The Government has threatened to revoke the licenses of over 10,000 Saccos that have failed to file annual returns for several years.
Cabinet Secretary for the Ministry of Co-operatives and Micro, Small and Medium Enterprises (MSME) Development, Wycliffe Oparanya, confirmed that out of the 13,000 Saccos registered in the country, only 2,700 regularly file returns with the Office of the Commissioner for Co-operatives, as required by law.
“This situation puts into question the principles of transparency and accountability and risks members’ deposits. Regulations require all registered Saccos to file returns with the Commissioner for Cooperatives,” said Oparanya.
Speaking during a 3-day meeting for cooperative leaders on leadership, ethics, and strategic governance, the CS noted that more than 10,000 Saccos have, for unclear reasons, failed to submit annual returns despite repeated reminders from the commissioner and other regulatory agencies.
“In the next 21 days, we will issue a gazette notice requiring all non-compliant Saccos to submit their returns, including audited accounts detailing their operations,” he said.
Oparanya warned that failure to comply within the stipulated period will result in the revocation of licenses. “We must ensure that regulations are followed to the letter in order to guarantee prudent financial management,” he added.
The CS further expressed concern that there lacks visibility into the operations and status of thousands of Saccos due to non-compliance, saying that it is only through filing returns that the government can monitor how these organisations operate and where they are located.
A committee of experts appointed last year to review the Sacco Societies Act and align it with national priorities found that over 5,000 Saccos remain unregulated, posing a potential systemic risk to the sector.
Commissioner for Co-operative Development David Obonyo said that governance is critical to the success of cooperatives in this country and that no institution, regardless of its size or strength, can withstand poor governance.
“Many of the challenges facing our cooperative institutions today stem largely from weak or ineffective governance structures, and that is why this forum is both timely and important. It provides an opportunity to equip leaders with the knowledge and tools needed to strengthen governance in their respective institutions and, in turn, effectively meet the aspirations of members,” the commissioner said.
He thanked the Cabinet Secretary for spearheading significant reforms aimed at strengthening cooperative institutions, saying that the efforts are geared towards building strong, competitive organisations capable of delivering value and competing effectively within the broader financial sector, particularly in the SACCO space.
Obonyo further emphasised the urgency of legal reforms, saying that for many years the Cooperative Bill and the Sacco amendments Act have remained at the draft stage without reaching any finality, and thus it is time to move beyond that.
“Before the end of this year, we must ensure that these bills are enacted into law to strengthen our cooperatives. I urge all of us to support the CS in this effort and let this be the key legacy we achieve together, ensuring that these long-awaited reforms are realised,” Obonyo said.
Cooperative Alliance of Kenya (CAK) Chief Executive Daniel Marube stressed that transparency and accountability among SACCOs are paramount and support the spirit of prudential financial management.
“Every registered Sacco is required under law to file returns every year. Defaulting to do so continuously for three years risks deregistration. Board of directors and management ought to ensure transparency and accountability fundamentals are observed,” said Marube.
He urged Saccos that do not have audit services to always seek the same from other institutions within the cooperative movement.
“The Sacco sub-sector plays a very vital role in the Kenya’s financial growth. It is a sector that cannot be ignored. It requires good governance and good structures,” he emphasised.
Marube said that cooperative leaders have agreed to operationalise the long-awaited Deposit Protection Fund to enhance confidence among members.
Although provided for in law, the Fund had never been implemented, but he noted that its activation will ensure members’ savings are protected in the event a SACCO collapses.
“The leaders have emphasised that while efforts are focused on preventing failures, an insurance mechanism is necessary to safeguard members against unforeseen circumstances. The fund will be managed within CIC Insurance Group to keep it within the cooperative ecosystem and leverage existing expertise,” the CEO explained.
On matters of reforms, Marube said that a 15-member committee representing various cooperative subsectors has been appointed to harmonise the Sacco Bill currently before Parliament with stakeholder proposals.
“The team will be sitting from Tuesday next week and will come up with a harmonised view and proposal in order to deliver a unified framework that will guide the sector for decades,” Marube said.
The government has been involved in cooperative reforms in order to foster growth through regulation and policy formulation aimed at enhancing financial inclusion, with key roles including registering societies, enforcing the Cooperative Societies Act, and regulating deposit-taking SACCOs.
By Wangari Ndirangu
