Savings and Credit Co-operative Societies (SACCOs) in Kenya which engage in the deposit-taking business, are set to reap big from the 2023/24 Budget. This is if proposed legal amendments to the SACCO Act, proposed in the budget and will be contained in the Finance Bill 2023, are passed into law.

“The Sacco industry is characterized by many small and medium size SACCOs that find it difficult to effectively compete in the deposit taking and credit market. To address this challenge, the Sacco Societies Regulatory Authority (SASRA) is working on amendments to the Sacco Societies Act, 2008, that will provide for licensing and supervision of Shared Sacco Services platform,” said Professor Njuguna Ndung’u, Kenya’s Cabinet Secretary for The National Treasury and Economic Planning when reading the 2023/24 budget last week..

Treasury CS Prof Ndung’u said establishment of the Shared Services platform seeks to improve efficiency and competitiveness of SACCOs through establishment of cost-sharing digital platform to enable small SACCOs achieve economies of scale while at the same time mainstreaming regulatory compliance in a cost-effective manner.

SACCOs that are financially distressed remain unstable due to lack of a Central Finance Facility

More than a decade ago, the Government introduced prudential introduced prudential regulations to secure the financial stability of SACCOs and boost savings for members.

“However, there has been lack of a resolution mechanism for financially distressed SACCOs.  In order to address this challenge, the SACCO Societies Regulatory Authority has proposed amendments of the SACCO Societies Act, 2008 to provide for a framework for appointment of trustees to the Deposit Guarantee Fund (DGF) for SACCOs in Kenya,” said Prof Ndung’u.

These proposed amendments to the SACCO Act, are expected to become law once the Finance Bill 2023 is passed into law before June 30^th 2023.

The mostly small-sized deposit-taking SACCOs are usually faced with frequent liquidity challenges with most unable to establish a robust ICT infrastructure.

Amendments to the SACCO Act, as proposed in the 2023/24 Budget is expected to trigger operationalization of the much awaited Central Liquidity Facility( CLF). This platform, which operates as a lender of last resort, will also enable SACCOs to access the National Payments System and engage in inter-Sacco borrowing.

The proposed SACCO industry reforms are happening at a time the Co-operatives Sector is yet to overhaul the dilapidated Co-op Act, Cap 490.

The Co-operative Bill 2020, which was validated on November 30th 2021 and submitted to the Attorney General’s for further processing, has yet to reach the floor of parliament.

Available figures indicate that Kenya’s Co-operative sector commands savings and deposits of more than KSh 850 Billion as well as a balance sheet size worth more than KSh 1.2 Trillion and a loan portfolio valued at more than KSh 806 Billion.