NEWS UPDATES

Members of regulated savings and credit cooperative societies (SACCOs) could eventually benefit from deposit protection and improved access to financial and digital services under proposed amendments to the Sacco Societies Act.

The Sacco Societies (Amendment) Bill, 2025, seeks to operationalize the Deposit Guarantee Fund (DGF), which is provided for under the existing law but is not yet operational. The Bill, No. 32 of 2025, also proposes a regulatory framework for SACCOs to pool resources and share services.

Deposit protection

The DGF is designed to compensate members when a regulated SACCO fails. However, the Bill proposes a moratorium on payouts until the fund has accumulated sufficient resources to meet its obligations.

The National Treasury, in consultation with the ministry responsible for SACCOs, would determine when payments can begin.

The moratorium is intended to prevent the government from becoming liable for claims before the fund has built adequate reserves. Members should therefore not regard deposit protection as immediately available if the Bill is enacted.

The proposed legislation does not specify the maximum compensation payable to an individual member, identify the SACCOs covered beyond the term “regulated,” or set a deadline for ending the moratorium. These details will be important in determining the extent of protection available to members.

The Bill also seeks to clarify the appointment of independent members to the DGF Board of Trustees, addressing ambiguity in the existing framework. A clearer appointment process could strengthen the independence of those overseeing the fund and help build members’ confidence in the scheme.

Share financial and digital services

The proposed amendments would establish a regulated framework for secondary SACCO societies, allowing groups of regulated SACCOs to provide shared services to their primary member societies.

The services would include a central liquidity facility, inter-lending, access to the national payments system, information and communications technology (ICT) and digital platforms, liquidity management, and payment and settlement systems.

The framework is intended to help SACCOs share the cost of infrastructure and services that individual institutions may find expensive to develop independently. The Bill envisages these services being provided at a reasonably affordable cost within a regulated environment.

For members, the arrangement could improve access to digital banking and payment services, particularly among smaller SACCOs that may lack the resources to develop such systems independently.

A central liquidity facility could also help participating SACCOs manage liquidity and meet members’ withdrawal and borrowing needs. However, the Bill does not guarantee lower charges, higher returns or specific improvements in service delivery.

Cooperation among cooperatives

The shared-services framework is based on the cooperative principle of cooperation among cooperatives. The model was among those recognized under the World Council of Credit Unions’ (WOCCU) 2025 Digitization and Standards Challenge Initiative.

If enacted, the Bill would establish a framework for deposit protection and greater cooperation in the provision of financial and digital services. Its impact would depend partly on the DGF accumulating sufficient reserves before payouts begin and on regulated SACCOs choosing to establish secondary societies.