Savings and Credit Co-operative societies (SACCOS) planning to convert into commercial banks or buying stakes in existing banks have to comply first with the regulations outlined by Sacco Societies Regulatory Authority (SASRA).
The regulator, however, has welcomed the idea of converting into banks, saying it demonstrates the appetite by Saccos to widen their service delivery scope as well as expanding the market share.
Sacco Societies Regulatory Authority Chief Executive Officer Carilus Ademba stated that the desire by the credit unions to venture into full financial services business would contribute to enhancing their profile as well as expanding their clientele base.
"This is a bold move and validates the encouraging growth in the Saccos sub-sector. It is a sign of the financial sector's maturity and thus will enhance the financial deepening inclusion concept as prescribed in the Vision 2030," he said in a recent interview in Nairobi.
However, he said Saccos planning to venture into the commercial banking business needs to be very careful not expose members' funds thus plunging the institutions into endless problems.
"They have to carry out due diligence of their intention with a view to safeguarding members interest and avoiding future problems that might discourage them from joining any financial institutions," he added.
Before giving the Saccos a clean bill of health so that it can graduate to the next level, Ademba added that the authority would ensure the credit unions fully complied with the regulations, for example, capital requirements and governance.
In the last few months, there has been an increasing number of Saccos seeking licence to convert into commercial banks, or expressing their interest in acquiring a stake in an already existing institution.
For example, Mwalimu National Sacco, has made public its intentions to buy a majority stake in Equatorial Commercial Bank, Wakenya Pamoja, and Unaitas Sacco, formerly known as Muramati Sacco, are also eyeing such ventures.
While current trends in the commercial banking business may favour big players, this does not appear to be discouraging Saccos from seeking entry into the sector.
SASRA had put off plans by Unaitas and Wakenya Pamoja to become microfinance banks and also halted the acquisition of Equatorial Bank, saying it was acting in the interests of members of these Saccos. However, last week, Ademba assured that the Mwalimu Sacco bid would soon be approved.
He said the regulator does not have any cause to block the bid, noting that a delay could result in Mwalimu Sacco incurring losses, which it may seek to recover from the regulator through a legal suit.
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