Proposed Co-operative Bill Aims to Revitalize Sector
Co-operatives are set to undergo a major overhaul with a proposed law that seeks to streamline their operations and align them with President William Ruto’s bottom-up economic agenda. Following a meeting between the Ministry of Co-operatives and Micro, Small & Medium Enterprises (MSMEs) Development and Council of Governors, the impasse surrounding the Co-operative Bill now tabled in the National Assembly has been resolved.
Once enacted, The Co-operatives Bill, 2024, will establish a regulatory framework that conforms to constitutional principles and incorporates the best business practices, propelling co-operatives towards a new era of growth and sustainability. “This legislative development is a pivotal step towards elevating the co-operative sector to new heights of success. We envision a future where co-operatives emerge as robust, inclusive, and well-governed entities, contributing significantly to our nation’s economic landscape,” said Simon Chelugui, Cabinet Secretary in charge of Co-operatives and MSMEs Development.
The Co-operative Bill aims to strengthen governance in co-operatives, support coffee farmers through the New Kenya Planters Co-operative Union, provide support to cotton farmers, macadamia, beef, and avocado, implement prudential guidelines, and regulate Saccos with deposits of over Ksh 100 million, oversee diaspora and digital Saccos through SASRA, and operationalize Sacco Central and Shared Services. It also aims to support dairy farmers through the designation of New KCC as a buyer of last resort and Strategic Food Reserve.
The Bill, sponsored by the Leader of Majority Kimani Ichung’wah, seeks to reclassify co-operatives into primary, secondary, co-operative federations, and apex co-operatives.
In the proposed dispensation, co-operatives will be restricted to one function, with employers facing a penalty of five per cent of unremitted Sacco deductions. The proposed law has classified them into producer, housing, savings, savings and investment, transport, worker and consumer co-operatives.
“Unless otherwise expressly permitted by the commissioner, a primary co-operative shall not be registered under this Act with multiple objects and shall not undertake multiple objectives or purposes,” the Bill states.
It restricts qualification for membership of co-operatives to persons of 18 years and above, with employment falling within the category the co-operative is formed and is a resident in the area of the co-operative’s operations.
The government wants members restricted to a fifth of the paid-up share capital of any co-operative registered in the country. Members without paid membership or acquired interest in a co-operative will be barred from exercising members’ rights.
No person shall be a member of more than one producer co-operative having similar objects.
The proposed law has come against the backdrop of plans by Ruto’s administration to revitalize Saccos.
The Bill also establishes the office of Commissioner for Co-operative Development.
Among the commissioner’s functions will be to register all co-operatives in Kenya and maintain a national register of the same.
Apart from the offices at the national level, the proposed law provides for the office of the County Director for Co-operatives in every county.
The two groups will form an intergovernmental co-operatives relations technical forum comprising the commissioner, 47 county directors for co-operatives, the Council of Governors, and a representative of an apex co-operative.
Kenyans could soon find themselves restricted on the number of co-operatives they can join.
According to the Co-operatives Bill 2024, the commissioner may refuse to register a co-operative if there is already a co-operative with the same objectives and membership drawn from the same common bond or field of membership. This provision is based on the opinion of the commissioner.
Enforcement
Co-operatives will have unique names and have to display their certificates of registration at the head office – a copy at every branch and any other place of business of the co-operative.
Boards of Directors of co-operatives that fail to display the certificate will be liable upon conviction to a fine of Sh100,000 or three years in jail.
The proposed law seeks to regulate the use of the word “co-operative” by any business or individual in Kenya. According to the Bill, only duly registered co-operatives will be allowed to use the word “co-operative” or its derivatives as part of their business name. Additionally, the word “limited” must be the last word in the name of every co-operative, except as provided in the Act or any other written law.
The Bill also stipulates that any co-operative registered as a savings and credit co-operative will be required to use the word “Sacco” instead of “Co-operative” in their business name. However, the word “limited” must still be the last word in the name of such co-operatives.
It’s important to note that the proposed law forbids anyone from using the word “Sacco” or any of its derivatives or any other words that indicate the transaction of Sacco business unless they are duly registered as a savings and credit co-operative under this Act.
Any person found guilty of using the terms wrongfully will be liable to Ksh500,000 fine or serve five years in jail or both.
If implemented, Saccos will have to rebrand their premises to reflect the nature of business they are undertaking.
Investment co-operatives will have to use the acronym ‘Sico’ of any of its derivatives indicating the name under which it transacts business, so would housing and transport Saccos.
“Where a co-operative is registered as a transport co-operative, the co-operative shall incorporate the word ‘transport’ immediately before the word ‘co-operative’ as part of its name; and at all times use the said name or the abbreviation Trans-Coop or any of its derivatives or any other words indicating transaction of transport co-operative business or the equivalent, in the name, description or title under which it transacts business,” the proposed law reads.
The Bill, which is in the second reading, aims to amend the Co-operative Societies Act, No. 12 of 1997, in order to align it with the Constitution of Kenya, 2010, by setting out the functions of the National Government and the county governments in relation to the governance of co-operative societies. It will ensure that the legal framework governing co-operatives reflects the current constitutional provisions and promotes effective governance and development of co-operative societies. This will create a conducive environment for co-operatives to conduct their businesses and contribute to the economy and the social fabric by strengthening the capacity and skills of co-operative members and leaders and offering innovation and competitiveness in the sector.
Any person found guilty of using the terms wrongfully will be liable to Ksh500,000 fine or serve five years in jail or both.
