REGULATION
By Co-op News
Saccos operating in the digital platform will face strict regulatory oversight as the government moves to protect Kenyan deposits.
There has been a rise of co-operatives operating online without physical presence that have mobilized savings running into millions raising the risk that citizens may lose their money.
Many Kenyans have lost their hard-earned money to online schemes that entice them to quick riches.
In a departure from the past, the government will now require digital Saccos to register with the Sacco societies Regulatory Authority (SASRA) starting July 1st this year. The Saccos will also be required to submit their accounts to the regulator regularly.
This move will protect citizens from unscrupulous institutions and individuals who raise funds only then close shop and disappear in thin air.
While digital financial institutions make it easier for members to save, withdrawing the money is always difficult when one opts to leave.
The Acting SASRA Chief Executive Officer Peter Njuguna has said the authority would oversee the digital Saccos to protect members’ money.
“We must authorize them before they ask Kenyans to deposit with them. Saccos need close supervision even when they are small in terms of savings and assets,” he said.
The Saccos operate in a different environment escaping regulatory oversight like the traditional institutions.
Njuguna said some of the institutions had caused a lot of pain to their members.
While traditional Saccos have a social bond, virtual ones lack such, and it is hard even to trace the officials that run them.
 “The whole idea is to ensure that they are properly anchored and their bylaws are clear,” said Njuguna.
New regulations were gazetted in January this year, requiring the digital Saccos to comply within six months. Recently the SASRA oversight has been extended to Non-deposit Saccos that have assets size exceeding Ksh 100 million.
While the banking sector is fully regulated, the Sacco sub-sector has for long escaped strict supervision from the regulatory bodies. SASRA, for instance, has been monitoring operations of 175 deposit-taking Saccos.
With the deadline approaching for non-deposits, Saccos fast Njuguna said the regulatory authority had received applications from 50 Saccos. About 200 Saccos operating Back Office Services are expected to apply for SASRA licensing.
 “I expect we shall see over 200 applications before May ends. We’ll authorize as they come. The law gives us the room of 90 days to process,” he said.
The non-deposit Savings and credit co-operative societies must comply with new regulations by June 30th.
The SASRA ruled out an extension for compliance to the Sacco Societies (Non-Deposit-Taking Business) Regulations, 2020, saying the societies had over a year to prepare for the rules.
It warned the public against dealing with any Sacco that will not have complied by the set date.
“Any person, including members of the public and public entities who undertake such specified non-deposit-taking business transactions or other businesses with an unauthorised person, entity, or Sacco society shall be doing so at his or her risk and peril,” said Njuguna in a statement.
The regulations not only affect Saccos with physical offices but also those that conduct their businesses virtually.
Organizations that mobilise members through subscriptions and those that take share capital from diaspora membership.
The regulations are meant to protect members’ savings following cases of Saccos going under with millions of shillings and leaving members destitute after years of toiling.
SASRA said many Kenyans had lost their money to pyramid scheme-like entities operating virtually and purporting to be Saccos by hoodwinking the public to save with them with promises of good returns, only to disappear.
 “The new regulations will thus rein in such dubious entities,” Njuguna said.
