ismail said.
It is mandatory for all regulated Saccos to be members of the fund to which they will contribute premiums.
“This move will restore public confidence in Saccos and reassure members of the safety of their shares and deposits,” the PS said.
He spoke in Nairobi on Monday during the Harambee Sacco 51st Annual Delegates Meeting.
Sacco’s chairman Macloud Malonza warned on increasing cyber security threats, calling for continued investment in systems to protect members.
“Cyber security remains one of the biggest concerns in the financial sector and more specifically the co-operative sector,” Malonza said.
The Sacco Societies Regulatory Authority (SASRA) has been putting in new regulations in the sub-sector to protect members.
Last year, it started implementing the non-deposit taking Sacco Regulations, effective January 1, targeting entities with over Sh100 million in deposits, diaspora co-operatives and Saccos operating on virtual platforms.
More than 190 have so far been brought under the watch of SASRA, which is targeting about 400.
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