8. Sacco Societies (Deposit-Taking Sacco Business) Regulations 2010

These Regulations provide for minimum operational regulations and prudential guidelines that are required of deposit-taking SACCOs.

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Quick Link: https://new.kenyalaw.org/akn/ke/act/ln/2010/95/eng@2022-12-31

These Regulations were published on 18 June 2010 vide Legal Notice No. 95 of 2010 for the purpose of providing minimum operational regulations and prudential guidelines required of deposit-taking Saccos.

· They provide licensing requirements for deposit-taking societies with the issued licence lasting one year with a requirement for renewal. The authority always retains the power to revoke a licence in case of violation of conditions. Part III of the regulations provides for capital adequacy requirements with the Authority demanding more capital in case of increased risks. Part IV provides for liquidity and asset liability management. These entry barriers and requirements placed by SASRA (authority) help promote financial stability and the stability of the SACCOs thereby ensuring they continue to provide necessary liquidity in the market.

· Importantly, deposit-taking Sacco societies may either be withdrawable deposits (Regulation 23) or non-withdrawable deposits (Regulation 22). The non-withdrawable deposits are not vulnerable to runs which characterise banks and therefore face fewer risks relative to those that have withdrawable deposits.

· Regulation 31 provides a limit on the amount of interest recoverable on a loan from a debtor to an amount equivalent to the principal amount when the loan became delinquent.

· Regulation 32 requires all loans granted by a Sacco society to be fully secured and prohibits the issuance of a loan against a member’s shares.

· Whereas part XIII of the Regulations further provides for a Deposit Guarantee Fund in line with section 55 of the Sacco Societies Act, which fund is meant to compensate members of a Sacco up to Ksh. 100, 000 in case of a failure.

· In addition, the amount of Ksh. 100, 000 that can be compensated to a member appears rather low to avoid any runs and to compensate members adequately.