New sacco regulations protect savings

Board members required to be diligent, to be held liable for any loss occasioned by their actions.

In Summary
  • Will be required to institute business contingency measures.
  • Risk-centred management approach has also been given province in the regulations.

The Sacco Societies (non-deposit taking business), Regulations, 2020, were gazetted on May 5, 2020. The 14-part regulations issued by Agriculture CS Peter Munya detail institutional sacco structures that must be in place.

Good governance practices have been re-stated, placing heavy responsibility on elected Boards of Management. Members are required to exercise prudence and diligence and shall be held liable for any loss occasioned by their actions contrary to the law, regulations, guidelines and directives issued from time to time.

The regulations give considerable guidance on members’ rights. Part XII, for instance, is dedicated to members’ protection against discrimination of any nature, guarantees equal opportunities for all members and the responsibility of the sacco to give full disclosure on all products available that must also be in sync with particular society members’ needs.

The saccos must also offer continued holistic sensitisation to its members at least once every year to enable them make informed financial and life choices. Key to this segment is the requirement for the saccos to develop responsive service charters and complaints handling procedures; and define infrastructure for which to operationalise the same.

In the regulations, saccos will be required to file periodic quarterly and annual reports (dependent on the matter at hand) to the regulatory authorities which keeps them apprised of the state of affairs of all the saccos under its watch. Such reports will be on: capital adequacies, liquidity statements, operation locations/change, credit portfolio, external borrowings, governance appointments/change, and a host of other policies that must be certified.

Risk-centred management approach has also been given province in the regulations. A responsive risk management framework must be implemented and reviewed by the apex organ of the sacco. The inter-relations internal organs such as the sacco management/staff, internal audit unit, the supervisory committee and those of external auditors has been delineated.

This is so that there is synergy in operation and mitigation mechanisms within their respective functional areas. The reporting of these control organs to the board is well laid out to ensure that risks are proactively raised, mitigated and/or cured as per risk and internal control measures.

In addition to the graduated exit of board members through elections, saccos will be required to institute business contingency measures as guided under part XIV of the regulations. Such will include having workable information preservation mechanisms to safeguard critical information. Such information systems are also envisioned to double as self-service platforms as well as act as institutional repository.

The provisions further oblige saccos to have appropriate disaster preparedness and business continuity  plans that must cater to all operations of the particular sacco and be aligned with the size and complexity of the sacco’s activities.

To attain the intent of the reformative guidelines, all saccos need to take the earliest opportunity to sensitise members. The regulations will not only address operational and governance grey areas in saccos but also speed up actualisation of the principles of  cooperative movement that have proved useful to Kenyans.