New rules to protect Kenyan SACCO members

Kenya is working on new rules to tame deposit-taking SACCOs (DT-SACCOs) that fleece members through inflated charges, delays in reimbursement of deposits, and “reckless” lending and debt collection.

This comes amid concerns over mismanagement, fraud and bad loans that are putting the stability of the DT-SACCO subsector at risk.

The EastAfrican has learnt that the SACCOs Sector Regulatory Authority (Sasra), in collaboration with the National Treasury, has hired a consultant to come up with new market conduct regulations. The move is part of the government’s efforts to restore sanity in a sector that controls over $5 billion in members’ savings.

Sasra, with funding from the National Treasury’s Financial Sector Support Project, has appointed industry expert Gianfranco Vento to develop the market conduct policy as well as legal and regulatory framework for SACCO societies in Kenya.

Through a circular to the chief executives of DT-SACCOs, seen by The EastAfrican, the industry regulator said the existing regulatory framework governing the operations of DT-Saccos is inadequate and has left customers exposed to market abuse.

“Lack of adequate emphasis on market conduct regulations has amplified challenges relating to low savings and over-indebtedness, and undermines steps taken to make the DT SACCO subsector more accessible to improve financial inclusion,” said John Mwaka, Sasra’s chief executive.

According to Mr Mwaka, some of the malpractices prevalent in the subsector are high fees and incomprehensible charges, delay in reimbursement of member deposits upon expiry of the mandatory 60-day notice requirement, and reckless lending often paired with disgraceful debt collection practices.

REGULATION

Although the SACCO Societies Act (Cap 490B) has some elements that cover market conduct regulations, such as product disclosures, suitability of persons managing DT-SACCOs and conflict of interest, Sasra says these regulations cannot deal with market abuse.

“Market conduct regulation is oversight that focuses on regulated entities’ compliance with laws and regulations related to the financial service provider’s pattern of behaviour in executing its pricing and promotion strategy, and its responses to the realities of the market it serves,” said Mr Mwaka.

In 2017, DT-SACCOs loan-loss provisions increased by 23.4 per cent to Ksh10.7 billion ($107 million), from Ksh8.6 billion ($86 million), because of an increase in non-performing loans. In addition, the number of DT Saccos that hold over Ksh305 billion ($3.05 billion) of customer deposits declined to 174 from 176 in 2016, when two institutions failed to meet their financial obligations, leading to revocation of their licenses.

Sasra also rejected five applications out of seven that were either pending at the beginning of 2017 or received in the course of 2017, after the institutions failed to meet the minimum licensing requirements.

Five other Saccos operated on restricted licences in 2017 even though they had been issued with conditionally restricted licences in 2016.

According to Sasra’s annual report for 2017, Kenya’s DT-SACCOs manage over Ksh442 billion ($4.42 billion) of assets, and microfinance institutions control an estimated Ksh73 billion ($730 million.) Commercial banks have the lion’s share, estimated at Ksh4 trillion ($40 billion).

Although DT-Saccos collect deposits from the public, they do not hold reserve accounts at the Central Bank or operate in the automated clearing house owned by banks.

Sammy Rutto, a director at Sasra, said growth of the DT-SACCOs could slow down due to the absence of a deposit insurance facility and the Sacco’s non-participation in the national payments system. (Source / the EastAfrican)

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Cooperatives and social enterprises may hold the key to more and better jobs

Co-operatives and social enterprises achieve employment growth at least on a par with other types of organisation, and also create good quality jobs, according to a new report by the University of Warwick, the Fondazione Giacomo Brodolini (FGB), and Eurofound.

The research team examined co-operatives’ and social enterprises’ resilience to economic changes. Based on new research, their report highlights how the management practices of these organisations helps sustain employment levels and deliver good jobs in the face of structural and cyclical economic changes.

Focusing on twenty case study organisations across five EU countries, including the UK, Peter Dickinson and Chris Warhurst in the University of Warwick’s Institute of Employment Research, Luigi Corvo and Feliciano Iudicone at Fondazione Giacomo Brodolini (FGB) and Stavroula Demetriades of Eurofound investigated the contribution of European co-operatives and social enterprises to job creation and retention; mapped the levels of public or social partner support for job creation in these organisations; and suggested ways to better support co-operatives and social enterprises so that they can continue to create and sustain good jobs.

The researchers found:

  • Co-operatives and social enterprises proved resilient to the financial crisis and have been successful in maintaining and creating jobs. Social co-operatives in particular have flourished.
  • Workers in co-operatives and social enterprises rate their job quality as high, both in absolute and relative terms.
  • Management skills are a key driver of employment success.
  • Managers in co-operatives and social enterprises tend to access informal support through their own networks rather than access formal support measures offered by governments.
  • Governments could support co-operatives and social enterprises by promoting social value clauses in public tendering rather than lowest cost

Peter Dickinson, from the University of Warwick, commented: “The challenge for UK and other European economies since the financial crisis is not just how to create jobs, but—in the era of zero hour contracts, the gig economy and flexible labour markets—how to achieve growth in good jobs.

“This study concludes that not only can cooperatives and social enterprises achieve employment growth at least on a par with other types of organisation, they create good quality jobs. They do this through inclusive management; reinvesting and sharing economic value; shared values; and prioritising jobs not just wages and profit.”

The UK has one of the largest social enterprise sectors in the EU, contributing around €61.6bn to the UK economy. Compared to other EU countries, the UK has a smaller number of co-operatives but a higher per capita membership, with 23 percent of the UK population in membership. This is second only to Sweden where 45 percent of the population belongs to a co-op. 32 percent of UK co-operatives are found in the health and social care sector, 10 percent are in housing, 9 percent are in retail and 8 percent are in finance.(source/PhysOrg)

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Cooperatives and social enterprises may hold the key to more and better jobs

Co-operatives and social enterprises achieve employment growth at least on a par with other types of organisation, and also create good quality jobs, according to a new report by the University of Warwick, the Fondazione Giacomo Brodolini (FGB), and Eurofound.

The research team examined co-operatives’ and social enterprises’ resilience to economic changes. Based on new research, their report highlights how the management practices of these organisations helps sustain employment levels and deliver good jobs in the face of structural and cyclical economic changes.

Focusing on twenty case study organisations across five EU countries, including the UK, Peter Dickinson and Chris Warhurst in the University of Warwick’s Institute of Employment Research, Luigi Corvo and Feliciano Iudicone at Fondazione Giacomo Brodolini (FGB) and Stavroula Demetriades of Eurofound investigated the contribution of European co-operatives and social enterprises to job creation and retention; mapped the levels of public or social partner support for job creation in these organisations; and suggested ways to better support co-operatives and social enterprises so that they can continue to create and sustain good jobs.

The researchers found:

  • Co-operatives and social enterprises proved resilient to the financial crisis and have been successful in maintaining and creating jobs. Social co-operatives in particular have flourished.
  • Workers in co-operatives and social enterprises rate their job quality as high, both in absolute and relative terms.
  • Management skills are a key driver of employment success.
  • Managers in co-operatives and social enterprises tend to access informal support through their own networks rather than access formal support measures offered by governments.
  • Governments could support co-operatives and social enterprises by promoting social value clauses in public tendering rather than lowest cost

Peter Dickinson, from the University of Warwick, commented: “The challenge for UK and other European economies since the financial crisis is not just how to create jobs, but—in the era of zero hour contracts, the gig economy and flexible labour markets—how to achieve growth in good jobs.

“This study concludes that not only can cooperatives and social enterprises achieve employment growth at least on a par with other types of organisation, they create good quality jobs. They do this through inclusive management; reinvesting and sharing economic value; shared values; and prioritising jobs not just wages and profit.”

The UK has one of the largest social enterprise sectors in the EU, contributing around €61.6bn to the UK economy. Compared to other EU countries, the UK has a smaller number of co-operatives but a higher per capita membership, with 23 percent of the UK population in membership. This is second only to Sweden where 45 percent of the population belongs to a co-op. 32 percent of UK co-operatives are found in the health and social care sector, 10 percent are in housing, 9 percent are in retail and 8 percent are in finance.(source/PhysOrg)

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Transport Paralyzed As Kangema Matatu SACCOs Strike

Commuters using Kangema-Murang’a town road were on Monday left stranded after local matatu SACCOs staged a demonstration.

Four SACCOs which ply the road were protesting what they termed as intrusion of their route by unauthorized matatu operators.

The Saccos including Muigana, Kamuna, Kangema travelers and Mathioya for the better part of Monday morning blocked the affected road at St. Mary’s area, accusing traffic police officers of failing to prevent other operators who were not authorized to use the route to ply on it.

Led by one of the SACCOs’ officials, Mr. Stanley Ngari the matatu owners accused NAMU Sacco of plying the route without a permit.

They said the SACCO had interfered with public service transport along the route and urged the National Transport Safety Authority to stop the unauthorized matatus from using the road.

Ngari said NAMU SACCO was licensed to ply Nairobi-Mugoiri-Kangema road, but not Nairobi-Murang’a- Kangema route.

“NTSA has failed to rid NAMU from our route, we are now demanding action from the government to ensure there is a level playing ground for all operators,” said Ngari.

Efforts to block the SACCO from the route started in 2016, but the court directed NAMU to operate five mini-buses along the road.

Police officers were called to calm the situation as they escorted NAMU vehicles, fearing to be attacked by the demonstrators.

In a rejoinder, NAMU SACCO Chairman, Samuel Wangige said NTSA had allowed them to ply vehicles along the route.

He said they won the court case filed by the four matatu SACCOs and thus they were legally using the route and downplayed the demonstration as underhand tactics to monopolize the route.

Three weeks ago, the county security team held a meeting with matatu owners in an effort to streamline operations in the sector.

The Area County Commissioner, Mohammed Barre cautioned Matatu SACCOs not to use gangsters to frustrate their rivals after it emerged.

The Murang’a East Sub County Police Commander, Alex Muasya promised to bring order on the route saying they will ensure only the legitimate SACCOs ply the road. (source/ Kenya News Agency)

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You must pay taxes, Kisumu boda boda riders told

Nobody will be exempted from paying tax, Kisumu county government has said as the standoff with boda boda riders escalated.

The county government, which is embroiled in a dispute with the riders over a Sh20 daily levy or Sh500 monthly, stood firm on the implementation of the County Finance Act.

The boda boda riders, who have not been paying taxes since the inception of devolution, are required to get stickers to enable them to operate. Attempts to have them pay the levy last year was flatly rejected.

Finance executive Nerry Achar on Thursday said tax must be paid and riders should emulate vegetable vendors.

“Tax is not negotiable and those who fail to pay will face the full force of the law,” he said.

“We can discuss other issues such as parking, shades and general welfare of the business community, but not a tax which is in the law,” he warned.

For the past five years, Kisumu has been struggling to meet its Sh1 billion revenue target.

Achar said the levy took effect on June 1 and defaulters will be penalised. This is part of efforts to boost revenue collection.

“We will not hesitate to take action against the defaulters. Even our mothers selling vegetables are paying tax,” he said.

Kisumu has more than 35,000 boda boda riders who said they they are not ready to pay because they did not give their input.

But Achar said public participation was done, noting that the money will help the county to build boda boda sheds and improve roads.

On Wednesday, the riders engaged county askaris and police in running battles as they protested the taxation.

One person was injured after being hit by a county vehicle during the melee on the Oginga Odinga Street.

The driver was trying to speed off from the irate riders who were smashing the windows of the vehicle. Some of the askaris were injured.

Police to lobbed teargas to disperse the rowdy crowd.

Earlier, the operators stormed the county’s yard and took away motorbikes which had been impounded.

Governor Anyang’ Nyong’o said his administration will not relent on the implementation of the Finance Act. “We are enforcing the law to ensure everybody pays tax,” Ager said.

The governor’s press unit director Aloice Ager said better service delivery will be realised through adequate revenue generation. He said the riders were engaged before the implementation of the taxation.

“The engagement started in the last regime. Not a single business community will be exempted from paying tax,” Ager said.

Some 113 operators have complied as their colleagues camped at the county offices to buy their stickers.

The county said it will deal with saccos to collect the boda boda levies weekly or monthly.

Achar told the riders to join saccos to ease the work. Those who will not comply will be expected to make a daily remittance.

The majority of the riders are, however, not ready to comply. County Boda Boda Riders’ Association leader Jacob Ochieng said there was no public participation.

He said they are not ready to pay. They want a clear explanation of how the money will be used if they have to part with their cash.

“Public participation must be done before imposing the new taxation law,” Ochieng said. (source/ The Star)

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City Hall freezes licensing of new matatu saccos in the CBD

Nairobi County government has frozen approval of new matatu saccos to operate in the city centre in a move aimed at decongesting the capital city.

The county government wrote to the National Transport Safety and Authority (NTSA) last week requesting it not to authorize or issue licenses for any new saccos intending to have Public Service Vehicles (PSVs) to operate within the Central Business District.

Nairobi County acting Roads and Transport chief officer Frederick Karanja explained that the move to freeze the issuance of licenses to and registration for operation of more PSV saccos in the city centre is aimed regulating the number of matatu saccos in the city.

“Due to the current congestion in the city centre, the Governor Mike Sonko initiated the process of decongesting the CBD and therefore approving more PSV saccos will inhibit the decongestion process,” said Engineer Karanja while appearing before Nairobi County Assembly Transport committee on Wednesday.

The chief officer also said that the county plans to remove long distance saccos from operating within the CBD and create termini in the outskirts of the city to allow only saccos within Nairobi to access the CBD.

SMALL SACCOS

Mr Karanja said that currently, 138 PSV saccos have been allocated termini in the CBD which is already a high number for the city centre.

“NTSA requirement is for a sacco to exist legally it should have the requisite number of 30 vehicles. As of now we already have more than enough saccos and adding new ones will create more menace in the CBD,” he said.

This comes after the committee, led by MCA James Mwangi, raised concerns of the number of new saccos in the CBD which he said end up double parking and disrupting traffic flow in the city.

Matatus in the city centre have perennially been blamed for blocking business premises, causing traffic snarl ups, blocking of loading zones and noise pollution.

The committee also took note of the proliferation of small saccos which break away whenever there are wrangles within the their parent saccos. They in turn allocate themselves stages on the streets leading to more congestion.

Also read:

CONGESTION

“To consolidate the number of PSV saccos in the city centre, we should come up with laws which will prohibit the formation of many clandestine saccos. This will also act as a way to enforce discipline within the saccos,” said Mr Mwangi.

On his part, City Hall’s director of Parking Mr Tom Tinega told the committee that he had revoked all the stages allocated to saccos who double park on the roads.

“There are a number of some new saccos were allocating themselves spaces in the CBD which is illegal and causes double parking,” said Mr Tinega.

Cartels operating in the matatu industry have been blamed for causing congestion in the city centre due to double parking.

This was after it emerged in March this year that there some two cartels operating within the CBD using Governor Sonko’s name to extort new saccos in order to allocate them parking slots.

The Transport committee said there are individuals brokering between the matatu owners and the county to extort matatu operators with the same individuals having also allocated parking to private cars especially the taxis in slots to operate as PSVs.(source/ NairobiNews)

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Kenya roots for harmonized quality standards for enhanced intra-Africa trade

NAIROBI: Kenya on Wednesday called for harmonized quality product standards across African countries in order to enhance intra-Africa trade.

Peter Munya, cabinet secretary in the Ministry of Industry, Trade and Cooperatives, called on the African continent to commit to the progressive elimination of tariffs and non-tariff barriers to trade in order to contribute to the sustainable development of Africa.

“Kenya is in talks with the African Organization for Standardisation (ARSO) member states to develop a common regulatory framework that will fast-track the implementation of the African Continental Free Trade Area (AfCFTA) agreement,” Munya said during the official opening ceremony of the 25th ARSO general assembly and the Africa day of Standardisation forum.

He reaffirmed Kenya’s commitment in promoting intra-African trade through elimination of import duties and non-tariff barriers, especially the technical barriers to trade (TBT).

Bernard Njiraini, acting managing director of the Kenya Bureau of Standards called on African countries and the regional economic communities to harmonize standards, technical regulations and conformity assessment systems so as to realize the full benefits of the AfCFTA.

Also read: 2019/20 budget: What is in it for Farmers, Traders and Cooperatives?

“We are cognizant of the central role that standards and conformity assessment plays in the realization of the full benefits of the Free Trade Area Agreements (FTAs),” said Njiraini.

Kenya, having been among the first batch of countries to ratify the AfCFTA agreement, is in the process of putting in place economic and trade policies that will support standards development systems and the quality infrastructure necessary to ensure conformity to standards, including testing, certification, and laboratory accreditation, according to Njiraini.

He noted that East African Community (EAC) partner states have agreed to work together in identified technical committees of strategic interest to the EAC. (source/ News)

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Six cooperatives supported by Nema-Chosso generate D11M

In an exclusive interview on Tuesday, 18 June, 2019, with the National Agricultural Land and Water Management Development Project (Nema), Mr. Momodou L. Gassama, the project director, gave the latest updates on some of the project’s success with special focus on support to cooperatives and linkages between producers, economic operators and other actors of the value chain. These initiatives have been ongoing since the start of project implementation in 2012.

“Over the last two years, the cooperatives have generated cumulative savings of more than eleven million dalasis (D11,000,000,000) from the purchase and sale of fertilizer alone,” he disclosed.

According to him, the six cooperatives were created in the cluster areas of: Boiram and Kudang in Central River Region South, Bajarally Suba in Central River Region North, Jurunku and Salikene in North Bank Region and Pakalinding in Lower River Region.

Mr. Gassama stated that the project provided support in organisational management, initial seed-funding as well as linkages with the Gambia Groundnut Corporation (GGC) and the National Seeds Secretariat (NCS) to promote access to fertilizer and improved seeds for rice production.

The Nema project, according to the project director, is financed by the government of The Gambia and the International Fund for Agricultural Development (IFAD), a Rome based UN Agency specialising in rural and agricultural development.

According to Mr. Gassama, since its official launching in 2012, the project has had a significant impact on the lives of Gambian women and youth. He noted that the project has supported the formation of six agricultural cooperatives to serve the interests of their members along rice value chains across the country.

Read also: Africa can feed not only itself, but the world

“With this initial support of the project,” noted Mr. Gassama, “the six cooperatives are now playing the role of economic operators, facilitating access to fertilizer for their members through bulk-buying from The Gambia Groundnut Corporation (GGC). With the revenues generated and the trust they have built with GGC over the years, the cooperatives are now able to secure fertilizer for their members without direct project support, thereby laying the fundamental foundation for sustainability after the phasing-out of the project.”

The project focal for the cooperatives, Mr. Bakary Jammeh, outlined additional support that has been provided to the cooperatives: “The project has also supported the construction of 19 seeds and grains storage facilities across the six cooperatives, making it possible for farmers to store and effectively plan the marketing of harvested paddy!” (source/ The point)

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This is why SACCO loans are more preferable than bank loans

If you’re keen enough you must have noticed that today more and more banks are pledging to lend cheaply to borrowers.

This has seen Kenyans turn to SACCOs, with the proportion of debt from commercial banks.

SACCOs are arguably more accommodating in their debt collection than banks making them a good option during harsh economic times.

Here are some advantages of taking loans from Saccos over banks in Kenya

1. Easy to get loans

It’s no lie, SACCO loans are easily accessible compared to bank loans.

Banks will require a host of documents that not all might provide before your loan is approved. SACCOS will only require your contribution record or payslip to get your loan approved. The great thing about SACCOS is that you can get a loan even if you’re not employed.

2. Low interest rates

Banks rates are ever high compared to SACCOS.

Banks have loan interest rates and again they’re never the same, this is where most people won’t imagine how costly it can be to find a bank with low loan interest to get a loan from. What if it’s an emergency loan? They’d run to SACCOS.

At any given time, interest rates for SACCOS are lower than those of banks. The most interesting thing is that they don’t change more often.

Also read:Saccos urged to buy government bonds, invest at the NSE

SACCOs Want Law on Loan Recovery

3. Additional benefits

The good thing about SACCOs is that they go ahead and buy real assets for members.

These are benefits you can’t get from a bank. SACCOs can purchase land, subdivide it and sell to members at a cheaper price.

4. Flexible payment terms

SACCOs are sometimes lenient on payment terms because the management has a strong attachment and knowledge of the loanees.

Banks are only interested in getting their money back in a limited time.

5. Dividends

Straight up! Banks don’t appreciate its members, their main aim is to maximize profits and grow their business.

On the other hand SACCO members benefit from annual dividends, which can even be used when applying for a loan. (source/ Jambo News)

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