Delays in reviewing the outdated Co-op Act Cap 490 to bring it in sync with the new constitution as well as the realities of a fast-changing technological, social and business environment, have continued to inhibit the growth of Kenya’s Co-op Sector.
While new rules have been introduced to accommodate Deposit-Taking as well as the Non-Withdrawable Deposit-Taking Savings and Credit Co-operative Societies, the Co-operative sector still faces significant challenges due to an outdated Co-op Act Cap 490, which is the mother law for the sector.
“At the moment, it is still not clear where the supervisory mandate of the Sacco Societies Regulatory Authority and the Co-op Ministry begins and ends or the role of Counties and the National Government when it comes to those societies that are located in more than one County,” said Everline Moraa, Chief Executive Officer of Sotico DT Sacco.
She added that the present regulations are also silent on the pegging of interest rates charged on any Sacco loan product.
“The old laws should be reviewed to extend the period upon which an asset-deposits, dividends or shares held by a co-operative society, can be classified as unclaimed. This period should be extended to at least 18 years so that a child who is left behind by a deceased member of a co-operative society can claim the assets upon attaining the age of an adult,” said Moraa.
Top executives in the co-operative industry also hold the view that the clause that requires a member of the Society to declare in confidence his or her beneficiary upon demise should be changed and made public so that it becomes easy to trace the beneficiaries.
“We are fortunate that our Society operates within the tea estate where a member lives with the entire family and therefore it becomes easy to trace beneficiaries in the event that a member is deceased. This comfort is not enjoyed by other Saccos that have members spread out in different places or even counties,” said Moraa.
Due to the absence of clarity within Co-op Act Cap 490, DT Saccos that have been paying levies to both the County and SASRA, mentioning that they do not get any benefits in return, apart from these payments enabling the regulators to supervise their operations.
“While the Sacco Act as well as other Sacco regulations have to a large extent covered the various inadequacies that the Co-op Act Cap 490 has, there is still need to harmonize the roles of Counties and the National Government in regulation and supervision of financial Saccos and other Co-operative societies so that there is no clash or duplication,” said David Masha, former Chief Executive Officer of Imarika Sacco.
There is consensus among top managers and directors within the Co-operative Industry that there is an urgent need to review the Co-operative Act Cap 490 so that it reflects realities on the ground.
A case in point is a move by Deposit-Taking Saccos to rebrand and open the common bond to recruit new members beyond their catchment areas. For instance, DT Saccos, such as Kisumu Teachers Sacco(KITE) Sacco, which is one of the latest to rebrand to Keystone DT Sacco, has opened its common bond to accommodate members outside the teaching profession. It is now seeking members from small business owners as well as individuals in the informal sector-most of whom have no payslips or even a permanent physical address or location.
“Cap 490 and the Sacco Act clauses which requires a financial co-operative society to have 9 members on its board of directors, is static, obsolete and does not reflect what is happening on the ground, especially with multi-sector DT Saccos societies that draw membership from all regions and economic sectors,” said Daniel Marete, CEO of Solution DT Sacco.
He said that clauses dealing with the common bond as well as definitions such as Management Committee Members as defined within Governance structures of Co-operative Societies, should not feature in the co-operatives law and statutes.
“Those DT Saccos that have rebranded and opened the common bond have members from other sectors, who are mostly not represented in leadership positions in these societies. This situation is a time bomb that is just waiting to explode,” said Marete.
Directors’ Remuneration
While the law has spelt out qualifications needed for an individual to be elected as a director of a DT Sacco, the regulations are silent on how they should be remunerated.
The Sacco Act, 2010 does not address the issue of remuneration or minimum salary that should be paid out to a director in a DT Sacco, who is presently paid a sitting allowance and travel expenses-all based on clauses with Cap 490 of the Co-op Act. This is even though there are directors of DT Saccos who engage in the daily management of Societies with huge balance sheets worth billions and are required to get University certification before qualifying to become directors.
Industry insiders have urged for regulations and policies that govern the remuneration of Sacco directors instead of allowing them to be at the mercy of members, who usually vote to pay them honoraria or not, at their Annual General Meetings(AGMs).
At present, the law requires a director to serve on the board for a maximum of two terms of three years each. This requirement has been described by the industry as too short for any director to adequately perform or even grasp the full workings of the Sacco.
There are numerous occasions when Sacco members decline to approve honoraria to its directors at an AGM even when the Society has made good profits or paid high dividends, largely due to what is seen as internal politics and infighting within the Society.
Key Stakeholders are already pushing for a review of the law to protect Sacco Directors, who now are required to be trained and qualified to sit on the boards of DT Saccos. A well-paid director is likely to also put in extra effort to ensure that the Sacco achieves good financial results and can reward its members with attractive dividends.
