The government has unveiled an ambitious plan to streamline and stabilise Savings and Credit Cooperative Societies, even as it blamed the current crisis on delayed remittances by employers, poor governance and weak regulatory oversight.
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In a detailed statement before the Senate plenary on Wednesday, Cooperative Cabinet Secretary Wycliffe Oparanya said the ministry is working to strengthen the legal and institutional framework to revive the struggling Sacco sector.
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Oparanya said several administrative measures have already been undertaken to safeguard members’ contributions and enhance the viability of the Saccos.
“Administratively, the ministry has issued a circular to all Saccos instructing them to avoid investing in non-core business,” the CS said.
He noted that studies have shown that Saccos which ventured into capital-intensive projects such as real estate development have struggled to remain afloat.
According to the CS, Saccos face three key challenges that have affected their viability.
Many employers, especially county governments, he said, are deducting money, running into millions of shillings from their employees.
However, they are not remitting the funds to the saccos, leading to a collapse of the entities that are meant to economically empower their members.
“Several county governments have deducted members' dues in millions, but they have not remitted them. This has created liquidity problems for Saccos. This is what affected Moi University Sacco, Afya Sacco and others,” he said.
In addition, many saccos are grappling with governance challenges, including corruption, which have threatened the existence of most of them.
Oparanya said weak supervision by the regulator—Sacco Societies Regulatory Authority (SASRA)— has perpetuated the problems the saccos face.
He said the authority is financially handicapped and ill-staffed to effectively supervise the saccos to ensure they effectively perform their functions.
“What is crucial is that we strengthen Sacco supervisory authority, which is SASRA. Unfortunately, SASRA has been underfunded, thus no capacity to carry out supervisory purposes,” he said.
“Sasra has been collecting about Sh800 million to carry out its supervisory work, but the money that comes back from the Treasury has never exceeded Sh500 million. That is an administrative bottleneck that has been there,” he added.
The CS said Sasra, which charges a percentage of Sacco member deposits to enable it to carry out its work, is starved of funds as the Treasury fails to remits the collected amount to it.
To respond to the challenges, Oparanya said the ministry has fronted cooperatives Bill that seeks to strengthen Sasra and enhance its supervisory mandate.
“To address these issues, in this particular house, the ministry has introduced a cooperative bill that is supposed to address some governance issues,” he said.
Administratively, the ministry has issued a circular to all saccos to ensure that they do not invest in non-core business.
In addition, the ministry has directed the saccos to ensure that any borrowing by their members is approved by the commissioner of cooperatives
The ministry has also directed mandatory filing of returns by all Saccos to ensure they are annually audited for financial soundness.
Oparanya said that it has directed Saccos to use delegates systems, especially annual general meetings, for effective participation and decision-making
“We have improved oversight to ensure members work within the delegate system. Few people during the AGM to ensure the sacco transacts business,” he said.
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