Saccos Clamp Down On Struggling Businesses, Recover Sh491 Million In A Ruthless Crackdown

Savings and Credit Cooperative Societies (Saccos) have made a significant recovery of Sh491.2 million from financially strained companies in the fiscal year ending June 2024. This recovery marks a continued effort to reclaim non-remitted deductions meant for Saccos, reflecting the resilience and persistence of cooperative societies in safeguarding members’ contributions.

Treasury data reveals that the recovered amount—mostly consisting of unremitted employer deductions—showed a rise from the previous year’s Sh482.3 million. The consistent increase over the years underscores an urgent drive to address financial discrepancies affecting the cooperative sector. For the third consecutive year, Saccos have witnessed a growth in recoveries, pointing to heightened enforcement measures and increased scrutiny on delinquent entities, including government bodies and higher learning institutions.

The drive to secure funds is motivated by a need to protect member contributions and ensure financial stability. The Co-operative Act, enforced by the State Department of Co-operatives, has become a pivotal tool in this effort, highlighting the importance of legal frameworks in reinforcing compliance.

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A significant portion of the recoveries has come from partial payments, reflecting the complexities faced by Saccos in engaging entities that are struggling financially. The enforcement challenge is particularly acute for organizations heavily reliant on fluctuating revenue streams. This includes public universities and various county governments, which have emerged as consistent offenders in non-remittance of member deductions.

Government agencies and counties were the most significant contributors to the outstanding debt, withholding Sh958.07 million in unpaid dues as of December 2022. This figure was a slight decrease from the Sh1.02 billion held back in the previous year, reflecting a marginal improvement. However, it’s clear that compliance remains a pressing concern, as non-compliance with remittance obligations continues to undermine the cooperative sector.

In response, the Sacco Societies Regulatory Authority (Sasra) has doubled down on oversight. The regulator has warned employers who deduct members’ savings but fail to submit them on time, urging compliance with set guidelines. By the end of December 2023, Sasra had reclaimed a total of Sh1.57 billion, indicating the persistence of the problem despite sustained recovery efforts.

Non-compliance is not just a challenge to individual Saccos but also impacts the wider financial ecosystem, straining liquidity and trust in the sector. Sasra’s efforts have included securing Sh1.68 billion in loan repayments by 2022 and an additional Sh909.49 million in monthly savings, demonstrating a strategic focus on restoring funds crucial to the cooperative movement’s survival.

The government has been urged to collaborate with Saccos to tighten regulatory frameworks. A proposed strategy would involve the introduction of stricter penalties for non-compliance, aimed at deterring organizations from withholding funds. This would include prioritizing remittances when government budgets are being allocated, ensuring Saccos receive their dues promptly.

The complexity of the recovery process is exacerbated by the intricate nature of public financing and the multiple layers of government bureaucracy. The suggested integration of Sacco recoveries into the broader public budgeting process is one solution being considered. This move could streamline recoveries, making them more efficient and transparent.

One key issue is the conflict of interest that arises in government-controlled entities, where decision-making around funds is often influenced by competing priorities. To mitigate this, Sasra has suggested setting up an independent unit to handle the distribution of recovered funds, ensuring that cooperatives are not deprived of what they are owed.

During the fiscal year ending in June 2024, deposits across Saccos witnessed substantial growth. Contributions rose by Sh79 billion, reaching Sh1.126 trillion—a notable increase from Sh1.047 trillion the previous year. This achievement underscores the cooperative sector’s resilience despite ongoing financial challenges. Moreover, total savings crossed the Sh1 trillion threshold for the first time, marking a historic milestone for Saccos in Kenya.

Deposit-taking and non-withdrawable Saccos supervised by Sasra reported deposits worth Sh716.05 billion in December 2023. This was a significant improvement from the Sh620.45 billion recorded the previous year. Membership in Saccos also expanded, growing from 6.84 million to 7.1 million members, highlighting increasing trust and engagement with cooperative societies.

Sasra’s regulatory actions reflect a broader push for greater transparency and accountability. In light of persistent non-compliance, Sasra has advocated for the introduction of alternative dispute resolution mechanisms. These would serve to expedite cases, easing the backlog in courts and providing a swifter path to justice for members seeking recourse.

The future of the Sacco movement will likely depend on a combination of stricter enforcement, more robust legal frameworks, and enhanced financial literacy among members. As more Kenyans rely on Saccos for savings, loans, and investment opportunities, the sector’s stability becomes even more crucial. This necessitates concerted efforts to eliminate any loopholes in the management of member contributions.

The proposed framework includes empowering Sasra to impose stricter fines on defaulters and establish guidelines that prioritize Sacco contributions over other budget items in county allocations. These measures aim to ensure that Saccos receive their remitted funds first, shielding them from the financial instability of other sectors.

Jack Ranguma, chairperson of the Cooperative Alliance of Kenya, has emphasized the need for a strong stance on this issue. He pointed out that the backlog of unpaid contributions hinders Saccos’ ability to provide essential services to their members, affecting their overall reputation and reliability. Ranguma called for greater accountability from public entities, urging them to honor their obligations promptly.

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The financial resilience of Saccos, despite the hurdles, remains a testament to the cooperative spirit that has driven Kenya’s economy for decades. However, the sector’s sustainability will hinge on how effectively it can navigate the complexities of modern governance and finance.

The recurring issue of non-remitted funds has led to calls for more proactive monitoring mechanisms, with Sasra at the helm of these efforts. There’s also a push to empower members with better tools to monitor their savings, increasing transparency and accountability from the ground up.

As the Sacco movement grows, the stakes are getting higher. With over seven million members relying on the system for their financial wellbeing, Saccos must strike a balance between aggressive recovery strategies and maintaining a cooperative ethos. This delicate balance will be crucial in ensuring that members continue to see the sector as a safe and trustworthy option for their financial needs.

Sasra’s recommendations are not only about enforcing compliance but also about building a culture of integrity and responsibility. A more educated membership base, aware of their rights and the regulations governing Saccos, will be critical in achieving long-term stability.

The cooperative sector’s future will depend on the willingness of all stakeholders to work together. As Saccos move forward, the challenge will be to maintain their foundational values while adapting to a rapidly changing economic landscape. Their success will be a reflection of Kenya’s broader financial health and the strength of its collective spirit.

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