Regulator blacklists Saccos for failing to meet requirements

The Sacco Societies Regulatory Authority (Sasra) has blacklisted two Savings and Credit Co-operatives (Saccos) and stopped them from offering banking hall services, owing to their inability to meet statutory requirements.

Sasra Chief Executive Carilus Ademba said Isiolo Teachers Sacco and Ogembo Tea Sacco Society have been prohibited from undertaking deposit taking Sacco business, popularly known as Front Office Service Activity, starting January 1, 2015.

In Kenya Gazette dated February 13, 2015, Ademba directed the winding up and closure of existing or current deposit taking business, if any and within the prescribed time. The two Saccos operate in Isiolo and Kisii towns respectively. They were among the 184 Saccos licensed last year to carry out deposit taking among other financial transactions.

However, they failed to meet the regulatory requirements. “Through findings of our monitoring initiatives, we established that the two financial co-operatives have not been able to adhere to the regulatory pace and thus we had to revoke their licences,” said Mr Ademba.

He observed that the Saccos can only operate Back Office Service Activity (Bosa) until they meet the requirements. Bosa implies that the Saccos operate services like loans, and repayment but don’t have banking hall services where direct access to cash is available.

In June last year, Sasra prohibited 31 Saccos from offering banking hall services, owing to their inability to meet statutory requirements. The banned financial co-operatives failed to meet the deposit taking regulatory requirements as stipulated in Sacco Societies Act 2008 and the accompanying regulations as at June 17, last year.

Financial management

The deposits taking Sacco business regulations of 2010 were formulated to enable the credit unions enhance their financial and management levels. The blacklisted Saccos are now being regulated by the commissioner of co-operatives until they improve their performance as per regulations.

The banned Saccos were supposed to have have capital adequacy, asset quality, non-earning assets, liquidity and sound governance. Each Sacco is supposed to have a minimum of Sh10 million as adequacy ratio. Profitability while not a regulatory requirement is implied to ensure financial and operational sustainability of the Sacco business.

Ademba warned the public against transacting with the banned Saccos, in deposit taking, saying doing so is risking. “Any person or institution that engages in deposit taking business with the said Saccos societies’ shall be doing so at their own peril and associated risks and all such business or transactions shall be illegal, null and void,” he added. He warned that contravention of Section 23 of the Saccos Societies Act will result to criminal charges.