Transcript [Business Communication]

THE SACCO SOCIETIES REGULATORY
AUTHORITY
(SASRA)
Developing a SACCO Supervisory Regime
from the Ground Up
Africa Sacco Regulators’ Round table, Malawi
1st December, 2010
By Carilus Ademba
CEO, SASRA, Kenya
Presentation structure
1. Where SACCO Supervision?
2. Policy Incentive to Prudential Regulation of SACCOs?
3. The Journey towards Prudential Regulation
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Cooperative Society Act
• Saccos have operated under Cooperative Societies Act,
(CSA) of the Laws of Kenya
– A general legislation for all Cooperative Societies
– CSA first enacted in 1966, amended in 1997 to give
Management Committees of Sacco societies greater
autonomy in running of Societies;
– Further amendments in 2004 to respond to growing
challenges with SACCOs
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Cooperative Society Act
• Being non prudential, the Act and the Rules thereunder
stipulated such requirements as:
–
–
–
–
Registration requirements;
Annual audits and returns thereof;
Conduct of elections;
Approval of borrowing powers etc
• Several amendments made to address uniqueness of Sacco
societies
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Need for Prudential Regulation
• Need was recognized in CSA 2004, Section 91A that
• “ The Minister shall in consultation with the apex society constitute by
notice in the Gazette a body to regulate the operations of savings and
credit co-operative societies.”
and
• “The composition of the body constituted under subsection (1), its
powers, duties and the terms of office of its members shall be as may
be prescribed in the rules.”
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A people without a Vision Perish
Kenya Vision 2030:
A globally competitive and prosperous nation
with a high quality of life by 2030
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A people without a Vision Perish
Kenya Vision 2030:
A globally competitive and prosperous nation
with a high quality of life by 2030
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Kenya Vision 2030
• Gave new impetus to prudential regulation of Sacco
societies given their significance in savings
mobilization
• Government aims to increase Gross National Savings
to 32 of GDP
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Kenya Vision 2030
Vision for Financial Services Sector:
“To create a vibrant and globally competitive
financial services sector that will create jobs and
also promote high levels of savings to finance
Kenya’s overall investment needs.”
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Vision 2030: Financial Sector dvpt Strategy
Based on three pillars:
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Provide wider access to affordable financial services,
including rural areas, thereby creating employment.

Enhance efficiency in the delivery of financial
services to reduce cost of delivery.

Strengthen the stability of the financial system to
reduce risk of financial crisis.
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Vision 2030 - Financial Sector Reforms
• Vision 2030 - envisages the strengthening of alternative
(described as “Formal others” in policy documents)
financial service providers e.g. MFIs and SACCOs with
specific strategies
• Specific sub-sector strategies and programmes identified
in the Sector plans
• Key Sacco subsector reform programme identified as
prudential regulation of Saccos
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Vision 2030 - Financial Sector Reforms
SACCO subsector specific programmes:
• Enactment of a Sacco specific law
• Setting up a regulator for SACCOs through SACCO
specific legislation;
• Establish and Operationalize Sacco Societies Act, 2008
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Vision 2030 - Financial Sector Reforms
• Top level policy objectives in Sacco subsector
being to:
 Improve governance;
 Protect member savings
 Drive efficiency gains in the sector and reduce
incidences of NPLs
 Increase savings and credit in SACCOs – through
increased membership
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The Journey towards Prudential
Regulations of SACCOs in Kenya
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The SACCO SOCIETIES REGULATORY
AUTHORITY
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Journey towards prudential regulation
1. Laying the foundation
2. Developing the Sacco Societies Bill
3. Enactment of the Bill in to Law
4. Challenges in developing the law
5. Operationalization of the Sacco Societies Act, 2008
6. Reflections on the Regulations development
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Journey towards SACCO Regulations
Laying the foundation
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2004:A Task Force comprising Ministry of Cooperatives,
Sacco subsector representatives and other stakeholders is
appointed
Views are collected culminating in a Stakeholders
workshop in 2005
First Sacco Societies Bill is drafted in 2006 but does get to
National Assembly
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Journey towards SACCO Regulations
Developing the Sacco Societies Bill
2007, 2nd and more inclusive task force appointed:
• Commissioner for Cooperative Development (CCD)
• Central Bank of Kenya (CBK)
• State Law Office (Attorney General Office)
• Kenya Union of Savings and Credit Cooperatives(KUSCCO)
• Kenya Rural Sacco Societies Union (KERUSSU)
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Journey towards SACCO Regulations
Developing the Sacco Societies Bill
Mandate of the 2nd Task Force
• Building on the work by the 1st Task Force
– Draft a new Sacco Societies Bill for introduction to the National
Assembly
• The draft bill was ready by early 2008
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Journey towards SACCO Regulations
Developing the Sacco Societies Bill
Sacco Societies Bill 2008 redrafted
Part I: Preliminary
Part II: The Sacco Societies Regulatory Authority(SASRA)
Part III: Licensing of Sacco Societies
…….continued
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Journey towards SACCO Regulations
Developing the Sacco Societies Bill
Sacco Societies Bill 2008 redrafted
Part IV: Governance of Sacco Societies
Part V: Regulation and Supervision of Sacco Societies
Part VI: Deposit Guarantee Fund
Part VII: Miscellaneous
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Journey towards SACCO Regulations
Enactment of the Bill in to Law
• Strategy is to lobby through:
– Parliament’s Departmental Committee on Agriculture &
Cooperatives in Parliament
– Sitting members of parliament who formally served as Sacco
leaders
• Support of departmental committee crucial to success of a
Bill
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Journey towards SACCO Regulations
Enactment of the Bill in to Law
• Bill introduced to the National Assembly in August 2008
• Debated and enacted in October 2008
• Huge support in National assembly because Sacco societies
are well known in Kenya
• Became law in Dec 2008, - Sacco Societies Act, 2008
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Journey towards SACCO Regulations
Challenges in developing the Sacco law
• Resistance to change - Consensus building
• Initial focus was on Front Office Service Activity (FOSAs)
• Some provisions removed/amended
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Journey towards SACCO Regulations
Operationalization of Sacco Societies Act, 2008
• Acts of parliament are operationalized through regulations
and/or rules
• Required:
– Development of the Regulations
– Establishment of the Sacco Societies Regulatory Authority
– Publication of the Regulations for by the Minister for Cooperative
Dvpt and Marketing
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Journey towards SACCO Regulations
Operationalization of Sacco Societies Act, 2008
• In early 2009, the Minister appointed a Task Force (TF)
• Principal deliverables of the TF:
– Regulations to operationalize the Act;
– Institutional design of the Regulatory Authority
– Required staffing levels to kick off
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Journey towards SACCO Regulations
Operationalization of Sacco Societies Act, 2008
• Task Force (TF) comprised key stakeholders in the Sacco
subsector:
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Ministry of Cooperatives (Three Representatives)
Central Bank of Kenya
Treasury/Ministry of Finance
KUSCCO
KERUSSU
Cooperative Bank of Kenya
Chairman was Commissioner for Cooperative Development
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Journey towards SACCO Regulations
Operationalization of Sacco Societies Act, 2008
• Task Force sought support from:
– Financial Sector Deepening Trust Kenya – Financial
– WOCCU – Technical
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Journey towards SACCO Regulations
Operationalization of Sacco Societies Act, 2008
•
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In May/June 2009 the TF appointed two technical
working committees namely:
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Regulations technical working committee;
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SASRA institutional design technical working committee
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Journey towards SACCO Regulations
Operationalization of Sacco Societies Act, 2008
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Scope of work and composition guided by documented
Terms of Reference approved by the TF but:
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Both committees comprises technical staff
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Both committees worked with consultants for technical advise
and best practices
Committees reported to the TF on their progress
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Journey towards SACCO Regulations
Institutional design and establishment of SASRA
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Technical committee focused on:
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Organizational structure and establishment
Staff establishment and budget
Job description, competencies and training
Business process – policies and systems
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Journey towards SACCO Regulations
Developing the Sacco Societies Regulations
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Regulations Technical committee:
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Guided by the Act, developed detailed operational and
prudential regulations
Classified by the subject matter of law namely governance, credit,
liquidity, licensing etc
Took about four months to have 1st draft
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Journey towards SACCO Regulations
Developing the Sacco Societies Regulations
The Regulations at a glance:
1. Licensing
2. Capital adequacy
3. Shares, Savings and deposits
4. Liquidity/Asset and Liability Management
. ……Cont’d
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Journey towards SACCO Regulations
Developing the Sacco Societies Regulations
5.
6.
7.
8.
9.
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Credit management
Risk asset classification and provisioning
Investments
Financial Performance Reporting
Governance of Sacco Societies
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Journey towards SACCO Regulations
Developing the Sacco Societies Regulations
10. Information Preservation and Business Continuity
11. Regulation and Supervision
12. Deposit Guarantee Fund
13. Regulatory forms and reporting formats
14. Miscellaneous provisions
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Journey towards SACCO Regulations
Stakeholder inclusion in developing Regulations
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Specifically Sacco societies
Indirect involvement of Sacco societies:
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Direct involvement of Sacco societies:
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Through inclusion of union
Request for written comments on final draft
Stakeholder workshop
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….. and the Journey ended with…..
Commencement of the Regulations
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Journey towards SACCO Regulations
Challenges in developing the Regulations
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Setting prudential ratios/standards on:
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Capital adequacy
Loans classification
Loan loss provisions
Liquidity
Governance in Sacco societies
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Journey towards SACCO Regulations
Challenges in developing the Regulations
•
Absence of credible data on financial performance of Sacco
subsector;
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Reporting frequency given poor ICT adoption in most
Saccos
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Transitional period for Saccos already deposit taking
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Journey towards SACCO Regulations
Challenges in developing the Regulations
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Influence of already existing Regulatory framework for
Microfinance and Banks
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Technical committee members were full time employees
in their parent institutions
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Time frame
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Many thanks
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