Radical structural, legal reforms on the way for the Cooperatives Sector
The Kenya Government is keen to use co-operatives to reach out to those at the low end of the income pyramid and who have no stable financial livelihoods.
This comes even as many Saccos face liquidity problems and are, therefore, unable to meet members’ loan requirements. Others are struggling with serious corporate governance issues and loss of confidence due to members losing their savings to a few corrupt leaders in the cooperative movement.
“This is why we are coming up with a Sacco Central Finance Facility and Shared Services Platform to ensure Saccos with liquidity problems borrow from each other as well as access a robust ICT infrastructure that will safeguard members’ funds against cyber criminals and hackers,” said David Obonyo -the Commissioner for Cooperative Development.
He made these remarks during the 39th Annual Delegates Meeting (ADM) of Hazina Sacco Society Limited, adding that while ICT is critical in the operation of any business anywhere in the world, as more Saccos move into digital platforms, there is a challenge of keeping off cyber criminals, keen to hack into the systems.
He noted that most agro-based cooperatives face the problem of a lack of adequate farm inputs that are also costly in cases where they are available.
“The Government has come up with a subsidized fertilizer program in order to cushion farmers against costly fertilizer and enhance their productivity. We also have low value addition with many agricultural cooperatives still trading on raw farm produce-which gives low returns to farmers. We are urging these cooperatives to embrace technology and acquire modern processing tools so that they can undertake value addition. This will enhance returns to members and create jobs, especially to the youth,” said Obonyo.
He disclosed plans by the Government and County Government Directors and CECs to aggregate those at the low end of the pyramid into groups or cooperatives to make it easy for the state to intervene and provide credit, equipment, or even farm inputs.
“We want to use Saccos to roll out the micro-credit product of the Hustler Fund. A few Saccos will be identified by Sacco Societies Regulatory Authority (SASRA) to deliver micro-credit products to MSMEs and other hustlers in the country,” said Commissioner Obonyo.
He also disclosed that after devolution, there needed to be a match between the role of National and County Governments regarding the supervision of the cooperatives sector.
“We are amending the cooperatives act in order to tighten governance. We are also working closely with County Governments, including County Cooperative Directors and CECs so that we have a seamless way of supervising cooperatives to ensure that they adhere to all the required legal frameworks,” said Obonyo.
The Cooperatives Bill 2022, validated by stakeholders and received by the Cabinet for approval, will soon be tabled in parliament for further action.
Once this Bill receives consideration by both the Senate and Parliament, it will then be presented to the President for Assent, opening up the way to repeal the old Co-op Act Cap 490.
If passed into law, the Bill intends to repeal certain sections of the old Act, to bring into sync with the new constitution-which has shifted management of cooperative societies to the devolved county government units.
“The SACCO Societies Act is also being amended to provide for the creation of a Central Liquidity Facility and a Shared Services Platform. This development will allow for Inter-Sacco borrowing and also allow Saccos to have access to the National Payment and Settlement System just like the Banks,” said Obonyo in Mombasa.
Highlights of the Cooperatives Bill 2022 include general rules on cooperative self-regulation, credit information sharing, inter-cooperative lending, cooperative share trading, and capital raising, as well as the remuneration of officers and members of cooperatives and setting up of a cooperative development fund.
The Bill also intends to institute several institutional reforms, such as a requirement that the Sacco Societies Regulatory Authority (SASRA) submits its statement of income, expenditure, assets, and liabilities to the Auditor-General and not the Controller of Budget in line with the Constitution.
While disclosing several measures already being undertaken, the Commissioner said that a raft of legal, policy and institutional reforms were being pursued in the Cooperatives sector.
Obonyo added that the Kenya Kwanza administration had re-established the Ministry of Cooperatives and Micro, Small and Medium-Sized Enterprises (MSMEs) Development and placed it strategically in its bottom-up economic transformation agenda.
He said the cooperatives business model is the ideal vehicle for ensuring financial inclusion for most Kenyans who would otherwise not have access to financial services from conventional financial institutions.
“I encourage Saccos to exploit this advantage by recruiting more members and develop more products to expand your sphere of financial inclusion,” he said, adding that Saccos should diversify their product offerings to include Housing Mortgage products and micro-credit loans. “This is because the Government plans to use Saccos to disburse the micro-credit products designed by the state-run Hustler Fund. Saccos should also partner with Kenya Mortgage Refinance Company to access affordable, long –term financing and complement the Government’s efforts to facilitate supply of decent and affordable housing to mostly the low and medium-income Kenyans,” he said.
