30 saccos to close front offices as AG rules out reprieve
Sasra chief executive officer Carilus Ademba. Thirty saccos will shut down their front offices after their appeal for more time to comply with new capital guidelines was rejected. FILE PHOTO | NATION
What you need to know:
The Industrialisation and Enterprise Development minister Adan Mohamed is said to have applied for the extension of the four-year compliance period after its expiry on June 17.
Sasra has also expressed fears of the saccos back office operations being affected by the closure of the front office business because the two are closely linked.
The AG is said to have based his decision on the fact that the number of non-compliant saccos was not so large that it would have destabilised the sector.
Thirty saccos will shut down their front offices after their appeal for more time to comply with new capital guidelines was rejected by the Attorney-General Githu Muigai.
The savings and credit cooperatives cannot collect deposits from the public, leaving them with back office operations that allow them to lend cash to members based on their savings. This means that thousands of Kenyans who depend on the saccos for banking have to look for alternatives.
The Industrialisation and Enterprise Development minister Adan Mohamed is said to have applied for the extension of the four-year compliance period after its expiry on June 17.
“The minister made an attempt to extend (the deadline) but it was declined by the Attorney-General because the application was time-barred,” said Sacco Societies Regulatory Authority (Sasra) chief executive Carilus Ademba.
Mr Ademba declined to disclose the names of the non-compliant saccos, saying the regulator feared a run on the co-operative societies which are required to give a report on how the depositors will be handled.
Sasra has also expressed fears of the saccos back office operations being affected by the closure of the front office business because the two are closely linked.
Following the AG’s decision, the number of saccos licensed to carry out front office service has now dropped to 185.
The AG is said to have based his decision on the fact that the number of non-compliant saccos was not so large that it would have destabilised the sector.
Prof Githu is also said to have argued that the saccos’ status was unlikely to change even if they were granted the extension given that they had not complied despite the four-year grace period offered by Sasra.
The unions had since 2010 to raise their capital levels to the statutory minimum, which included institutional capital — defined as retained earnings — to eight per cent of the total assets.
The threshold of institutional capital was difficult to achieve as most of the saccos had a history of paying out all their profits in dividends.
Sasra also requires that saccos’ core capital be at least Sh10 million and not less than eight per cent of its total deposits.
Two months ago, 79 saccos had not complied with the new regulations but Sasra has recently widened the parameters used to calculate the capital base of the co-operative societies so as to avert a crisis with the coming to effect of the regulations.
The regulator made amendments on supplementary capital to include revaluation gains, among other changes, which saw 49 saccos gazetted last week.
Financial inclusion
Sasra was created in 2009 to regulate deposit-taking saccos. In the past 10 years, the societies have risen to account for 50 per cent of the registered co-operatives.
Saccos have registered double-digit growth year-on-year and last year had deposits of more than Sh300 billion.
This growth has helped to improve financial inclusion and deposit mobilisation especially for rural and low-income Kenyans shut out of banks through closure of branches in the 1990s.
