Unremitted deny Saccos cash valued at Ksh4.31bn meant for loan repayment
By Correspondent
The Sacco Societies Regulatory Authority (SASRA) seeks to overhaul the existing legal frameworks to recover non-remitted funds owed to Savings and Credit Cooperative Societies (Saccos) by various institutions, including criminalizing intentional failure to remit such deductions.
“Despite the impressive comparative growth recorded by the DT-Saccos in 2020, the Authority continues to be very concerned with the ever-growing amounts of non-remitted deductions which some employers continue to owe,” said John Munuve, Chairman SASRA.
According to figures in the latest Sacco Supervision Annual Report, 2020, the total amount of non-remitted funds as of September 2020 stood at a staggering KSh 5.04 Billion compared to KSh 3.87 Billion as of September 2019.
The highest proportion of the non-remitted funds owed to the DT-Saccos, KSh 4.31 Billion, relates to loans repayment.
“Consequently, all the loans which were expected to be repaid with these unremitted deductions remains non-performing, denying Saccos liquidity in the equivalent of the same sums,” said Munuve.
Public Universities and Tertiary Colleges are listed as the worst culprits in failing to timely remit the deductions due to DT-Saccos, which stood at KSh 2.95 Billion as of September 2020 compared to KSh 2.86 Billion as of September 2019.
Private sector companies and institutions owed the second-highest amount of non-remitted deductions, which increased to KSh 0.85 Billion as of September 2020 from KSh 0.48 Billion reportedly owed as of September 2019.
The amounts of non-remitted funds owed by the national government ministries, agencies, and constitutional commissions increased to KSh 0.58 Billion compared to KSh 0.037 Billion in the previous year.
“Public Universities and Tertiary Colleges owes the highest amounts in non-remitted funds at over KSh 2.95 Billion.
Consequently, it is apparent that the policy and administrative initiatives undertaken by the National Government, the State Department for Cooperatives, and the Authority to reduce this menace of non-remittance are yet to bear fruit,” said Munuve.
He said SASRA is urging for an overhaul of the existing legal framework to recover non-remitted funds owed to DT-SACCOs, particularly from defaulting public entities, which are the most perennial culprits.
“In this regard, the Authority entreaties the National Co-operative Policy Ministerial Implementation task force, which was appointed in December 2020 to overhaul the legal framework for the recovery of such non-remitted funds owed to Saccos by various employer institutions, including criminalizing intentional failure to remit such deductions,” added Munuve.
He stressed the need to overhaul the legal framework to recover non-remitted funds, particularly those owed by public sector employers.
Saccos have conventionally operated under the concept of remittances of deductions from employer institutions which has a legal underpinning in Section 35(1) of the Cooperative Societies Act.
This law says that an employer of a Sacco member must remit the deductions made before the lapse of seven days, failure to which the employer shall be liable to pay the sum deducted together with compound interest thereon at the rate of not less than five percent per month.
Members of Saccos issue instructions to their respective employer-institutions to directly make periodic deductions from their salaries or other incomes; and remit the deducted amount directly to that member’s individual Sacco or Cooperative Society.
The deductions and remittances are usually two-fold. Firstly, are the deductions meant to build the members’ non-withdrawable deposits (popularly known as the BOSA deposits).
These are the deposits that the member may utilize as collateral to obtain credit facilities from the Sacco. While the same may earn interest, the BOSA deposits are only refundable upon the member’s resignation from the membership of the Sacco.
Secondly, are the deductions and remittances meant to periodically repay any loan or credit facilities that the member may have obtained from the Sacco (popularly known as the loan repayment deductions).
Although Section 35(1) of the Cooperative Societies Act requires employers who make any deductions from the employees’ emoluments to remit the deductions to the beneficiary Cooperative Society within seven (7) days of such deductions, an analysis of the annual operations of Saccos shows that several employer institutions have failed or neglected to remit the deductions made within the prescribed time and in some instances, taking too long.
In 2019, the National Government issued Circular No. OP/CAB 1A dated 11th November 2019 directing that “all MDAs in the National Government including Universities, Judiciary, Parliament, Independent offices and commissions shall ensure that financial obligations such as PAYE, pensions, Sacco deductions…are budgeted for and paid in compliance with the statutory timelines…”.
The Authority, on its part, had also issued General Advisory Note on Non-Remitted Deductions Due to Saccos from Various Employer Institutions – Circular No. SASRA/800/2/2019 dated 11th June 2019, providing an in-depth internal administrative measure for SACCOs to adopt and implement as a way and mean of reducing incidences of non-remitted funds.
Kshs 5.04 Billion
Non-remitted Sacco funds
