Co-operatives Policy (Adoption) and Withdrawal of proposed legislative amendments - Kenya Union of Savings and Credit Co-operatives (KUSCCO) Limited.

In 2017, the Agricultural Industry Network (AIN) mobilised stakeholders in the Co-operative sector to review the draft Co-operative Development Policy, 2017, the theme of which is to promote Co-operative Enterprises for Industrialisation to replace Sessional Paper no. 6 of 1997. As of July 2018, The Draft Co-operative Development Policy 2017 has been completed with industry input and approved by Cabinet but is yet to be presented to the National Assembly for adoption into a Sessional Paper.

Regulation of Co-operatives, legislated under the Co-operative Societies Act, CAP 490 of 1997, is now devolved under the Fourth Schedule, Part 2; Section 7(e) of the Constitution.

The SACCO Societies Act, CAP 490B creates the Sacco Societies Regulatory Authority (SASRA), a national body that regulates all SACCOs. According to the proposed Co-operative Development Policy, SASRA is expected to remain as a national regulator that will not be devolved, a position that KUSCCO supports.

The State Law (Miscellaneous Amendments) Bill, 2018 is currently published and proposes amendments to the Co-operative Societies Act, CAP 490; and the SACCO Societies Act, CAP 490B. A proposal to increase SASRA’s levy on SACCOs is also been submitted to the Committee of Delegated Legislation in the National Assembly for approval. The proposed legal amendments, KUSCCO argues, will have the following adverse effects:

  1. Proposed increase of SASRA Levy: Section 15 of the SACCO Societies Act imposes an annual levy of 0.1% on total deposits held by deposit-taking SACCOs, for which the levy payment is capped at KShs. 5 million per SACCO. SASRA does not disclose what income these levy payments yield. SASRA is currently proposing an increase of this levy from 0.1% to 0.125% in 2018; 0.15% in 2019 to 2021; and 0.175% in 2022 with a new payment threshold cap at KShs. 10 million. These payments would start in 2020 and would be based on 2018 financial statements.
  2. Introduction of “social impact member” class: The State Law (Miscellaneous Amendments) Bill, 2018 proposes amending the Co-operative Societies Act, CAP 490 by introducing a new class of members – "social impact member" – to be created in an Annual General Meeting (AGM) of a Co-operative society subject to approval by the Cabinet Secretary in-charge of co-operatives. This new ‘class’ will be exempted from payments made by other members of the society. In addition, the social impact member will have strictly reserved voting rights on resolutions relating to the special fund, the investment committee, the special fund trustee and related matters; rights which go beyond the rights of Co-operative members. Other members of the co-operative will not vote on these matters reserved for the special impact class.
  3. Introduction of ‘special fund’ – The State Law (Miscellaneous Amendments) Bill, 2018 proposes amending the SACCO Societies Act, CAP 490B to introduce a Special Fund (with its own advisory board, investment committee, special fund investment policy, and special fund trustee). The special fund will receive money from SIMs as determined by the investment committee. Benefits accruing from these investments will only be shared among the social impact members, rather than the entire co-operative, which KUSCCO argues, bears the entire risk of the investment. KUSCCO wants these miscellaneous amendments to CAP 490 and CAP 490B expunged from the State Law (Miscellaneous Amendments) Bill, 2018.

KUSCCO is seeking to advocate for the adoption of the Co-operative Development Policy 2017 and the withdrawal of the proposed amendments as discussed above.

Expected Outcome

If the Co-operative Development Policy is adopted and implemented, it will guide stakeholder-inclusive reforms in the sector including the review of the SACCO Societies Act and the Co-operatives Act. Successful review of these legal frameworks will minimise the exposure of SACCOs to multiple regulations, therefore, safeguarding the savings of millions of Kenyans.