9. Sacco Societies (Non-Deposit Taking Business) Regulations 2020
The Regulations seek to regulate non-deposit taking SACCOs given the risks to the members of the public and the wider financial system.
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· These Regulations became effective on 1 January 2021 after publication vide Legal Notice No. 82 of 2020.
· They were a consequence of the findings of a report of the Taskforce on the development of regulations for non-deposit taking Saccos.
· In the main, the Regulations seek to regulate non-deposit taking SACCOs following concerns that these SACCOs, despite not taking deposits from members of the public, posed risks to the financial system thereby necessitating a monitoring of their operations.
· They expanded the mandate of the regulator, the Sacco Societies Regulatory Authority (SASRA), to also regulate these SACCOs.
· The Regulations seek to improve the governance of large non-deposit taking Saccos in light of recent cases of fraud relating to such institutions.
· It is however noted that there is currently a National Cooperative Development Policy, developed in 2019, that is awaiting adoption. The Policy seeks to bring all the financial institutions under the ambit of the regulator, SASRA, including the non-deposit taking SACCOs which were not under the regulator’s ambit.[1] This needs to be fast tracked.
· In particular, the Regulations require the said Saccos to provide particularized details to SASRA within 30 days of issuance of a notice requiring such details; the core capital must not be less than 8 percent of the society’s balance sheet; submission of a three year business plan and feasibility study; submission of ‘fit and proper test form’ relating to senior management of Saccos to SASRA; independent onsite inspection by SASRA to assess the institutional infrastructure, risk management policies, internal control systems and Management Information Systems.
· Some of the envisaged legislative and policy changes include: the setting up of a deposit protection scheme (SACCO Deposit Guarantee Fund) for members like those of commercial banks; establishment of the SACCO Fraud Investigation Unit; and prudential supervision of non-deposit taking SACCOs.[2]
[1] Brian Ngugi, “Kenya: New Law Set to Beef up Sacco Regulators Roles” (allAfrica.com March 22, 2021) <https://allafrica.com/stories/202103220421.html> accessed November 6, 2021.
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