Saccos wary of plan to merge regulators

The Umbrella body of Savings and Credit Co-operatives (Saccos) has called for caution as the Government moves to merge financial regulators in Kenya.

Speaking during the 29th Annual Delegates Meeting of Kenya Union of Savings and Credit Cooperatives (Kuscco), the lobby’s Managing Director George Ototo said while Sacco regulation is welcome, it should not derail the sector’s growth.

Principal Secretary State Department of Investment and Industry Julius Korir ( right ) arrives at KUSCCO Annual Delegates meeting at Intercontinental Hotel Nairobi 20/05/16 PHOTO MOSES OMUSULA

He observed that the Financial Services Authority (FSA) Bill 2016 that seeks to merge all other bodies is likely to stifle growth and lead to closure of some Saccos. He noted that Back Office Service Activity (Bosa)-based Saccos are under great threat.

“We recommend a transition period of not less than four years for the Bosa-based Saccos to give us time to walk them through this new path of regulation,” said Mr Ototo. Bosa-based Saccos only receive savings from members and also allows them to borrow. Usually, they are not as developed as Front Office Service Activity (Fosa) Saccos.

Confidence in sector

While Fosa-based Saccos run like mini-banks and even have services such as ATM cards linked to various banks, Bosa-based Sacco members can only access money through Co-operative Bank cheques. Under the proposed regulation, it will be mandatory for all Bosa members to have a conduct licence from FSA in addition to already existing standards from Sacco Societies Regulatory Authority (Sasra).

Already, Sasra has deregistered five saccos facing financial difficulties and ordered them to stop offering front office services. The regulator withdrew licences of Nest Sacco, Green Hills Sacco, Maono Daima Sacco, Ufundi and Transcom.

According to Treasurer of University of Nairobi’s Chuna Sacco Nixon Otiende, rushing up the merger agenda could expose Saccos to stricter regulations that may be hard to meet. “Exposing Saccos to blanket regulation is likely to plunge them into stricter regulations such as high liquidity ratios and huge cash reserves. Most Saccos, especially Bosa, will not meet this stricter requirements,” said Mr Otiende.

Regulatory bodies that are to merge into one single unit are Sasra, Retirement Benefits Authority (RBA), Capital Markets Authority (CMA), Insurance Regulatory Authority (IRA) and Central Bank of Kenya (CBK).

Principal Secretary in the Ministry of Industrialisation and Enterprise Development Julius Korir told delegates that there was still time for them to raise their concerns since the envisaged law was still a draft Bill.

“The intention of the Bill is to ensure that all organisations providing financial services are regulated and services standardised to create harmony and confidence in the sector. I urge you to study the draft and give your inputs,” said Korir.

Subject to consultation, Korir said the government will create a window through which Saccos can trade their shares or raise capital. He added that plans to set up a central liquidity fund to facilitate access to finance are in advanced stage. There is also a plan to create Saccos deposit protection fund.

Under vision 2030, it is projected that cooperative societies will raise at least 10 per cent national savings and provide 25 per cent of the housing units required annually.