Personal Finance

Bid to shake up sacco operations welcome

Moi University Sacco members demonstrating in Eldoret town
Moi University Sacco members demonstrating in Eldoret town to save their property from sale. Members stand to lose a lot of their investments and savings when saccos collapse. FILE PHOTO | NMG 

Governance of Savings and Credit Co-operatives (saccos) in Kenya is set to change once the Savings And Credit Co-operative Organisations Bill 2018 is passed.

There has been a lot of mismanagement and bad governance in Kenyan saccos. Such mismanagement by officials has lost members a lot of their savings and investments. According to an article by this publication, members had lost close to Sh 3.6 billion in savings and investments due to fraud and corruption. While criminal investigations have been commenced against officials of such saccos, these do little to recompense members of their lost earnings.

Perhaps in a bid to address is management of saccos, the Bill proposes some governance and management reforms. Most of these changes allow the regulator a say in determining who may serve as an official of a sacco.

Before anyone can be admitted as a sacco official the regulator’s permission must be sought and the regulator may determine the suitability of such a person to serve as an official. The regulator may with sufficient reason bar a person from serving as a sacco official. The regulator considers a potential official’s financial status and academic qualifications. I particularly like that they consider one’s academic qualifications before allowing one to serve. Good governance of a financial institution such as a sacco requires a very high level of expertise. It is good that there is a proposal to legislate this requirement so as to enhance professionalism and reduce fiduciary mismanagement.

I believe then that sacco management will cease to be a political affair once the regulator is involved. Other things the regulator will consider is the proposed officers ‘past conduct in terms of managing funds. This consideration serves to ensure that serial fraudsters are stopped in their tracks. If a proposed official was involved in mismanaging a sacco previously then it is unlikely that he will be allowed to serve on the board of the society again. Some officials have been very negligent in how they manage saccos such that the members ‘investments are lost.


Such negligent officials may be stopped from serving on another sacco. It may be difficult to serve as an official of a sacco if one was an official of a sacco that wound up due to mismanagement. This is very protective to the public and enhances longevity of saccos.

Involvement in crime especially fraud and economic crimes will also minimise an official’s chances of serving on a sacco board. The regulator is required to constantly come up with professional development courses for officials if they deem it fit, to ensure that they are up to date.

The Bill’s proposals on governance are sound because they allow the regulator determine the suitability and composition of the sacco board. While the Bill has these provisions, it remains silent on enforcement mechanisms against errant officials. The past practise has been to prefer criminal charges against such errant officials.

A proposal is to criminalise some aspects of mismanagement. For example the Companies Act criminalises some mismanagement malpractices by providing for fines where such malpractices occur. For example it is an offence if a director fails to file a resolution within the stipulated time. When malpractices are criminalised then it may serve to uphold good governance.

There also ought to be sufficient enforcement and recovery remedies against fraudulent officials. When saccos collapse members stand to lose a lot of their investments and savings. The enforcement measures against those responsible ought to be stricter as a deterrent.

The Bill is a good start for reforming the sacco sector in Kenya.