It was only recently that the Kenya Union of Savings and Credit Cooperatives (KUSCCO) saga was uncovered that saw savings and credit cooperative organizations (SACCOs) lose billions as a result of mismanagement, fraud, and regulatory loopholes.
While it remains fresh in the minds of Kenyans, the cabinet has approved amendments to the Sacco Societies Act, 2008 in a bid to win back the eroded public trust in the sector and safeguard the interests of millions of Kenyans who rely on the financial institutions.
The proposed reforms, encapsulated in the Sacco Societies (Amendment) Bill, 2023, aim to modernize the financial and technological operations of SACCOs, particularly benefiting smaller institutions that have been most vulnerable to financial instability.
One of the reforms includes the introduction of a SACCO Shared Services Framework. This initiative allows SACCOs to pool resources, adopt fintech solutions, and enhance cooperation while maintaining their operational independence. By leveraging shared services, smaller SACCOs can reduce operational costs and improve efficiency, making them more resilient to financial shocks.
The amendment also introduces the establishment of a Central Liquidity Facility, which will facilitate inter-SACCO transactions and short-term lending, ensuring that these institutions have access to liquidity when needed. This facility will also enable SACCOs to participate in the National Payment System, further integrating them into the broader financial ecosystem.
To enhance regulatory oversight, the reforms also propose the creation of a centralized data repository. This repository will provide regulators with real-time access to critical financial data, enabling them to monitor the health of SACCOs more effectively and take timely action to address any emerging risks.
Improved data transparency is expected to bolster public confidence in the sector, which has been severely dented by the KUSCCO saga and other high-profile cases of financial mismanagement.
Additionally, the approved amendments propose the strengthening of the Deposit Guarantee Fund. By ensuring better protection of SACCO deposits, the government aims to reduce the risk of future bailouts and enhance the stability of the cooperative financial sector.
This move is particularly important in light of the billions lost due to mismanagement and fraud, which have left many depositors in financial distress.
While these amendments will surely introduce a layer of protection to the sector, most Kenyans still remain wary after the saga and the fact that many questions still remain unanswered. As the Sacco Societies (Amendment) Bill, 2023, makes its way through Parliament, it acts as a step to win back trust.
However, to many Kenyans, it is not enough. The stability of cooperative societies across Kenya remains shaky as the confidence of many SACCO members is at an all-time low, with many looking to withdraw from the institutions.
