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Forcing Saccos to pay excise duty will weaken them

By - | October 17th 2013 at 00:00:00 GMT +0300

Kenya Union of Savings and Credit Co-operatives (Kusco) officials were right to meet parliamentary committee members earlier this week to lobby to be exempted from paying excise duty on transaction fees.

Surely, the Treasury should reconsider whether the meagre amount of money it would collect from the new taxes are worth the disruption the new measures would cause in the still fragile sector.

Losing members

The Savings and Credit Co-operative Societies (Saccos) are required to absorb these new costs at a time when the entire co-operative movement is losing its members to banks who are luring them with attractive savings and loans products.

Banks and insurance companies compete fiercely with the Co-operative Bank of Kenya and the Co-operative Insurance Company the banker and insurer of the co-operative movement, respectively.

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Ironically, the employees of commercial banks and insurance companies belong to Saccos that are customers and also significant investors in the Co-operative Bank and the Co-operative Insurance Company.

The commercial banks and financial institutions, particularly the deposit taking ones, have taken the fight for business to the Saccos’ door by offering loans to meet consumer needs in education, health care, housing and growing entrepreneurs and small and medium size enterprises (SMEs). Saccos had dominated loans in these areas for the longest time.

In view of the evolving business dynamics within the Saccos and the entire co-operative movement, expectations were that the relevant committees of the National Assembly would do more than promise to pass some amendments to deal with some of the challenges raised by Kuscco officials.


Historically, the main obstacle to the viability of Saccos as investment tools has been poor management.

Their governance has been so bad they have, more often than not, become liabilities.

Instances where members have lost huge sums of money have been rampant. Yet, the perpetrators of the fraudulent dealings that led to these losses have, at best, either got off scot-free or, at worst, been let off the hook with a mild rap on the wrists.

For some time, the practice almost killed the co-operative movement in the rural areas and the savings culture in urban centres.

What is saddening, however, is to note that the government only remembers the sector when it is casting around for ways to raise tax revenues. Yet, this is the sector that has the potential of pulling the bulk of the marginalised people out of poverty into a life of having enough — and more than enough.

Were the government officers charged with the responsibility of overseeing the sector to bestir themselves out of their decades-old lethargy, they could give the Sacco Regulatory Authority teeth.

It is inconceivable that few Kenyans, for example, know little about the authority that was established under the Sacco Societies Act of 2008. It is time they did.

Kuscco Saccos Co-operative Bank of Kenya SMEs
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