Sacco Societies Regulatory Authority(Sasra) CEO John Mwaka faced questions about the Sacco sector from members of the public via Sunday Nation.

The limitation on the number of saccos one can belong to (no more than one serving similar purpose) is discriminative and nowhere else is such a principle applied. What is so unique about saccos? Joan Nafula, Maseno

The rationale is to avoid SACCOs from competing in an unhealthy way. For, instance, if we allow this practice, an employer will be in a dilemma on which deduction should be implemented first if both of them require loan repayment from the same payroll. However, a person can belong to more than two cooperatives if they do not serve the same objective. An employee with a tea plantation can belong to an employer-based Sacco and also one that receives payment for tea proceeds.

The Covid-19 pandemic saw companies retrench their employees, who were members of various Saccos. How has the pandemic affected Saccos? Victor Muchui, Kathwana

The severity of the impact of Covid-19 on Saccos has been varied depending on the sector each draws its membership from and the extent of business diversification. But the most adverse impact has been felt in rising non-performing loans to 6.9 percent as of December 2020, the highest in the last five years. This has equally meant reduced earnings for most Saccos. The impact was, however, most severe in Saccos serving members in micro and small enterprises, otherwise referred to as community Saccos, as well as those serving private firms.

Financial institutions have leveraged on fintech to increase their efficiency thus boosting their profits. How has this technology impacted on Sasra? Komen Moris,  Eldoret

Saccos being financial institutions have followed suit in investing in technology to better serve their members and enhance operational efficiency. Further, the regulations require Saccos to invest in management information systems capable of facilitating deposit-taking business and accounting for all transactions in a safe and secure manner.

This has thus meant that Sasra has to invest in appropriate skills and competencies to effectively evaluate performance and compliance of the Sacco businesses, which are increasing in complexity by the day. However, several guidelines have been issued to ensure regulatory expectations are understood by the Saccos.

But challenges abound starting with lack of standards for the technology systems, what has meant that some Saccos simply go for the price without careful analysis of provider capability and/or system capabilities, a common problem for the small and mid-tier Saccos. Additional challenges have come with several incidences of mobile fraud and cyber-frauds being experienced in the recent past.

Some people have bitter and painful experiences with Saccos, especially those institutions that collapsed with members cash.  How are you dealing with rogue institutions and managers? Komen Moris, Eldoret

Kenya has one of the highest Sacco penetration rates – at 28 per cent of the adult population. But this popularity of Saccos across all income groups has become an opportunity for some enterprising Kenyans, who lure unsuspecting citizens into their outfits with unrealistic promises. Sasra has taken actions on corrupt officials of Saccos. But more importantly, we have established the Sacco Fraud Investigation Unit as a critical step in addressing this challenge and good progress is being made in the one year that this unit has been in operation. Second, the recent expansion of Sasra’s mandate to include non-deposit taking Saccos is another policy measure to protect Kenyans from losing their cash. Always join a tried and tested Sacco.

I used to be a member of Macadamia Sacco, which changed its name to Jijenge and was eventually put under Sasra. However,  I have never received my shares worth over Sh200,000 back after withdrawing membership in 2014. What should I do? Osanya Luke Wilson, Bungoma County.

Sasra is working very closely with the State Department of Cooperatives to operationalise the deposit guarantee fund, which will compensate members for the deposits upon failure of regulated Saccos, who will mandatorily have to be members of the deposit insurance fund.

I am an employee of Laico Regency and a member of Regency Sacco, which has been running without holding AGMs and without paying dividends to its members for years. At the same time, the management of Laico Regency has failed to remit all the deducted money to the Sacco. These are things Sasra should know. Why have you not compelled such employers to remit monies they deduct from workers?  Concerned worker

Corporate governance is key and the Sacco should follow the law as well as the by-laws in place. We request that you report the issue to the county director of cooperatives or the cooperatives commissioner’s office since Laico Regency is not regulated by Sasra.

Exponential growth of digital lending is adversely affecting financial institutions like banks and Saccos. How can Saccos remain competitive? Dan Murugu, Nakuru

Deposit-taking Saccos by their nature offer banking services to their members and our records show that they have greatly adopted mobile financial services to remain competitive. However, digital lending is a growing space and we have noted a number of Saccos deploying solutions to offer digital credit. But to scale up digital financial services in a safe and secure way, Sasra is working with Saccos to develop a legal framework on shared technology platform to open opportunities including strategic partnership with fintechs.

Many Saccos face poor governance, lack of liquidity for funds’ transfers and low automation of services. How can Saccos overcome these hurdles? Dan Murugu, Nakuru

The introduction of the prudential regulatory framework for Saccos in 2010 was a strong policy signal that this industry has become of age. Some Saccos have thus made tremendous progress in improving governance, financial management and automation of services thus are recording annual growth rates of 10 per cent plus in key parameters including membership, deposits, capital, loan portfolio and earnings.

That is why less than 100 deposit-taking Saccos account for about 95 per cent of the Sh630 billion assets for the Sasra regulated Saccos. The small Saccos are therefore struggling as they lack the financial and human capabilities to effectively compete in the deposit and credit market. Sasra is thus promoting the concept of shared technology platform amongst Saccos as a sustainable strategy to address these challenges.

Can you take action against an auditor who gave misleading financial report to a Sacco? Irungu Maina

He should be reported to his superiors either at the county or at the national government. All technical staff are supervised by the commissioner for cooperatives development.

The proposed establishment of the Central Liquidity Fund (CLF) for Saccos is big and could have far-reaching consequences on the institutions.  But as a Sacco member,  how will inter-Sacco lending benefit me? Steve Mwaisaka, Kitengela

The strength of Saccos lies in cooperating to address market and or policy challenges. The proposed Sacco shared services is designed to facilitate cooperation among them to enhance service delivery. This will unlock huge opportunities for the Saccos, which are essentially community-based institutions.

Hundreds of Kenyans have lost their life-savings after Saccos collapse. The latest is Kumisa Savings and Credit Cooperative. Where is Sasra before Saccos collapse? Bernadette Musembi, Nairobi

Kumisa Savings and Credit Cooperative was not a deposit-taking Sacco under Sasra’s jurisdiction up to December 2020. However, starting January, there is a law that has come into force allowing Sasra to regulate specific non-deposit taking Saccos and decisively deal with any malpractices. Hopefully, this will save the public from such losses.

It is good to point out that all Saccos are registered under the Cooperatives Societies Act, and request that any other inquiry regarding this Sacco can be channelled through the County Director of Cooperatives in the county where this Sacco operates.