Savings and Credit Co-operative Societies(SACCOs) that engage in Back Office Service Activity(BOSA) will pay lesser dividends to members at the end of this financial year.
This impact follows recent changes to the law, bringing BOSAs with more than KSh 100 Million in deposits under the ambit of Sacco Societies Regulatory Authority(SASRA).
The new SASRA rules( Non-Deposit Taking Business) Regulations 2020, which took effect at the end of June 2021, now require BOSAs to increase their capital base and maintain a core capital of KSh 5 Million.
The minimum capital shall also not be less than 8% of the total assets.
It is expected that BOSA SACCOs will retain their earnings to meet the requirements under these stringent regulations.
Currently, BOSAs issue their surplus funds as dividends to members. Now, many will be forced to inject this surplus into their core capital.
SACCOs that offer BOSA
SASRA has already issued permits to only 25 Non-Withdrawable Deposit-Taking Credit Unions that operate Back Office Service Activity(BOSA).
This is out of the 157 BOSA SACCOs with more than KSh 100 Million deposits required by law to be supervised by the Authority.
All large Non-Withdrawable Deposit-Taking SACCOs had a deadline of the end of June 2021 to comply with the SACCO Societies Act and the Regulations, 2020, which requires that they fall under the supervision of SASRA.
In the past, SASRA’s oversight was confined to regulating only FOSA SACCOs-those engaged in the deposit-taking business.
” BOSA SACCOs were not under any specific supervision other than rules spelt out in the Co-operatives Societies Act,” said Peter Munya, CS- Ministry of Agriculture, Livestock, Fisheries and Cooperatives.
The SACCO Societies (Non-Deposit Taking Business) Regulations, 2020, were published through Legal Notice No. 82 of 2020 on 5th May 2020.
After approval by both Houses of Parliament, these Regulations, 2020 became operational from 1st January 2021, with a transition period of six (6) months which lapsed on 30th June 2021.
Munya has warned that any potential BOSA-only SACCOs remaining out there who did not submit their applications would soon rather than later face the law.
Financial analysts maintain that the effects of these new rules will result in short-term pain for members, lasting for a 5-10 year period, before BOSAs stabilise and begin issuing dividends.
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