This archive report was first published on 15 June 2020.
June 15, 2020, marked a significant step towards reforming the governance of Savings and Credit Co-operatives (saccos) in Kenya. The proposed Savings And Credit Co-operative Organisations Bill 2018 aims to address the mismanagement and bad governance that has led to significant losses for members.
According to an article by this publication, members had lost close to Sh 3.6 billion in savings and investments due to fraud and corruption. While criminal investigations have been commenced against officials of such saccos, these do little to recompense members of their lost earnings.
The Bill proposes some governance and management reforms, allowing the regulator a say in determining who may serve as an official of a sacco. Before anyone can be admitted as a sacco official, the regulator's permission must be sought, and the regulator may determine the suitability of such a person to serve as an official.
The regulator considers a potential official's financial status and academic qualifications, which is a welcome move. Good governance of a financial institution such as a sacco requires a very high level of expertise, and it is good that there is a proposal to legislate this requirement to enhance professionalism and reduce fiduciary mismanagement.
Other proposed reforms include considering a proposed officer's past conduct in terms of managing funds, ensuring that serial fraudsters are stopped in their tracks. If a proposed official was involved in mismanaging a sacco previously, it is unlikely that he will be allowed to serve on the board of the society again.
Such negligent officials may be stopped from serving on another sacco, which is very protective to the public and enhances the longevity of saccos. Involvement in crime, especially fraud and economic crimes, will also minimize an official's chances of serving on a sacco board.
The regulator is required to constantly come up with professional development courses for officials if they deem it fit, to ensure that they are up to date. The Bill's proposals on governance are sound because they allow the regulator to determine the suitability and composition of the sacco board.
However, the Bill remains silent on enforcement mechanisms against errant officials. A proposal is to criminalize some aspects of mismanagement, which may serve to uphold good governance. There also ought to be sufficient enforcement and recovery remedies against fraudulent officials.
The Bill is a good start for reforming the sacco sector in Kenya, and it is hoped that it will be passed to address the mismanagement and bad governance that has plagued the sector.
