The establishment of the Kenya Saccos Central Liquidity and Shared Services Co-operative Society Limited (The Sacco-Central) now marks a critical step in plans by the Sacco subsector to become more stable and join the league of other deposit-taking institutions, including commercial banks.
“We have already formed working groups to ensure that we work with other players in the deposit-taking business,” said Evans Kibagendi-Interim Chairman, The Sacco-Central.
According to Sacco Societies Regulatory Authority (SASRA) CEO Peter Njuguna, the Sacco Sub-sector is still highly exposed to instability and has yet to develop tools that can be able to deal with a large Sacco that is experiencing financial problems.
“The solution that is currently available in the law is to liquidate the Society. But before you get to liquidation, there are a number of steps to be followed and this is why we need the tools to undertake these measures,” said Njuguna.
 He said the Sacco sub-sector needs to build stronger rails that will ensure a much stronger industry; similar to what is happening in the banking industry and the rest of the deposit-taking market, which he said has grown in size and sophistication because of the capital investments that they have made.
 “The conceptual framework for the Sacco sub-sector to reach these levels are integrating, keeping our identity and taking advantage of the available support from Government. We need to enhance the safety of deposits raised by this industry using other regulatory tools,” said Njuguna.
 While it has taken more than 10 years for the Sacco sub-sector to come up with solutions to its liquidity and its ICT challenges, there is growing optimism that with the formation of this unique co-op society, the industry can now begin the critical conversations.
It is still early to establish when the Central Liquidity Facility and Sacco Shared Services platform will be happening since there is a need to anchor these changes in the law through a bill yet to be presented to parliament.
This platform is expected to enable co-operatives to participate in the national payments system, facilitate inter-borrowing among Saccos and share ICT services.
 According to industry observers, a move to create a Central Finance Fund Facility will depend on the Sacco industry’s speed in setting up the required structures.
Although the Sacco industry has a central finance facility run by the Kenya Union of Savings and Credit Co-operatives(KUSCCO), the lobby group is reluctant to surrender this facility so that it can be better funded and accessible to all Saccos.
There is a fear that while KUSCCO is a lobby group, relinquishing its central finance facility could end up crippling the organization since this CFF is its most significant source of funding.
Financial capital for KUSCCO’s Central Finance Fund is sourced from regular deposits by Saccos. KUSCCO pays a reasonable interest on these deposits, which are disbursed quarterly to member societies.
 Industry observers maintain that the fact that large Saccos such as Mwalimu National can acquire a commercial bank implies that there is sufficient cash within the Sacco industry that players can lend and borrow among themselves.
The Sacco industry is also mulling the idea of setting up a cheque clearing system similar to the one run by the Kenya Bankers Association (KBA) to assist Saccos in the clearing and payment of cheques. Commercial banks currently handle this process on behalf of Saccos-which have no access to the cheque clearing house run by KBA.
 Incidentally, there are Captains and top chief executives in the Sacco industry who feel that it is still premature to discuss or even imagine that Saccos can have their own cheques, let alone run a cheque clearing house that is parallel to that operated by commercial banks.
 At present, there is hardly any Sacco with excess liquidity that can lend to another Sacco in financial distress. The amount of cash circulating among Saccos is said to be still dismal.
 Commercial Banks are said to be well aware of the plan by Sacco to set up their own inter-lending, and cheque clearing facility and are busy plotting to counter these moves.
 Although Saccos have a central finance fund managed by KUSCCO, it still lacks the necessary muscle to service the needs of the entire Sacco industry. This means that it will take a while before big Saccos, which have partnered with Commercial Banks, issue cheques, meet their liquidity shortfalls, or even do electronic funds transfers.
