Bleak future for outfits as regulator tightens noose on bogus players

Sacco Society Regulatory Authority CEO John Mwaka. [Kelvin Karani, Standard]

Hundreds of non-deposit-taking Saccos face de-registration as the government cracks the whip on new regulations introduced in a bid to shut down rogue players in the multi-billion industry. 

This following the lapse of the six-month deadline within which the more than 3,000 non-deposit-taking Saccos were expected to register with the Sacco Societies Regulatory Authority, SASRA. 

The Sacco Societies (Non-Deposit Taking Business) Regulations, 2020 came into effect in January 2021 with a six-month grace period for Saccos to seek compliance. 

According to the regulations, non-deposit-taking business in which the total non-withdrawable deposits from members is equal or exceeds Sh100 million and those that raise funds through digital channels or from the Kenyan diaspora were required to register with the regulator.

“Upon the expiry of the transition period on June 30, 2021, no Sacco Society shall be allowed to undertake or to continue undertaking a specified non-deposit taking business,” stated Sassra in a guidance note released earlier this year. 

With more than 3,000 non-deposit-taking Saccos in the country, regulators have in the past grappled with the challenge of providing adequate oversight and consumer protection.  

As at last month, only 157 non-deposit-taking Saccos had applied for and received their compliance certificate from Sasra.  

The new regulation is a game-changer as it set to introduce more stringent requirements for Saccos and brings hundreds of them under the radar of authorities. This comes on the back of a wave of liquidations by non-deposit-taking Saccos in the past year worsened by the Covid-19 pandemic. 

Peter Munya, Cabinet Secretary Agriculture and Cooperatives. [Wilberforce Okwiri, Standard]

In the past year alone, regulators have ordered the liquidation of more than 12 Saccos across the country following audits initiated by members or the regulators themselves. 

Those put under liquidation include Transline Galaxy Sacco that saw the Commissioner for Co-Operative Development Geofrey Njangombe cancel its registration on the grounds that the savings society was registered through misrepresentation of facts. 

The commissioner also extended the liquidation period for Moi University Savings and Credit Cooperative Society with effect from June 30, 2021, for another one year, a fate shared by Yamaha Farmers Co-operative and Mutheithia Farmers Co-operative.

Deposit-taking Saccos on the other hand have traditionally been under regulation by Sasra and while they enjoy a relatively stable financial position, industry data point to some potential weak spots.    

Data from the latest Sacco supervision report indicate that many of the smaller deposit-taking Saccos in the sector are struggling with member enrolments, and raising capital. According to the report, the total asset portfolio of the 172 deposit-taking Saccos crossed the half-trillion mark in 2019 to reach Sh556.7 billion. 

However, 31 deposit-taking Saccos with deposits above Sh5 billion account for  70 per cent of the entire industry’s total assets. On the other hand, 58 deposit-taking Saccos with assets of between Sh1 billion and Sh5 billion controlled 24 per cent of the total assets, a reduction in market share compared to the previous year. 

SASRA Board Chairman John Munuve. [Wilberforce Okwiri, Standard]

“The market share of the small-tiered deposit taking Saccos by asset size whose asset portfolios is below Sh1billion equally recorded a substantial shrinkage from 6.8 per cent of the market share recorded in 2018 to just 5.5 per cent in 2019,” explained Sassra in its industry supervision report. 

A similar trend was recorded in the share of deposits where just 20 deposit taking Saccos account for 60 per cent of the entire Sh380billion industry deposits. According to Sasra, about 74 per cent of the assets and deposits within deposit-taking Saccos is concentrated among just 79 Saccos whose membership is drawn from the government and government-related institutions. 

This means the remaining Saccos are left with the paltry 30 per cent of the market. The recent impact of the Covid-19 pandemic has also constrained the ability of companies to employ more staff with some laying off. This has eroded the membership base of several Saccos, compounding their liquidity challenges.