Stakeholders in the co-operative sector are waiting in high hopes the debate and approval of the Co-op Bill 2024, which has already been published and is now before the Senate. The upper house is expected to expedite the processing of this Bill, which will move to Parliament and ultimately be signed into law.
The Bill is currently at the Committee of the Whole House, as indicated by the Senate Bills tracker, which outlines the status of Bills before the Senate.
“The new law will address leadership gaps within the sector to improve corporate governance. It also includes provisions for establishing a compensation fund to protect members from the fallout of collapsed savings and credit co-operative societies, as well as aligning the current liquidation Act in Co-operatives with the Insolvency Act,” said Patrick Kilemi, Principal Secretary, State Department of Co-operatives Development.
Currently, many co-operatives that collapsed in the past remain stuck in protracted legal battles, leaving some members who lost their investments without any compensation, even in death.
If passed, the Co-operative Societies (Amendment) Bill, 2023 (Sen. Bills No. 53 of 2023) aims to amend the Co-operative Societies Act, No. 12 of 1997, aligning it with the Constitution of Kenya, 2010. This amendment will clarify the roles of the National Government and County Governments in relation to the governance of co-operative societies.
Such changes will create a conducive environment for co-operatives to operate effectively, enhancing their contribution to the economy and social fabric. The Bill aims to strengthen the capacity and skills of co-operative members and leaders, encouraging innovation and competitiveness in the sector.
While financial co-operatives hold significant cash reserves and engage in lending, those facing liquidity challenges often have no choice but to resort to costly loans from banks and other lenders. This situation is expected to improve with the establishment of an inter-cooperative lending facility, allowing co-operatives to borrow from or lend to one another to cover temporary liquidity shortfalls or provide loans to their own members.
Under the proposed law, a co-operative shall not borrow from another co-operative in amounts that exceed its borrowing capacity or the prescribed limit for external borrowing. The boards of directors of both the borrowing and lending co-operatives must approve the terms and conditions of the intended borrowing, with additional approval from the Commissioner, County Director for Co-operatives, or the relevant authority.
The Co-op Bill will also ensure that the legal framework governing co-operatives reflects current constitutional provisions and promotes effective governance and development within the sector.
Despite the co-operative sector’s crucial role in supporting the Kenya Kwanza administration’s Bottom-Up Economic Transformation Agenda, it has faced challenges. Although the new constitution has devolved the co-operative sector to the County Government, there are currently no uniform legal instruments or guidelines to enable County Governments to supervise the Savings and Credit Co-operative Societies (SACCOs) under their jurisdiction.
