A State-appointed committee has proposed that the minimum membership of Saccos be raised a hundredfold, arguing that current requirements are too low.
The team of experts is proposing that Saccos have a minimum of 1,000 members, up from the current 10, a move that will not only regulate new entrants but push for mergers among existing credit unions.
Minimum requirements for registering a Sacco, which are allowed to pool savings from the public, are too low, allowing easy entry to persons who could be fraudsters to collect deposits from the public, said the committee.
“The minimum requirements for registering new saccos must be increased. There are significant risks to the sector and to members' funds if this does not happen, and a pathway is developed to enable all Saccos to be regulated in the future,” the committee said in its report.
The committee, put together by the Cabinet Secretary, Ministry of Co-operatives and MSMEs Development, Wycliffe Oparanya, has also called for a minimum capital requirement for all saccos. Currently, there is no capital requirement for non-deposit-taking saccos that are regulated by the ministry.
Deposit-taking Saccos have a minimum capital requirement of Sh10 million. The committee is proposing a tiered regulatory approach, which would be based on asset size and operational complexity of a Sacco.
Currently, there is a moratorium on registration in new saccos, which the committee recommends be upheld until the minimum requirements are reviewed.
The state-appointed team has cautioned that failure to develop a clear and comprehensive pathway to regulation for all Saccos presents significant risks associated with registration of under-capacitated unions.
One major concern is regulatory arbitrage, where saccos deliberately register under minimal thresholds to avoid oversight by the Sacco Societies Regulatory Authority (Sasra), thereby exploiting loopholes in the framework.
Sacco Societies Regulatory Authority (Sasra) Chief Executive Officer Peter Njuguna. He has opted not to seek a new term.
Photo credit: Photo | Billy Ogada | Nation Media Group
In such cases, unregulated saccos may operate in ways that closely resemble banks, yet without the necessary prudential safeguards, capital adequacy standards, or supervisory scrutiny required to protect depositors.
“Sacco may register under minimal thresholds to avoid Sasra oversight, creating loopholes… Unregulated saccos can mimic banks without prudential safeguards,” the committee added.
Failure to establish a comprehensive regulatory pathway for all saccos also heightens member vulnerability.
Weak governance structures and inadequate risk controls increase exposure to fraud, mismanagement, and potential insolvency, especially since deposit protection mechanisms such as the Deposit Guarantee Fund do not apply.
