This archive report was first published on 25 August 2021.
As of June 2021, Savings and Credit Co-operative Societies (SACCOs) that engage in Back Office Service Activity (BOSA) are required to comply with new regulations, which will result in them paying lesser dividends to members at the end of the financial year.
The new regulations, which were published through Legal Notice No. 82 of 2020 on 5th May 2020, bring BOSAs with more than KSh 100 Million in deposits under the ambit of Sacco Societies Regulatory Authority (SASRA).
According to the SASRA rules (Non-Deposit Taking Business) Regulations 2020, BOSAs are required to increase their capital base and maintain a core capital of KSh 5 Million, with the minimum capital not being less than 8% of the total assets.
Financial analysts predict that the effects of these new rules will result in short-term pain for members, lasting for a 5-10 year period, before BOSAs stabilise and begin issuing dividends.
Currently, BOSAs issue their surplus funds as dividends to members. However, many will be forced to inject this surplus into their core capital to meet the requirements under these stringent regulations.
As of now, only 25 Non-Withdrawable Deposit-Taking Credit Unions that operate Back Office Service Activity (BOSA) have been issued permits by SASRA, out of the 157 BOSA SACCOs with more than KSh 100 Million deposits required by law to be supervised by the Authority.
CS Peter Munya has warned that any potential BOSA-only SACCOs remaining out there who did not submit their applications would soon rather than later face the law.
