This archive report was first published on 1 September 2019.
The Sacco sector in Kenya, the largest in Africa, can breathe a sigh of relief following the withdrawal of a Bill that sought to introduce a special category of members known as Social Impact Members (SIMs).
The proposed SIMs Bill had the potential to plunge the sector into troubled waters and undermine efforts to improve and safeguard Sacco operations.
According to sector players, the Bill would have created a special group of members, the Social Impact Members (SIMs), who would have enjoyed total autonomy and equal voting rights with other members, despite not being required to purchase shares.
The SIMs admission would have been through a simple resolution at the AGM, and the source of the Special Fund, which would have lent to eligible individuals looking to invest in start-ups, would have remained unknown to the larger Sacco membership.
This would have left the financial institutions open to even more risks, including the threat of money laundering, as they would have had no way of verifying and monitoring the source of the Special Fund or the identity of the SIMs.
Section 44 of the Proceeds of Crimes and Money Laundering Act, 2009 requires financial institutions to monitor and report suspected money laundering activity, and section 45 requires them to verify customer identity.
However, with the SIMs, the Sacco would have had no capacity of verifying the identity of the SIMs, since they are not members of the Society in the first place.
It is therefore easy to see why the withdrawal of the Bill is being hailed as good news for the sector.
Published on September 1, 2019.
