Anybody operating any form of savings and credit co-operative societies (Saccos) in Kenya, whether physically or digitally, must comply with new regulations and accordingly procure a license by June 30.
To that effect, the Sacco Societies Regulatory Authority, in charge of regulating the operations of saccos in Kenya, has ruled out the possibility of an extension for compliance to the Sacco Societies (Non-Deposit-Taking Business) Regulations, 2020, stating the societies had over a year to prepare for the rules.
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“Any person, including members of the public and public entities who undertake such specified non-deposit-taking business transactions or other businesses with an unauthorised person, entity, or Sacco society shall be doing so at his or her risk and peril,” said Sasra Acting chief executive Peter Njuguna in a statement yesterday.
Here Is What You Need To Know
- It warned the public not to do business with any Sacco that did not comply by the deadline.
- The rules apply not only to Saccos with physical locations, but also to those that operate entirely online.
- This involves organizations that solicit membership by subscriptions and those that accept share capital from non-Kenyans.
- The regulations’ main goal is to secure members’ savings after cases of Saccos going bankrupt with millions of shillings in assets and leaving members penniless.
- Many Kenyans, according to Sasra, have lost money to pyramid scheme-like organizations operating virtually and posing as Saccos, which entice the public to save with them with promises of high returns only to vanish.
“The new regulations will thus rein in such dubious entities,” Njuguna said.
- Non-withdrawable Deposit Saccos, where members get their deposits back after leaving the Sacco but may use them as collateral for loans during their membership, are also targeted by these regulations.
How Can New SACCOs Register Under The New Regulations?
Saccos’ Specific Licensing Requirements
The Act (Section 24) and Regulations (Section 4) specify the details that must be provided in order to obtain a license. The following is a partial list of the most important requirements:
1. Capital: SACCOs must have a minimum core capital of Kshs 10 million ($92k) in their financial statements or by submitting bank statements. According to the Regulations, all SACCOs must meet three capital adequacy ratios.
2. Fit and Proper Test: Both directors and senior management (or department heads) will be subjected to a “fit and proper” examination, which will assess their moral and technical suitability to serve on the board and run the SACCO society, respectively.
3. Business Plan: A comprehensive four-year business plan as well as a feasibility study with estimated financial statements is needed. SACCOs that conduct deposit-taking business or plan to start a FOSA must meet all of these criteria.
Saccos’ Primary Licensing Steps:
A five-stage process will be followed to obtain a license:
- The SACCO will apply to SASRA the license application forms and required supporting documents contained in the First Schedule of the Regulations.
- If SASRA is satisfied, a Letter of Intent will be sent, requiring the SACCO to establish its business premises, implement a management information system (MIS), and create a comprehensive isk management structure.
- SASRA will conduct an on-site inspection within 30 days after the SACCO has completed (2) above, and if satisfied, SASRA will issue a Letter of Compliance to the SACCO within another 30 days;
- SASRA will then issue a license after the SACCO has paid the licensing fee of KShs 50,000 ($461k) for a head office and KShs 20,000 ($184k) for each branch retained.
- SASRA predicts that issuing a license to a SACCO that completely complies with all licensing conditions would take an average of four (4) months.
- The deposit-taking business license will be extended on an annual basis.
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Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer