The Cabinet of President William Ruto has approved significant amendments to the Savings and Credit Cooperatives (SACCOs) Act, aimed at increasing stability, efficiency, and competitiveness within Kenya’s SACCO sector.
A cabinet dispatch dated March 11 highlights that the proposed reforms, now presented in the Sacco Societies (Amendment) Bill, 2023, focus on modernizing financial and technological operations to particularly benefit smaller SACCOs.
Key among the reforms is the establishment of a SACCO Shared Services Framework, designed to allow financial institutions to share resources, implement financial technology (Fintech) solutions, and enhance collaboration while maintaining their independence in management and decision-making processes.
The introduction of a Central Liquidity Facility will facilitate SACCOs in conducting transactions with one another, providing access to short-term loans, and participating in the National Payment System.
Additionally, a centralized data repository will improve regulatory oversight by enabling efficient monitoring of SACCO activities and enhancing overall data management.
The Cabinet also emphasized that reforms to the Deposit Guarantee Fund aim to better protect SACCO deposits, minimize government bailout risks, and fortify the cooperative financial sector.
“These reforms will reduce operational costs, spur innovation, and enhance public confidence, solidifying SACCOs as vital components of Kenya’s financial inclusion and economic empowerment efforts,” the Cabinet’s statement indicated.
These changes come in light of the ongoing crisis following the insolvency of the Kenya Union of Savings and Credit Co-operatives (KUSCCO) and concerns regarding the vulnerabilities of primary SACCOs.
In response to these developments, the National Treasury has issued a tender for consulting services to establish a SACCO Shared Digital Services Platform for Central Kenya.
This consultancy will aid SACCOs in developing a secure and efficient technology platform, ultimately enhancing their operational capabilities.
Moreover, the consultancy will assist in creating a strategic roadmap for participating in the national payment system and developing an instant payment system for the SACCO sector.
They will also be instrumental in the establishment and operation of Business Development and Central Liquidity services.
Commissioner of Co-operatives David K. K. Obonyo reported on March 3 that a comprehensive inspection of KUSCCO identified significant financial irregularities, including the inflation of dividends.
“The falsification of records was a major issue, with KUSCCO attempting to declare surplus dividends despite incurring losses,” he noted.
A circular has since been issued to regulate the declaration of dividends on deposit interest, addressing this problem directly.
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