A Bill that seeks to facilitate licensing and regulation of a Central Liquidity Facility and Shared Services Platform for Savings and Credit Co-operative Societies(SACCOs) has received cabinet approval.
This follows backroom efforts by the State Department for Co-operatives Development, to operationalize the Central Liquidity Facility and Sacco Shared Services platforms.
During a Cabinet Meeting at State House, Nairobi, the session also approved proposed Legal Amendments to the SACCO Societies Act to Facilitate Operationalization of the Deposit Guarantee Fund (DGF) for SACCOs in Kenya.
According to David K. Obonyo, the Commissioner for Co-operative Development, the Central Liquidity Facility will allow co-operatives to join the national payments system, facilitate inter-borrowing among SACCOs, and share ICT services.
Bill to set up Deposit Guarantee Fund also approved
Cabinet approval of the Deposit Guarantee Fund(DGF) comes after assurances by the Ali Noor Ismail-Permanent Secretary-State Department for Co-operatives, Ministry of Agriculture, Livestock, Fisheries and Co-operatives, that this bill will be ready before Kenya goes to the August 2022 polls.
The DGF financial safety net, designed similarly to that of the Kenya Deposit Insurance Corporation(KDIC) for banks, is expected to provide cover to SACCO depositors up to KSh 100,000.
All SACCOs will contribute to the Fund as prescribed in the new regulations that Cabinet has now approved.
Following approval of the two crucial bills in the SACCO sector by the Cabinet, these regulations are expected to go to the legal committee on delegated legislation in parliament before the bills are brought before the house for debate and passage.
Approval of a Bill to operationalize the Deposit Guarantee Fund follows the collapse of several Savings and Credit Co-operative Societies, leaving desperate members with empty pockets.
The latest Society to go under due to theft and or mismanagement by its top officials and directors is Moi University, which collapsed and could not compensate its members. This is even after the court ordered the Society’s remaining assets in Eldoret to be sold off.
Operationalization of the DGF will require SACCOs to pay a premium to the Fund based on the amount of deposits belonging to members they hold. This will be specified in the regulations that are being finalized.
The World Bank and Kenya’s National Treasury is expected to lay down the necessary infrastructure before implementing a Central Liquidity Facility for SACCOs. Sources said this process has yet to take off, following a lack of the required legislation.
Top executives in the SACCO agree that there is a need to protect members’ deposits, and that is why the DGF is being created. The idea is to build confidence in the Sacco sub-sector.
“We should have a national payment system so that those with excess funds can leverage and provide affordable products and services to members. SACCOs will be able to provide faster processing of loans to members with the Central Lending Facility(CLF),” said Macloud Malonza, Board Chairman-Harambee Sacco Society Limited.
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